Sailingfun, earlier you posted that there would be 900 million or so in profit sharing. Is that in addition to what was already paid out or was the Sep payment part of that? Will we get a Feb check and how much, roughly?

 

Was just in the main terminal and up walks Congressman John Lewis... To thank me for my service (I'm wearing my Delta uniform). I thanked him for his, in that politics is a rough business, I'm told.

The next thing he said was that he loved seeing our ALPA guys on the hill, and that they were doing great work up there.

Hard to get a better plug for the PAC.

 

September was included in the profit sharing but if things go as planned your Feb check will be similar in amount to your check last year.

Scoop

 

I'll have to reread the release. I thought we made a profit on the fuel hedges as well.

"$82 Million – The amount Delta reduced its fuel expense during Q3 as a result of fuel management initiatives, including $63 million in hedge gains and a $19 million profit at Delta’s Monroe Energy refinery subsidiary. The airline expects hedges and the refinery to reduce its overall fuel cost by $200 million for the entire year."

 

Are you taking pleasure with this statement?

 

From the earnings call this morning...they expect the overall profit sharing payout to be almost a billion, equivalent to 15% of W-2 for employees. We've already received 5%, so the check in Feb should be about 10% of 2014 W-2 (Flight Pay + Flight Adv).

 

Good post. As an aside, I think if you were to become unemployed, the cost of the plans on the exchange would be much cheaper. I was under the impression that the less you make, the cheaper the plans are.

 

That is the total number. The Feb check should be in the 8 to 10% range or close to last years check.

 

Wow....

 

Earnings report take aways: We are aiming for a 19% return on invested capital. Making tons of money but any extra money generated will go to investors (this was stated several times). We are still in love with JV's. Pulling down Atlantic flying and using some of those airplanes to fly the routes the 747's that are going away used to fly. One question referred to costs if an early pilot deal gets done. No direct answer but it was stated non fuel CASM would stay below 2%.

RA:

There are three key areas that we’ll de-risk going forward in our business. The first is the continuation of our capacity discipline.

we’re still finalizing next year’s plan and will have the details that our Investor Day in December, we’re targeting overall 2015 system capacity growth at approximately 2%

This capacity reduction in the trans-Atlantic has freed up smaller gauge right by the aircraft that we can now redeploy to the Pacific allowing us to accelerate plans to retire our entire fleet of 16 747-400s. We’ve already retired three in September and another one this quarter.

Probably the biggest sorts of questions we currently get from investors is how we’re managing the international entities in the current environment. Optimizing the international network is one of the best opportunities we have to continuing to improve margins and returns. Capacity discipline is especially important to this effort. And to this end, our plan is to keep our international capacity growth relatively flat next year.

The second aspect of risk reduction is diversifying our revenue base by widening our global footprint, building immunized joint ventures internationally with our equity investments

Through a combination of new and used aircraft purchases and right now given the huge glut of airplanes in the global market, we’ll have great opportunities for used aircraft purchases in the future.

With roughly 3 billion in free cash flow each year, we will continue to pay down debt, address our pension obligations and return more cash to our shareholders. As our net debt goes down and our free cash flow improves, our Board is quite focused on meeting ROIC goals, while continuously improving our shareholder capital returns. We have shown our commitment to return capital to our owners. In our initial capital deployment plan announced less than 18 months ago, we envisioned returning approximately $350 million per year. We will return more than 1 billion this year and have already completed more than 15% of our $2 billion share repurchase authorization in the first four months.

In closing while we are consistently producing record profitability we know there is more work ahead. For the fourth quarter, we expect 10% to 12% operating margins and a full year pre-tax profit comfortably above 4 billion.

Ed:

AeroMexico contributed more than 20% of the traffic into our key Mexican markets. And GOL contributed nearly 30% of the traffic from the U.S. to Brazil. Combined, this traffic generated $40 million of incremental revenues for the quarter. Our investments in these two carriers are proving to be beneficial.

In the trans-Atlantic, capacity levels have been recalibrated to the current demand environment working with our JV partners we lowered our growth plans to 1% to 3% for the winter with a similar level of growth plan for 2015. While our overall trans-Atlantic capacity will modestly grow, we have very different approaches to capacity within the entity. Our primary growth area is London. The Delta Virgin Atlantic combined capacity into London is expected to increase 2.6% in the winter as growing demand is supported by our new joint venture.

we have an aggressive strategy to improve our margins and returns and we have a three-pronged approach to restructuring the Pacific.

First, we’re adjusting our capacity levels. Our Pacific capacity will decline in the high single-digits next year with a 25% to 30% reduction in our low yielding intra-Asia flying. Second, we’re getting the gauge rate regarding our aircraft in the market. We’ve retired the first 4 747s this year with the remainder set to exit the fleet over the next two to three years. This year we’re backfilling a portion of this capacity with smaller gauged aircraft moved from the trans-Atlantic

PJ:

we’re on-track to produce $3.5 billion of free cash flow this year. We used that to continue to strengthen the balance sheet and return cash to shareholders with our $910 million of free cash flow during the quarter.

We have a clear line of site to achieve our $5 billion adjusted net debt targeted 2016. During the September quarter, we also returned $325 million to shareholders through dividends and buybacks. We paid out $75 million in dividends as we increased our dividend by 50% to $0.09 per share. In addition, we repurchased $250 million in shares during the quarter.

Q and A:

Good morning, guys. Regarding the $2 billion share repurchase program through 2016, with the stock obviously sub $35, do you guys need an authorization from your Board to accelerate the buyback if you wanted? Or in theory, could you put that whole $2 billion to work this year if you wanted?

Richard Anderson - CEO
Well, we do need to go back to our Board and our Board is quite focused on two things which is one return on invested capital and keeping that number high, and number two driving continued improvement in the returns to our shareholder. We expected our Investor Day to be in a position to update our investors because it is an incredibly accretive to the company to buyback our stock at these multiples. So, as Paul reiterated we’re well ahead of where we said we would be last May and you can expect that we would continue that kind of trajectory particularly given the tremendous value that we can create for our owners by buying back our stock...

Next year in Europe the majority of our capacity adds we’re thinking will primarily be in London, which is producing significant returns as part of the Virgin JV and I think the bulk of the overall system-wide capacity add next year is going to be in the domestic system and it is going to be reflective of the upgauging initiatives that we’re doing as both margin accretive and very incredibly cost efficient.

bottom-line is we want that 19% return on invested capital on a consistent basis and in order for us to do that we’ve got to be very adroit at deploying our capital to make sure we get a return or the maximum return every quarter.

Julie Yates - Credit Suisse
Good morning. Thanks for taking my question. This is a question for Paul. How should we think about 2015 non-fuel unit costs, taking into account the recent wage increase and if a pilot deal work to get done sooner than later? How comfortable do you feel you can still achieve the less than 2% growth in non-fuel CASM again after such strong cost performance over the last five quarters?

Paul Jacobson - CFO
Good morning, Julie. Well, heading into 2015 as we’re developing our operating plan right now, we still have the benefit of further increases in operating leverages as we continue to re-fleet and upgauge the airline, so that’s providing a lot of tailwind. We do have some cost pressures in 2015 but we have those every year. So we feel confident about our ability to keep it below 2% again next year.