Good morning, everyone, and welcome to the Delta Air Lines June Quarter 2021 Financial Results Conference Call. My name is Katie, 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. I would now like to turn the conference over to Julie Stewart, Vice President of Investor Relations.
Please go ahead.
Thank you, Katie, and good morning, everyone. Thanks for joining us for our June quarter 2021 earnings call. Joining us today from Atlanta are its CEO, Ed Bastian our President, Glenn Hauenstein our Interim Co CFO, Gary Chase and our entire leadership team will be available for Q and A. Ed will open the call with an overview of Delta's performance and strategy, Glenn will provide an update on the revenue environment and our brand momentum and Gary will discuss cost, fleet and I'd also like to welcome our incoming CFO, Dan Jenke, who is with us in the room today, but will not be participating in Q and A. Similar to last quarter's call, we've scheduled today's call for 90 minutes to make sure that we have time for plenty of questions.
For 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 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.
Well, thank you, Julie. Good morning, everyone. I appreciate you joining us this morning. As we speak, we're well into the summer travel season. And if you've been to the airport in recent weeks, you've seen firsthand how travelers are reclaiming their lives and returning to the skies.
This increase in demand drove a better than expected revenue outcome for us in the June quarter, with revenues down 49% versus 2019, resulting in a $6,300,000,000 total revenue. This was an impressive 76% sequential improvement from the March quarter. More encouragingly, the momentum is continuing as we exited June with a demand environment that's accelerating. Domestic leisure demand and yields are above June quarter 2019 levels and we see clear signs of business and international demand recovery heading into the fall. Through the crisis, we've earned an unprecedented level of brand loyalty and trust.
Thanks to the world class service, Operational reliability and innovation that drives the Delta difference and our commitment to safety, cleanliness and wellness is as strong as ever. The people of Delta are our strongest competitive advantage, powering our resurgence and running the best operation in the industry. It is because of our people's incredible work that Delta was honored as the number one airline for 2021 by J. D. Power.
I want to thank every member of the Delta family for the professionalism, spirit of service and warmth you show to our customers every single day. I'd also like to thank our crews and operations teams for continuing to put our customers and their safety first as we restore our business. We are now in active recovery of our business and the challenges of getting our airline fully back to the service level our customers expect and deserve is daunting in light of the huge surge in demand that we are experiencing. But we are taking all the right steps, primarily through increased staffing levels at both Delta In our contract service providers to service this demand without compromising on the standard of care and cleanliness that our customers have become accustomed to on Delta throughout the pandemic. And even with these challenges, our team continues to run the very best airline in the industry, leading on all key For the June quarter, we narrowed our pre tax loss to $881,000,000 This was meaningfully better than initial expectations driven by demand strength.
Importantly, we achieved significant financial milestones during the quarter. These include returning to profitability in the month of June with the pre tax margin in the high single digits Despite still missing 40% of our prior revenue from June of 2019, generating $1,500,000,000 of free cash flow And nearly $200,000,000 of adjusted free cash flow in the June quarter. Achieving solid profitability and generating meaningful free cash Slow a little over a year from the start of the worst crisis in this industry's history is an impressive statement about the resilience of our business and the great work of our people. In showcasing the value of the commercial partnerships that we have developed leveraging the Delta brand, We have created almost $1,000,000,000 in investment value this year through our partnerships with WheelsUp and Clear. And I want to point out that $1,000,000,000 is against a zero cost base.
I want to give a big shout out to Kenny Dichter and the WheelsUp team as their listing on the New York Stock Change goes live today. We're proud to be Will's exclusive commercial airline partner and largest shareholder The stake valued at over $500,000,000 Also congratulations to Karen Seidman Becker and the CLEAR team on their successful IPO. Our investment in Clear is worth approximately $340,000,000 And finally, I want to congratulate Sir Richard Branson And our team at Virgin Galactic for making history last weekend and completing their first fully crewed spaceflight. It It was exciting to watch Richard break new barriers once again, this time commercial space travel. I take the time to mention these relationships Because of the much larger ecosystem that Delta operates and attracts, and these opportunities to create value will continue to be nurtured as we extend our brand beyond traditional airline boundaries.
With June profitability in the books, we're now in the restoration phase of recovery and focused on harnessing the power of our differentiated brand and our resilient competitive advantages to drive sustainable profitability in the second half twenty twenty one and enable long term value creation. Specifically, for the September quarter, we expect a mid single digit pre tax margin as demand continues to improve with the return of corporate travel and gradual reopening of international markets. We are starting to see signs of a resurgence of business in international travel, both of which are supporting the next leg of the revenue recovery. And we're well positioned to take advantage of both with leading domestic corporate share and a strong global network. Around the country, more and more offices are opening and people are reconnecting to their businesses and to each other.
With 72% of our employees vaccinated, we officially reopened our own offices last month in June. And as I interact with other CEOs, I'm encouraged to hear about their own plans to accelerate their return to office. That sentiment is coming through loud and clear in our most recent corporate survey with almost 95% of our accounts indicating they'll be Turning to their offices by the end of this year. Domestic corporate volume grew from 20% base In March of this year, March month that is, to 40% recovered in the June month and we expect it to be close to 60% recovered by September based largely on these reopenings. I'm also encouraged by the strength that we're seeing in international.
While we know international demand recovery will be very choppy and uneven, we're seeing strong bookings to Europe when countries open their borders. From our experience in the U. S, we are seeing the impact that widespread vaccinations have on reopening the economy. We know the same will be true for the rest of the world over time, but are mindful of the risks that new variants pose to the pace of recovery and Our team will stay very disciplined in restoring international capacity. As the recovery builds steam, we are making the required investments, including hiring frontline and reservations employees and investing ahead of the full recovery of the airline in places like maintenance and training.
This will allow us to continue to provide industry leading service levels and prepare the airline for success in a stronger than previously expected demand environment. These investments are key to the execution of our strategy to win, which is defined by providing best in class service to our customers And leveraging the brand while creating a simpler, more efficient airline. The power of our brand has come through the crisis stronger than ever And we're seeing evidence of this across the business. The resilience of our American Express co brand credit card program is a great testament To the increasing brand affinity that we have, card spend on the Delta American Express portfolio in the month of June was 115% recovered to 2019 levels for the same month, despite Travel purchase is still being off by 25% in that same period. We're continuing to renew and simplify our fleet.
And yesterday, we announced that we're opportunistically adding 7 Airbus 350s and 20 9730seven-nine 100 ERs that will enter service over the next 12 months to 24 months. These are current vintage to the aircraft that we operate in our existing fleet And we're adding these pre owned aircraft for substantially less than the cost of new planes. These aircraft align with our strategy that's focused on simplification, scale, size and sustainability and create optionality for future growth or replacement in a Capital disciplined manner. These transactions accelerate our recovery plans, which also began with the exercise of 25 Airbus 321neo options in April. The A321neos, which will start to deliver in 2022, Offer the lowest seat cost in our fleet and will strengthen Delta's gauge advantage relative to our competitors.
