Delta Air Lines (DAL) Q3 2026 Earnings Call: Q&A Summary

Q: Why is CASM deviating from low single-digit targets as the year ends?

A: Erik Snell explained that there are three buckets of investment: operational improvements, capacity discipline, and higher revenue-related costs. He noted that these were deliberate choices to support revenue quality and that the company has a path back to low single-digit cost growth.

Q: How should we think about CASM if fuel stays high and capacity takes longer to normalize?

A: Erik Snell stated that the company will remain disciplined on capacity and manage the business for margins, taking out costs where possible to elevate returns.

Q: What is driving the revenue and RASM acceleration despite tougher comps?

A: Daniel Janki highlighted strong demand, noting that the company is over 60% booked for the fourth quarter with high teens growth in premium products and strong corporate travel.

Q: What is driving loyalty program strength and can it continue into 2027?

A: Joe Esposito attributed the strength to higher fares and greater engagement across the SkyMiles ecosystem, American Express partnerships, and premium products.

Q: What are you seeing in domestic and international capacity, and will competitors cut capacity as energy prices rise?

A: Joe Esposito noted that domestic competitive capacity is down in their hubs. He added that as international hedges roll off, he expects global carriers to manage their businesses for margins.

Q: What is your view on industry ROIC and competitive capacity?

A: Ed Bastian remarked that the industry excluding Delta is destroying capital with a 3% ROIC. He emphasized that in a high-cost environment, carriers cannot grow their way out and must take action.

Q: What gives you confidence in the mid-teens margin framework going forward?

A: Ed Bastian cited the industry's ability to get greater value for its product, the sustainability of revenue, and internal operational investments in reliability and cost structure.

Q: How do you balance load factors and yields?

A: Joe Esposito explained that they manage for margins by supplying premium seats rather than Main Cabin seats, noting that they still have room to grow load factors.

Q: How do you think about the mix across cabins next year and delivery schedules?

A: Joe Esposito said they will maintain a similar balance of growing premium while keeping Main Cabin growth modest.

Q: Any color on the MRO business for 2027?

A: Daniel Janki expects double-digit revenue growth and steady margin expansion, with a long-term goal to double the business.

Q: Can you speak to the acceleration expected in the fourth quarter and exit rates on RASM?

A: Joe Esposito said they expect unit revenue progression from the third to the fourth quarter, with November being a strong month as they lap the government shutdown.

Q: How do you think about the growth of non-ticket revenue relative to capacity?

A: Joe Esposito noted that diversified revenue streams are growing at much higher rates than capacity, and Ed Bastian added that these streams come at higher contribution margins.

Q: Can you clarify what normalized capacity growth means for next year?

A: Ed Bastian explained that they are adaptive and will likely see more international growth than domestic, remaining cautious until they see the all-clear on fuel prices.

Q: What is the long-term plan for Seattle given increased competition?

A: Joe Esposito stated they are pleased with Seattle and will continue to invest in products and international gateways. Ed Bastian added that the market is large enough for multiple carriers.

Q: How sticky are fare increases and what is the outlook for 2027 if fuel normalizes?

A: Ed Bastian said the consumer is healthy and the market has accepted these price points, making the revenue strength sustainable.

Q: Can we see absolute CASM-Ex come down in 2027?

A: Joe Esposito noted they are at the peak of CASM and expect low single-digit growth as they lap investments. Ed Bastian added that absolute CASM likely will not decrease.

Q: How does the corporate franchise sit in the Transpacific and what is the competitive intensity?

A: Joe Esposito said corporate demand is resilient and as they add economies in the Transpacific, they are capturing more corporate traffic.

Q: Any thoughts on pursuing personal monetization of the loyalty program?

A: Ed Bastian said he is reticent to put a third party between the company and its customers. He noted they are creating value in-house, though they may consider it in the future.

Q: Are fuel surcharges based on day of the week a new pocket of pricing power?

A: Joe Esposito said it is a new phenomenon, but the company has not moved in that direction.

Q: What is your take on AI-powered shopping assistants?

A: Ed Bastian said they are cautious about giving access to inventory and prefer their own Delta Concierge solution to protect the brand.

Q: What are you seeing for early Q1 bookings?

A: Joe Esposito said early indications for Q1 are very similar to Q4 and they feel very good about forward bookings.

Q: What is driving the baseline increase in operational costs and how do you balance labor pay with margins?

A: Joe Esposito said the focus is on crew resiliency and improving completion factors. Ed Bastian noted they will not comment on contract negotiations.

Q: Can you provide color on what is driving loyalty growth and if it is sustainable?

A: Joe Esposito cited strong consumer wealth, Amex spend, and new partnerships like Hyatt. Ed Bastian added they are broadening the aperture to younger demographics.

Q: What are the key puts and takes on margin progression for 2027?

A: Ed Bastian said fuel is the overarching question, but they have many tools, including fleet efficiencies and operational improvements, to hit their mid-double-digit margin target.

Q: Can you size the upsell revenue bucket?

A: Joe Esposito said it is a fast-growing segment, but they are early in the process and will not provide an exact number.

Q: Is there a cost savings opportunity to update legacy systems or go in-house with software?

A: Ed Bastian said moving to the cloud has been a significant source of efficiency and they continue to work with partners to drive faster solutions.