Our recent actions on fleet enhance efficiency throughout the cost structure. Gary will talk more about this shortly and will highlight the progress that we're making on our balance sheet and journey back to investment grade metrics. As our recovery path becomes clear, so does our future as a carbon neutral airline. In 2020, we committed to our airlines' carbon neutrality and we're taking actions today that are critical to our future. This includes the reduction in emissions that we're achieving with our fleet renewal, investments in sustainable aviation fuel together with many corporate partners and the evaluation of long term investments in carbon reduction and removal technologies.
During the quarter, we released our inaugural 20 Moving forward at Delta's Capital Markets Day, which we will be holding in person in New York on December This event will give everyone an opportunity to hear from our management team, which over the past year we strengthened by bringing in outside perspectives and promoting our deep bench. That includes Alison Osman, who during the quarter, pleased to announce was named our Executive Vice President and Chief Customer Experience Officer. In addition, John Lauder, who I'm also pleased we announced as our new Executive President and Chief of Operations. Allison and John are Delta veterans who bring deep experience and unmatched expertise to their roles. In addition, our incoming CFO, Dan Janke brings As well as a broad global perspective and operational experience that will serve us well In the recovery and beyond, Dan's background makes him the ideal leader to advance our efforts to restore Delta to our pre pandemic financial position.
You'll hear from him briefly before Gary delivers the financial update. With this great team of servant leaders, we're building an airline that's positioned to drive long term value for all our Our people, our customers, our owners and our communities where we live, work and serve. I could not be more excited about our future. And now, I'd like to turn it over to Glenn.
Thanks, Ed, and good morning, everyone. 16 months after the start of the pandemic, I'm encouraged advantages and a differentiated customer experience, all of which are increasingly driving deeper customer engagement. During the quarter, we saw consumer demand for travel return at an accelerated rate as pent up demand drove an increase for air travel. As customers return to the skies, Delta is their airline of choice given our industry leading service that's provided by the best employees in the industry. This resulted in a more than $2,700,000,000 improvement in revenue from the March quarter.
Compared to 2019, revenues were 49% lower, beating our initial guide on 39% less sellable capacity. Bookings in domestic and short haul Latin leisure markets Recover to nearly 90% of 2019 levels and during the quarter we began experiencing strength in demand to select European countries as they reopened. Domestic Business Travel is on an improving trajectory with corporate volumes 40% recovered in the month of June, doubling from the 20% recovery rate in March. Small and medium sized enterprise volumes continued to outperform corporates by 10 points This is a great accomplishment considering that we had the middle seat block in place For the month of April, which when lifted on May 1, resulted in a 45% increase in sellable capacity with minimal incremental costs. So kudos to the Delta team for managing through this transition period and driving these outstanding results.
I also want to congratulate our cargo team for an outstanding quarter with cargo revenues up 35% compared to the June 2019 quarter despite running a much smaller operation. We are also seeing momentum in daily bookings and net cash sales. Our average net cash came in 20% higher than forecast, doubling relative to the March quarter. Importantly, in the month of June, our average net cash Sales are 70% restored to corresponding 2019 levels. That's running about 10 points ahead of revenue recovery as customers are making travel plans out into the future.
As Ed mentioned, we're exiting June with a demand environment that's much stronger than just 3 months ago. Since At the start of the year, we've seen a sequential revenue improvement from 35% recovery versus 2019 in Q1 to 51% in the 2nd quarter. That trajectory is continuing and we expect our September quarter total revenue to be 65% to 70% recovered on capacity that 70% to 72% recovered when compared to the same quarter in 2019. This positions us At the midpoint of our guidance, this represents another $2,000,000,000 sequential increase in revenue on approximately 10% higher capacity. We expect strong leisure demand to continue through the fall and winter and we're Delta is well positioned to take advantage of both with leading domestic corporate share and a strong global network.
Corporate travel volumes accelerated in May June with almost 95% of our accounts booking travel in the month of June. We're also beginning to see a return of consulting and sales related travel and higher volumes in traditionally business heavy markets like New York City and Boston. Our recent corporate survey results show that over 90% of our corporate accounts anticipate travel volumes to increase in the September quarter, up from just 33% in the March quarter. In addition to these survey results, our close engagement with customers give us increased confidence of the acceleration of business travel, especially as we move towards the post Labor Day period as schools and offices continue to reopen. We expect domestic corporate volumes will recover between 55% 60% of 2019 levels by the end of the September quarter, up from 40% at the end of the June quarter.
Despite volatility in global COVID recovery trends, international travel is accelerating Today, more than 15 European countries are open and we're seeing strong bookings follow as border closings lift. We are also helpful that 212F restrictions prohibiting inbound travel to the U. S. Will be significantly reduced in the September quarter. The recovery in short haul Latin exceeded 2019 levels, but in long haul Latin demand remains muted as many countries are still closed.
Specific demand remains low and will likely be the last region to recover. Delta has a strong platform internationally due to Structural changes in the landscape, but more importantly because of elements unique to Delta. First, we will have the number one joint ventures in each And our international partners will emerge from their restructuring efforts more competitive than before. We look forward to continuing our valuable strategic relationships With all of our global partners as they navigate through the COVID-nineteen crisis and as they position themselves to emerge from their restructuring processes, We are confident these strategic relationships will accelerate our international recovery in the years to come. 2nd, our hubs are powerful, Offering extensive and efficient global coverage, the strengths of our global hubs resemble those of our core domestic hubs, namely strong presence and local share and the ability to connect traffic efficiently.
3rd, our wide body fleet renewal will be instrumental in our recovery and The higher margins. Adding the 7 A350s announced yesterday builds on our long term fleet plan efforts. Our wide body fleet renewal program improves our product offering, enhances our cargo capability, reduces our unit costs and is more efficient, Fuel Efficient contributing to a more sustainable future. As we rebuild the airline, we are optimizing the network for the return of business and international Travel and are building on the strength of our core and coastal hubs where we have been able to improve our local share by 3 points from pre pandemic levels. We also continue to put the customer at the center of everything we do, creating an enhanced premium experience.
This is successfully decommoditizing air travel on Delta, providing customers with the products and flexibility that they value most. Premium products are demonstrating resilience where demand is strongest with domestic and short haul Latin premium revenues outpacing main cabin by 5 to 10 points. We believe this will be reflected at the system level as premium revenue and other entities improves with the return of business and international travel at scale. We are also seeing increases in customer engagement and brand momentum. This is evident in SkyMiles acquisitions, which set an all time record in the month of June, outpacing the prior record achieved in July of 2019.
These acquisitions allow us to bring new customers into the Delta ecosystem. Engagement is also coming through the performance of our co brand credit card program as customers are increasingly seeing the value proposition and continue to aspire for travel Status and premium experience. For the quarter, co brand spend was 110% recovered to 2019 levels, driven by improving T and E spend indicating customers' desire to explore the world and reconnect with friends and family. We exited the quarter with co brand spend around 115% recovered for the month of June. New co brand account acquisitions Improve more than 75% sequentially and were around 90% recovered to 2019 levels for the quarter.
In addition, we are seeing more customers moving into premium co branded cards given the value proposition for those products. The improving trajectory resulted in cash remuneration from American Express in the month of June exceeding 2019 levels. We expect remuneration will continue to remain at or above 2019 levels into the second half with significant growth opportunities in the years ahead. In closing, the foundational building blocks for our long term success are in place. With the industry's best domestic and global network, renewed and efficient fleet, a decommoditized product and a highly valued brand And the industry's best employees, we continue to extend our commercial and financial lead.
Combining that with our efficient cost structure Puts us on a path to improve on our pre pandemic margins and generate sustainable free cash flows, allowing us to reinvest in the business and restore our balance sheet Delta's future is incredibly bright. And with that, I'd like to take this opportunity to welcome our incoming CFO to Delta. Dan, I'm looking forward to working with you. And now I'll turn the call over to you for a few minutes.
Thank you, Ed and Glenn, for the warm welcome. Certainly pleased to be here and begin working closely with Ed, Glenn and the entire executive leadership team to ensure that we continue to establish clear priorities, Deliver on our commitment and build a more resilient valuable Delta. There is no doubt it is an interesting time to join. But what really drew me to this opportunity at Delta is the unique culture, industry leadership And growing brand strength with customers. It's a combination like no other in the industry.
It's really clear that there's a great deal of talent in the finance organization. I'm humbled and honored to lead this organization forward through this pivotal time. A key guiding principle for me will be open And transparent communication with the financial community. I look forward to speaking all of you and getting to know key stakeholders in the coming weeks months, including many of you on the call. Now, I'll turn it over to Gary for the financial update.
Thank you, Dan, and on behalf of the entire finance team, welcome to Delta. Good Good morning, everyone on the call and thanks for joining us. Delta People shined and carried our brand to new heights during the crisis. Those efforts combined with the strong demand recovery Glenn described and the benefits of operating a simpler more efficient fleet are enabling us to cross a number of key milestones on our journey to return to and exceed 2019 performance. Let me quickly review the second quarter, then provide color on our second half cost outlook.
I'll wrap with a discussion of our capital outlook and balance sheet. Starting with highlights from the quarter, we reported an adjusted pre loss of $881,000,000 a more than $2,000,000,000 sequential improvement and generated a solid June month profit despite revenues for the month June still 40% below 2019. Non fuel costs rose 6% sequentially on 21% higher capacity As the teams continue to rebuild our network efficiently, non fuel CASM was 9% higher than 2019. We realized savings from tax credits and third party rate reductions that were offset by rebuild expenses and maintenance and pilot training And a non cash expense for employee flight passes awarded to our employees in recognition of winning the J. D.
Power award. Adjusted fuel price per gallon of $2.12 was 11% higher than the Q1, including a $0.23 per gallon impact from refinery losses. We realized a 7.1% fuel efficiency gain versus the June quarter of 2019 with the majority driven by fleet renewal. Demand momentum fueled cash sales across the booking curve, driving $1,500,000,000 of growth in our air traffic liability to nearly $7,000,000,000 now $300,000,000 higher than the same period in 2019. With the strength we see in the demand environment, we expect Our air traffic liability to remain above 2019 levels into next year.
Daily cash generation was substantially positive for the full quarter. More importantly, we generated nearly $200,000,000 of free cash flow, excluding our $1,500,000,000 pension contribution and $2,500,000,000 in We are transitioning now away from daily metrics to focus on regular free cash flow, The best measure of value creation as we turn the corner on profitability and look to restore our financial strength. As we head into the second half, we're excited to shift our focus to return into profitability, generating cash and restoring and exceeding our pre COVID results and financial position. With continued recovery and limited cost growth, we expect to be profitable in both the September December quarters at current fuel prices. Regarding the cost outlook, I'm very happy with the team's performance in the first half as we continue to rebuild the network efficiently.
We remain on a path To achieve non fuel CASM below 2019 levels by the Q4, though the strength of demand recovery is creating some welcome cost pressure on Despite these pressures, we will see continued leverage in key areas. For example, we expect an approximate 8% headcount growth through the end of the year On a nearly 15% increase in ASM production, we'll see our fleet utilization rise from 2Q levels approximately 15% below twenty 19 to approximately 5% in the 4th quarter. Our airports will also see better utilization, particularly our coastal hubs As they move from 70% to more than 90% restored. As we accelerate maintenance and training to meet higher potential Capacity in 'twenty two, rebuild expenses are stepping up in both the 3rd and 4th quarters to a 5 to 6 point cost headwind versus 3 to 4 points September quarter will see non fuel costs grow sequentially at roughly the same rate as capacity due to the higher rebuild and revenue related expenses I mentioned. With these factors, September quarter nonfuel We expect to close the gap to 2019 non fuel CASM in the 4th quarter Through continued volume leverage as capacity remains essentially flat from the 3rd to 4th quarters instead of the more normal seasonal decline of approximately Adjusted fuel price per gallon for the Q3 is expected at $2.05 to 2.15 Fuel efficiency for the quarter is expected to remain better than the September quarter 2019 period by approximately 5%.
On the capital outlook, we now expect gross CapEx of approximately $3,200,000,000 in 'twenty one, up from our original guidance of $2,500,000,000 driven by our aircraft announcements. Hats off to our fleet and technical supply chain teams for landing these compelling opportunities that meet 3 key These transactions are opportunistic and take advantage of attractive economics in the used market. These aircraft types are currently active in our fleet and entirely consistent with our fleet simplification strategy. In addition, these aircraft along with the 321neo options We exercised in April will support the potential for up to 7 points of additional capacity restoration at compellingmarginaleconomicsby2023. We have a lot of additional optionality in our fleet plan to flex capacity up Or down at low cost depending on the shape of the recovery.
Our 717 and 767 fleets are our largest levers. We're still flying these fleets at scale today and could retire additional units or reactivate parked aircraft to meet higher demand scenarios. Let me now move to the balance sheet. With improving financial performance and a strong liquidity position, we're using cash to reduce leverage and non operating While rebuilding unencumbered assets and managing our debt maturity profile. During the quarter, we prepaid $450,000,000 in aircraft related debt In addition to normal amortization of $875,000,000 and contributed $1,500,000,000 to the pension plans.
Additionally, we paid cash for all but 3 aircraft deliveries. Since October, our debt reduction initiatives have totaled $11,000,000,000 and freed up 6,000,000,000 With the additional funding this quarter, we do not foresee the need to make any material pension contributions in the future. By year end, we expect the plans to be fully funded on a Pension Protection Act basis and 90% funded on a GAAP basis. With this level of funding and the plans frozen to new participants, we are now reducing the investment risk of the portfolio to protect our funded status.
The great work of our
pension and treasury teams over the last decade in funding this obligation frees up roughly $1,000,000,000 in annual free cash flow that can be used in the future to further delever or otherwise create value. Adjusted net debt is expected to be approximately 19,000,000,000 The end of the September quarter modestly increasing from where we ended June as we pay cash for aircraft deliveries. As we turn the corner on profitability and look to the future, We're excited to shift our focus to restoring our business and delivering long term value for our owners. Restoring our financial foundation remains Let me conclude by congratulating the 75,000 people who make the Delta difference a reality every day. These excellent results are your scorecard and a reflection of all you do to delight our customers.
With that, turn the call back over to Julie to begin the Q and A.
Katie, can you please remind the analysts how to queue up for questions?
Thank Thank you. Our first question will come from Helane Becker with Cowen.
Thanks very much, operator. Hi, everybody, and thanks for your time. Welcome, Dan. So here's my questions. My first question is, I was wondering if you could talk about maybe Glenn, this is How you expect the non U.
S. Recovery to look by the different regions over the next, say, 6 to 12 months, If you can. And then my other question is, I think, Glenn, you might have talked a little bit about this in the ATL line. Are you seeing that people are booking further out? And I don't know if you can talk to like after Labor Day bookings or even holiday bookings, how they're comping to previous levels?
Thank you.
So Helane, first about the entities a little bit. We're seeing a U. S.-based demand recovery to the open countries in the transatlantic. And we expect our loads to move to be close to historical levels running probably in the low to mid-80s by the August, September, October period. Again, you're September October period.
Again, you know that 212F restricts Europeans from coming to this country. So I think we focused on those countries Generally have high U. S. Outbound demand. And as we move forward, we will be adding a little bit of capacity, but essentially keeping our levels Flat where we would normally pull down in the September, October timeframe and focusing on our European hubs and distributing traffic through them.
So I'm pretty optimistic about how the results could play out in the transatlantic and that's really we have 35% to 40% of our travel Still missing with the European origin piece not open for sale and with business really not recovering at the same level as leisure. So Pretty optimistic about where we can get to on this leg, but there's a lot more to come in the transatlantic. In Latin, it's really the tale of 2 markets. 1 is the Close in U. S.
Point of origin leisure market as well as Mexico business. Both of these are actually exceeding 2019 levels. So short haul Latin is doing quite well and we continue to expect that to be very, very strong as we move into the more traditional leisure season in the late fall. And then the Pacific, which I think Ed has talked in the past, we expect this to be the laggard due to low vaccination rates and continuing outbreaks over And restrictions in the Pacific, and we really don't see any impetus for that to be lifted now. I think we're looking at a 2022 At the earliest probably, we have significant recovery in the Pacific.
So, Atlantic, clearly the furthest along. That's great for us because 5% of our international revenues are in the transatlantic. So, we're excited about what we see in terms of U. S. Demand there.
Domestically post Labor Day, this is every month that we look from August to September October. Clearly, as you move out, you have fewer and fewer bookings, but we have about a third of our September bookings on the books now. And we have As it sits today and we expect to give some of this back, but we have positive yield in every one of the entities. We have sequential improvements in RASM. So I think we're seeing very strong indications of demand through the post Labor Day period.
Of course, those are initial indications. We have a long way to go as we move closer and closer to those departure dates.
Got you. That's very helpful. Thank you.
Thank you. Our next question comes from Sheila Kahyaoglu with Jefferies. Good morning, everyone, and thank you for the time. Maybe just on cost related questions. On CASMs, they're expected to remain fairly elevated in Q3.
How do you think about the delta And driving CASM from up 11% to 14% in Q3 versus 2019 levels to flat in Q4. I get about half of that is rebuild costs, but maybe what's the bridge and the moving pieces? And more broadly, how do you think about cost headwinds and inflationary pressures?
Well, Sheila, we
talked about the major drivers. The key is really leveraging the Continued build of the network. And as I was describing in prepared remarks, generally when we move from the 3rd into the 4th quarter, we have Pretty big reduction in our activity levels this year. We expect that to be relatively flat. That gives us the opportunity to leverage the things that I was describing to get some good incremental leverage on our people, Some good incremental leverage on our asset utilization, and it's just a natural outcome of the way the capacity Progression is moving.
In terms of how we see the bigger pieces, they don't change that much between the third and It's the 3rd and the 4th quarter. We expect that rebuild expenses will still be at elevated levels In that 5 to 6 point range in both quarters. And one of the things I mentioned on the last call, from a mix point of view, Both the second and third quarters, we've got about a 5 point drag from not having anywhere near as much of our long haul international Which is just structurally very low CASM, long stage length flying. As we move into the Q4, it's still a headwind. It's not quite as much.
It's about
Thank you. Our next question comes from Connor Cunningham with MKM Partners.
Hey, everyone. Thank you. It's great to hear that corporate continues to improve, as people return to the office. I will I do have to ask like your competitors are now pushing to replicate some of your success that you've had with large corporates. So I was curious if you could talk to The modes that you've built around that franchise and how you anticipate strengthening that segment in the face of potential competition?
Well, thanks, Connor. It's a very important segment for us and we have won, as I think you know, Business Travel News, Airline of the Year for 10 straight years and we expect to hopefully win it again this fall as well. Our team does a magnificent job Of servicing the accounts, providing the technology, the access, the insights to make their job at travel on Delta It's as easy as possible and that's supplemented by the great product and service that our people put forward every single day. We're the Leading operational airline in the industry. So when you marry up the investments we've been making, particularly in the premium product sector, which our Corporates are a main consumer of with the great service our sales and commercial team provide and the product and Operational integrity of the business, it's a very, very strong moat.
We have gained share over the pandemic, meaningful amount of share That we have gained and the one thing that we have seen is when customers come to Delta, they don't leave. And so we're going to continue to expand upon that. Great to hear. Thank you.
Thank you. Our next question comes from Hunter Keay with Wolfe Research.
Hey, thanks. Good morning. I got two questions for you. The first one is for you, Ed. How do you feel about deleveraging the balance sheet if it hurts your ability to maintain market share?
Good morning, Hunter. I'd have to ask you first, so you're sitting on a rocking chair asking that or no?
Actually, I am.
I'll rock back in my chair as I answer today. I
really am.
That's good.
That's good. De leveraging It's important to us. It's something that first of all, we're the same team that's been here for over the last 15 years. We believe in derisking our balance sheet and are then paying down debt. And we also know that we can do that while also driving a premium product and service offering in the markets that We see as being critical to Delta.
We were able to do both those things over the last decade and we'll continue The level of debt that we took on over the pandemic, candidly, It's a meaningful amount, but it's not an overwhelming amount. It was about $8,000,000,000 of net debt that we took on during the pandemic. And when you think about, As Gary mentioned, we're basically done funding our pension plan with no more pension contributions required. As I think you also know that We've been averaging over the last several years close to $3,000,000,000 $2,000,000,000 to $3,000,000,000 a year in stock Which clearly we won't be doing in the next 2 to 3 years until we get our investment grade metrics back And another $1,000,000,000 on top of that of dividend distributions that we've been making. There's a substantial amount of free cash That is available to us as we reclaim investment grade for Delta.
And we'll be sharing our longer term metrics At the Investor Day in December and showing you the path forward, but we can do all this and have plenty of headroom to compete Hard and effectively in the marketplace.
Okay. That's super helpful. Thank you. And then, Gary, if you would just I think you said something about 7% capacity. Are you saying that the current plan for 2023 system capacity is to be 7 Above 2019, but you can take that higher or lower if you need to.
Am I interpreting that correctly?
No, Hunter, that's not what I was saying. What I was saying is that the fleet actions we've taken give us the potential to add 7 points To our capacity profile by 2023, but I was also noting the flexibility that we continue to have with Some of the flex fleets to go up or down. And I think the teams have positioned us really well to react to what comes at us In terms of the demand environment.
I see. Okay. Thank you, Gary. Thank you, Ed.
Thank you. Our next question comes from Jamie Baker with JPMorgan.
Hey, good morning, everybody. And Just apologies off the bat that my colleague Mark isn't joining us, but he is on one of your aircraft on a JPMorgan sponsored business trip. So I guess we're all better off. Glenn, is there a way to tell what portion of summer domestic revenue is driven by reallocated international For example, could you look at SkyMile behavior this summer and identify what portion of those travelers would have Historically been in Europe or Asia instead?
Yes, I think domestically we see a redistribution towards domestic From long haul international, that's a natural occurrence. I think people are ready to get out. The exact quantification, I think would be difficult, but we do see that if those leisure destinations are open, there's significant demand for that and That includes the transatlantic where it is open. And if you think about running load factors in the mid to high 80s in the shoulder season as we head to the end of the summer here Just on U. S.
Origin travel, there's some pretty strong demand trends that we're seeing. And so if it is open, people want to get there.
Yes, definitely. Thank you. And Gary, just to follow-up on the ATL and I haven't historically obsessed About the air traffic liability, until we all sort of had to. Ordinarily, the second to third quarter sequential Decline for Delta would be somewhere around, I don't know, dollars $750,000,000 $800,000,000 If we continue to get international reopening, particularly for inbound U. S, Could we model for something closer to a flat outcome next quarter?
So staying in the 6.5 $1,000,000 range of that sort of thing or would that just be too ambitious? I know you said it would be above last year's levels, but that still leaves a lot of room.
Yes, Jamie, obviously, there's still a
lot of uncertainty around that. Our thinking right now and That's embedded in how we're thinking about net debt is for a slight decline in that, but we don't expect that you're going to see the normal seasonal Pattern as we move through the remainder of this year for all the reasons you just highlighted.
Okay, perfect. Thank you everybody. Appreciate it.
Thanks Jamie.
Thank you. Our next question comes from Stephen Trent with Citi.
Hello, everybody, and thanks very much for taking my question. Just a quick one from me. When we think about And certain pockets in the United States that we are seeing some difficulty with new variants and low vaccination rates. Do you see any scenario in which Delta could trim capacity to some of these regions or Reinstate on some routes blocking off middle seats?
Good morning, Steve. I don't. As we've We've been monitoring our bookings and clearly reminding of the risks around COVID and the new variants and The continued information that the CDC provides us with, we have not seen any Reduction or drop in demand, looking out over the next 60 days to 90 days, which is about as far as our crystal ball can go right now. We know our customers are largely vaccinated. Our people are largely vaccinated.
We have over 72% of Delta. People are vaccinated and the vaccines work and they are giving people the ability to get back to their lives. So no, we're not anticipating any changes at this time.
Okay. Appreciate that, Ed. And thank you and looking forward to seeing you guys in December 15, I believe you said. And thanks again.
December 16. 16.
16, excuse me. Thank you.
You can fly down and see
us on the 15th
Thank you. Our next question comes from Myles Walton with UBS.
Thanks. Good morning. Ed, I think at the beginning you mentioned commercial partnerships and creating $1,000,000,000 of value from Wheels Up And clear from a zero cost base. I'm curious of your view on the eVTOL market given the moves by American as well as United on that front and where that fits in your portfolio of investments and operations over the medium term?
Thanks, Myles. As you can appreciate, every one of the proposed manufacturers has been after Delta. We've heard from many of them. We're studying this space and we will continue to Get smart in this space. I think it's at a very, very early stage right now and I think a lot of the plans that we've seen are a bit premature candidly, but It's not anything that we are unaware of and I guarantee every one of those manufacturers would love to have Delta colors On their plane.
So hard to predict timing, but we're in the marketplace having lots of conversations. Okay.
And then maybe Gary, just a clarification, the CASM ex questions, I'm just looking in absolute dollars, It looks like sequentially 3Q, you're looking for the same unit cost X and 4th quarter the same. And the improvement was really just about comps In 2019, is that right? And then, for 2022, how much of these rebuilding costs Go away and we get the tailwind of those 6 points. Thanks.
Yes, I'm not sure I would characterize it exactly that way, But it is about having more scale relative to 2019. So sequentially, I think that what you outlined is Roughly accurate, and that is what we expect. As we go into 2022, your question was About the sustainability of the rebuild?
Yes. What goes away from what you're doing?
Yes, we definitely expect those to moderate. A lot of that is going to depend candidly on how the demand environment Developed. What I would say is, what we've articulated is driving to levels below 19. We're not Excluding rebuild expenses. This year they happen to be particularly high as we get into 'twenty two, we expect those to be more normal And it's part of the thought process on what we've got to accomplish.
Myles, if I could speak to that for a second. We At Delta, our number one task is to safely get our business to back up with the service levels that our customers deserve and expect of Delta. And given the huge surge in demand that we've seen over the last 90 days, the entire industry is challenged with that. That's not a unique Delta Position. And we're going to do everything we can to get ahead of it.
And that includes staffing levels, providing whatever support we need This is about protecting our brand and our long term customer base rather than trying to manage costs for an individual quarter. We will hit the close targets that we mentioned to you. One of the things that we learned a lot about Delta Over the pandemic is our ability to manage down labor cost is really unique in this industry and we have a whole lot more, Many more tools and flexibility, I think, than we ever really appreciated. And so we shouldn't think about labor, which is the biggest part of the rebuild As a fixed cost, that's not going to stay. So the productivity, the efficiency, the ability to work closely with our people, We'll be in really good shape on the cost front next year and we'll have protected our customers' experience at the same time in the revenue base, Which is the most important.
Thanks.
Thank you. Our next question comes from Savi Syth with Raymond James. Hey, good morning. Competing on product is kind of good for the consumer and the industry, but One of your competitors plans to grow like 1st class next to like room seats by about 10% a year through 2026. And just kind of curious if that level of growth is something we'll see at Delta because it's part of some kind of A structural trend or if that has any implications to Delta's premium kind of revenue leadership or how Delta is set up to kind of compete against that?
Processed many, many years back and we're well along and I think we're objectively maybe the furthest along in terms of exploiting that opportunity. There's probably more space out there for other carriers given the appetite we've seen for these products that have in sustained through the pandemic. So I'm not going to articulate on anybody else's plan, but we think that there's continued growth in our Fleet evolution as we continue to up gauge the airline over the next several years, our percentage of seats that are in the premium cabins continues to increase. And we think given the fact that we are still in the early stages of being able to distribute those products and services To all of our customers, through all of our channels that there is plenty of opportunity for us to continue to grow that space in the next years, next several years.
That makes sense. Thanks, Glenn. And maybe a quick follow-up for you, Glenn, as well. Just appreciate the color on the domestic Corporate demand recovery, I know that's around volumes. Is that RPK?
And curious what that looks in terms of revenue. I'm guessing volumes have to recover 1st and then revenue comes back, but I was just wondering if it's similar or if there is a disconnect there?
Yes. Those are passengers and yields Domestic leisure are up, yields on domestic corporate are down, but we see trajectory in domestic corporate and we expect that, As you say, they continue as we move forward.
Makes sense. Thank you. Thank you. Our next question comes from Mike Linenberg with Deutsche Bank.
Yes. Hey, good morning. I guess 2 Projection related questions for Glenn. On Amex, over the last year, you sort of had backpedaled on when you would get To the $7,000,000,000 of contribution, obviously, because of the pandemic, the fact that, I guess, the month of June or the June quarter, we were 110% and 115 In the month of June, Glenn, can you update us? Are we now not on just track, but maybe at a pace that we'll get to that Amex bogey prior than the previous forecast?
Yes. Well, I think that's something you'll have to come toward December Investor Day to see. I don't think we're ready to disclose the exact date yet, but it suffices to say that we're feeling much better about making up some ground that we lost during the pandemic
Yes. I would Mike, this is Ed. If I chime in, I would say that we are thrilled with the Relationship with American Express, our team, their team, I was with Steve Squeri last Friday And I think we have the best performing card in their entire portfolio. Delta, even though we're the highest Value that we create, I think we're also the best performing on top of that, so in terms of growth. So it's really been a great relationship And that's still without a lot of travel spend that's missing international and business yet from the card.
So We're excited.
Great. And then just sort of a second projection question, Glenn. I mean, to watch you go from 20% of corporate volumes The $40,000,000 and yet even recently, I think we had a survey from U. S. Travel and even the GBTA Talking about U.
S. Corporate travel getting back to, I don't know, 70%, 85% by 2024, It just feels very conservative. I mean, it seems like we're running well ahead of that. Is that the case? Or is there just something different at Delta where you guys are outpacing the industry?
Yes.
Mike, let me chime in on that one too, because I've got the numbers right here in front We've done our own survey, talking to our clients, the biggest companies in the world. I know a very large number of them and I couldn't make heads or Sales out of what the GPTA was speaking to either. Let me give you the most recent survey and this is as of last week updated. 36% of our big corporates expect they're going to return fully to pre COVID levels no later than next year, 2022, it's 36%. Another 21% says fully back no later than 2023.
Interestingly, only 5% of our big corporates say that we will never return To pre COVID levels, 5%. That had been 8% in previous surveys, that's now down to 5%, while 38% Indicate it's still unclear as to what their levels, not that they're not getting back, it's just the level of flying and the timing is still somewhat uncertain, which Understandable. So if you take the 2022, 2023, that's 57% no later than 23% and you assume, say, 75% of those unknowns, the 43%, that gives you actually 90% back over the course of the next couple of years. And frankly, I think it's going to be even better than that. So This is one of the things that as we have seen, there's enormous pent up energy and demand for travel.
Also in that survey, 93% of our customers said they're going to increase travel in Q3 over Q2 And many of those by meaningful amounts. So I think the surge is coming and just as we've seen it on the consumer side, We're getting ready for it on the business side. And once you open businesses, offices and you get international markets opened, I think it's going to be it's really it's
Thank you. Our next question comes from Duane Pfennenwerth with Evercore ISI.
Hey, thanks. Good morning.
Ed, you have a good Board, in my opinion. Lots of experience driving real value In consumer industries, maybe arguably easier consumer industries. Can you give us some insight into debate At the Board level regarding balance sheet improvement as a priority right here and now versus investment, are there differing opinions On investment rate versus balance sheet improvement, and I guess longer term is investing half of your operating cash flow How we should be thinking about 2022 and beyond or how we kind of moved away from that?
Well, thanks Duane. We do have a great Board. I agree with that. And there is a lot of good insight that We garnered from that Board. This is largely the same Board that's been with us over the last decade.
It was the Board that was involved And how we delevered coming out of the financial crisis in 2,009, how We managed to lead the industry in getting back to investment grade metrics over 5 years ago, While delivering a premium product and service level and expanding internationally at a rate probably faster than anyone, particularly with the investments that we So, the Board knows the strategy that we're on. We've talked a lot at the Board level about needing to get Our debt down off the balance sheet to get those investment grade metrics back. We'll give you some very specific Guidepost on that when we have our Capital Markets Day in December, so you know what to expect from us. And at the same time, we're also investing meaningfully into the business with opportunistic purchase of Airbus 350s and 730seven-900s that are current vintage, they'll plug and play and we'll continue to be able to grow the business accordingly. So The strategy actually is not that different from where we've been.
And I think it's going to we're going to stay very focused to getting the investment grade back and growing the business at the same time. Okay. Appreciate the thoughts.
Thank you. Our next
Thanks, Ed. Good morning. Ed, in response to Mike's question, you said, I think based on your time with Steve that the Delta card is Amex's highest value, like what do you mean by that? Are you trying to Say that it's a very profitable card for Amex as well or their most profitable card?
No, I don't know if it's the most profitable. I hope we are. You'd have to ask Steve that. But what I can tell you is it creates the highest overall level of spend and growth In the portfolio and it's been that way for some time and it continues and we both continue to invest to keep it that way.
Okay. Okay. And then Gary, you said the fleet actions would allow you to add 7 points to ASMs by 2023. So what level of Chin, are you on track to kind of achieve in 'twenty three? I know there's a lot of flexibility, but Does the current fleet support 100% of 2019 capacity in 2,003, 105, like where are you now with that?
Thank you.
Yes. Joe, we'll talk more about that and what our long term capital needs will be in December with you. What I was pointing out was the portfolio decisions that we've made gives us 7 points of additional Capacity that we can bring in that timeframe and just continue to point out that the team has positioned us with a tremendous amount of flexibility to So either up or down depending on how we see the demand environment. But we'll have more color on that With a bigger picture about how some of the other components play into it as well.
Okay. Thank you.
Thank you. Our next question comes from Chris Stapoulopoulos with Susquehanna International.
Good morning. Thanks for taking my question. So your marginal cost per mile in 3Q was just under $0.04
And it's
picking up sequentially significantly and
I realize that
as you said you're spooling up capacity here, but I was wondering at what point whether it's in ASMs or revenue, where we could expect to see this Operating leverage for the costs that you've taken out over the last year or so, more clearly show up, in results. Normalizing for the change in your marginal cost per mile From the second to the third quarter as you spool up here, what a kind of a more accurate run rate looks like and that would also Assuming corporate does return as you expect by the end of the year.
Well, Chris, on an underlying basis, we still have and are experiencing a lot of leverage even as we move Into the Q3, that will be the case for a good bid here. The guidance we have in the Q3, we're still Operating 28% to 30% below where we were in 2019. So there are Parts of the system where we were under pressure as Ed described and we're absolutely meeting the needs there, but there are also Lots of opportunities for us to drive that leverage. Some of what you're seeing in terms of the moving pieces are, At least I think unrelated to that, a big cost pressure as we've moved from the second to the 3rd quarter at least a couple of points, it's just selling related expense, which we're obviously thrilled to be seeing. And it's just a function of the demand recovery that we're experiencing.
Normally, when we're in a typical year, we work very hard to not be maintaining Aircraft during the peak summer months for obvious reasons, we want them flying and generating contributions. This year, we've got a maintenance Step up as we move from the second to the third quarter. In fact, I think when you look at 3rd quarter maintenance, it will
be comparable to if not even slightly ahead of where we
were in if not even slightly ahead of where we were in 2019 instead of the down 30 ish percent that you've been seeing over the last few Quarter. So, it's a year with a lot of unique features in terms of how they play out on the cost side, but the fundamental
And now we'll go to our final analyst question.
Thank you. Our next question comes from Andrew Deodora with Bank of America.
Great. Good morning, everyone. Just kind of wanted to go back to costs. Obviously, the labor market is very tight right now. And I think your last base pay increase was in October of 2019.
So Gary, is there anything in your 3Q or 4Q CASM expectations for a wage increase? And I guess, Ed, how are you thinking about the need for 1 right now?
Thanks, Andrew. We don't preannounce what we're doing Our labor strategy and cost and obviously our people are working really hard and delivering great value. We're still losing money. We need to get the company stabilized first before we start talking about wage increases.
Okay. And then last one for Ed. Not sure if you're going to have any comment on this, but the last end of last week, the President issued an executive order and you just called out flat administration as one of its objectives. What do you Just given your position in a pretty stock constrained market here in New York, just love to hear if you have any comments on that. Thanks.
I really don't. We'll study. We'll talk to the administration and Department Transportation and Secretary Bujig and many, many individuals about it. We have a long history of driving great value for customers. It's expensive To drive great value and we're making the investments to drive great value.
There's no question when you think about the level of service, the quality of service, the reliability, The affordability, everything is moving in the right direction. So we're thrilled to be able to show them the actual results of what we're doing.
That will wrap up the analyst portion of our call. I'll now turn it over to Tim Mapes, our Chief Marketing and Communications Officer to start the media questions.
Good morning to all the members of the media. Thank you for your time this morning. We're grateful for that. And Katie, if you wouldn't mind reiterating for the members of the media the
Thank you. Our first question will come from Mary Slotenstein with Bloomberg News.
We're planning for the rest of the year. If you can talk about The numbers versus the percentage increase that that will be and then also if you'll comment on whether you're having any trouble finding enough people to hire?
Mary, this is Ed. We missed the first part of your question. Could you repeat that?
Yes. I wondered if you could Say how many employees you're going to add the number versus the percentage increase?
Over the course of this year, we're in the process of hiring between 45,000.
And are you having any trouble finding applicants for those jobs?
We are not. The Delta brand is a very strong hiring brand. We're having great success. The challenge, as I mentioned on the call, is the training, the time it takes to get people In position, whether it's on the phones and reservations or in the airports, it takes a few months and the demand has come back at such a fast clip. It's taken us all a little bit of time to catch our breath, but we'll be fully back over the next couple of months and providing we've been providing great service, but the Service levels that customers should expect and deserve, you'll be getting back from Delta in the next couple of months.
Okay. And have your flight operations been affected at all in terms of lack of flight crews?
Not at all. Not at all. We've been managing the best completion factor in the industry and it's not even close. Our team is doing a good job. We've been at this for over a year, managing the training queue and the training pipeline and our pilots and Our maintenance team are doing great.
Great. Thank you very much.
Thank you. Our next question comes from Tracy Ryginski with Reuters.
Hi, good morning. I was wondering if you have any updates on your plans for the Trainer refinery and particularly on the outstanding liability on the biofuel credits?
Tracy, we don't have Anything, any news in that regard, we continue to operate trainer. The team does a very nice job there. We said in the past that there are opportunities to pull another strategic partner in, we'd be open to that. Relative to the question around RINs, we are fully accrued. So I know there's been some discussion in the press about whether we Pulled away from acquiring RINs.
We just know the pricing of RINs is not a market based price at the present time and we We're not going to spend good cash chasing a fairly marketplace that isn't transparent. So We've accrued the costs, but we have time to decide as we settle those obligations over the next couple of years.
Okay. Thank you.
Thank you. Our next Question comes from David Kotick with the Associated Press.
Hi. Well, Mary asked my question, but if I could kind of follow-up. I know, Ed, you said that it's too early to raise wages. But what about starting pay? Are you having to raise Starting pay to attract people or do anything else out of the ordinary to find those 4000 to 5000 folks?
You know, it's interesting, Dave. We've looked at potentially hiring bonuses and other incentives And largely we haven't needed to resort to that. People look at the Delta brand as a place they want to be long term and say this is an opportunity to get inside Delta. So no, we haven't had to make any changes to scale. We always watch it.
We're very competitive in the market. We pay well. Our people, we take great care of them. But no, we haven't had to adjust our salary scales in any meaningful way. Okay.
Thanks.
Thank you. Our next question comes from Dawn Gilbertson with USA TODAY.
Hi, good morning. My questions are about the customer service wait times. They still are as long as 6 hours at least as recently as yesterday. So I'm wondering from a traveler's perspective, is there any end in sight? I've also noticed that you guys have temporarily Suspended helped through Twitter DMs, which is a frequent recommendation I and other travel reporters give.
So Is there any end in sight? And what's your best advice for people to reaching Delta, especially with last minute travel questions?
Thanks, Don. This is Ed. We are hiring a couple of 1,000 people into reservations. We've already hired at least Half that number, we've got more to go every single week, but more and more people are getting on the phones. We've reached out To many of the people at reservations who have retired as we had separation packages and voluntary departure packages over the last year, we We have a fair number of them that have returned.
They are on the phones. We have people working from home. It's not a question of not providing the staffing. We are doing everything we can. The volumes Are beyond anything we've ever seen.
They're beyond the high point of 2019 and the handling times are substantially longer as people have more questions, as Travel has changed as sort of the first time back. So we're incredibly sensitive to it. The number you mentioned is not the average number at all. Yes, there are rare The general SkyMiles queues, the premium queues, the non member queues, and we're all at the longest, the average We're seeing is in the 1 hour timeframe, but which is by the way way too long. And by September, we expect to get that back down to normal levels.
Could somebody comment or get back to me on the Twitter DM because you guys appear to be the only one of the major
I'm not sure about that. We'll get back to you.
Thank you.
And by the way, people e mail me every day, every hour, and that's a good way. If somebody needs help, just send me a note. We'll take care of it.
Thank you. Our next question comes from Leslie Joseph with CNBC.
Hi, good morning. Thanks for taking my question. For the employees that are coming in now that you're hiring, are they on average at lower wages than some of the people that left with a lot Senior people took retirement. And then also for the 28% of employees that are not vaccinated, are there certain work groups That's concentrated in and are you doing anything to decrease vaccination rates across the company?
Your first question, Leslie, yes, the starting rates of people joining the company are clearly lower And the rates that people retired at as they left the company after 25, 30, 40 years of service. So we are getting a juniority Benefit in the scale, we're giving a lot of people, a lot of our particularly our young managers are having opportunities To take on more responsibility and growth in their careers and that's all very, very healthy. Your question around vaccinations, the 28%, could you repeat that?
What are you doing to increase that vaccination rate across the company? And is that do you see that concentrated in any one work group Or geography, if there is a best case to access or information?
So listen, 72%, candidly, we're proud of It beats any national average by a meaningful amount. We do have pockets within the company in certain regions and certain demographics That are below 72% and we are doing everything we can to continue to encourage and incent. We provided $1,000,000 Last month in total awards to vaccinated employees through drawings, we had 40 different drawings of $25,000 a piece. I think we have one more drawing today that we have of anyone that's just We've given away free travel to employees Through drawings that could get vaccinated and we continue to describe the risks to individuals if they're not vaccinated from the variance. So, I don't know a company that's doing more to get its team vaccinated than Delta.
Thank you. Thank Our next question comes from Allison Snyder with Wall Street Journal.
Hi. Thanks so much. Just curious So what you are hearing about the mask mandate on planes, if you think it will be lifted in September and I guess how you feel about that if you are hoping
Hi, Ali. I don't know what's going to happen. It's up to the FAA. It's not really up to the Airlines to make that decision will be in conversations clearly with the FAA. I think it's important that medical experts Make those decisions not airline professionals as we've learned through the pandemic.
They're the ones that have all the insight and the information and keeping people safe. I can appreciate people not wanting to wear the mask. I don't like wearing the mask when I'm on board either, But it's something that we need to do to keep each other safe. And I think of their question about what's going to happen in September really depends on where we are in the recovery phase. If the If the variants are continuing, I think people are going to be a little more careful about lifting the masks.
If international borders are not yet opened, I'm not sure lifting the mask is going to help opening up those borders. There's a lot that goes into that and I think as many pros to taking the mask requirement off as there are to keeping it on at the present time.
Thanks.
Thank you. Our next question comes from mahu eunirishnan with Gift Airline Weekly.
Hi, good morning. Thanks for taking my call or my question. I had a question about the federal payroll support and whether Based on the arguments Delta Management made last year, if you still believe that the support was Facilitated with faster recovery protected jobs. And the second part of my question is what happens after October 1 and whether and what The burning off of the expiration of support will mean for Delta's earnings?
Well, the I think it's without debate that the federal support was critical To keeping our industry afloat, to keeping our employees employed and being in position for the recovery, as we've talked on this call, One of the biggest challenges we're having now is getting everything fully stood up, even though we've kept all our employees. So you can imagine if we had To actually let many, many people go and abandon those individuals, the challenges we'd be facing in our country Of getting travel moving again. So I think it's been an incredible success. I think one can debate the length of the PSP2 and PSP3. I see no interest in going beyond what we have at the present time with PSP3 and we expect to be profitable in Q3 3 and beyond without any PSP support, yes.
Thank you.
Katie, we have time for one final question, please.
Thank you. Our final question comes from David Zlatinick with TPG.
Hi, good morning. Thanks for taking my question. I'm wondering if you could talk a little bit about what you've seen in the last few weeks with unruly passengers. Has there been any upward or downward Trending in incidence of that. And do you have any thoughts on just what's been causing the sort of surge this spring early summer?
David, we haven't seen any meaningful shifts. It's been something we've been dealing with over the course of the pandemic. I know some people want to relate it to having to wear masks. I'm sure that's a piece of it. I don't know that's the main piece.
I think the bigger challenge is that we've got A lot of individuals that have been impacted, excuse me, their emotional well-being have been impacted during the pandemic. And as people are coming back out into society, you see challenges in all walks of life, not just in our industry, you see it in other places as well in society. So, obviously, social media amplifies that and puts it on a stage. That's not our experience. It's not our normal experience by any means.
They're rare. Our crews are trained and they're incredibly Professional in managing the conditions when we have someone who doesn't want to follow instructions of the crew. And unfortunately, it's something we've become good at. And I look forward to the return of our business and patterns of normalcy so that We can start to manage our business without having to worry about these effects.
Patterns of normalcy is a good way to put it. Thank you.
Thank you for the question, David, and thank you to all the members of the media for your time this morning. As we wrap up, we'll turn it over to Ed for final comments.
Well, I thank you all for joining us. It's been an hour and a half. We spent a fair bit of time with you, but hopefully, you've learned a lot as to why we're encouraged. And as we power our plan for the post pandemic future, why that I'm in our team As ever for the journey that we're on, U. S.
Travelers are returning and it's really a tribute to the incredible work of our scientific community in Developing effective vaccines and that's going to be key to opening the world. Our return to profitability in the month of June is a major milestone, Solid profitability close to 10% speaks to the strength of our brand and the great work of our team worldwide. As we move past this inflection point from crisis into restoration, the people of Delta will be front and center serving our customers and our communities. Our mission Of connecting the people of the globe is a noble one. It's an important one.
It's got great purpose and the social good that's generated by travel will be essential in the months and years ahead as our world heal. So I thank you all for your time today for joining us. Yes. One more time, I want to say a special thanks to all the Delta people worldwide for their great work over the course of this last 16 months in getting our business to a point where we're looking to bright skies ahead. So thank you all.
This concludes today's conference. Thank you for your participation.