Delta Air Lines, Inc. (NYSE:DAL) Q3 2019 Earnings Conference Call - Final Transcript

Oct 10, 2019 • 10:00 am ET

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Delta Air Lines, Inc. (NYSE:DAL) Q3 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Of course. [Operator Instructions] We will hear first from Michael Linenberg with Deutsche Bank.

Analyst
Michael Linenberg

Hey, thanks. Hey, good morning everybody. I guess maybe this is a question to Ed. If you can just give us an update on kind of where things, to the best of your knowledge, stand with respect to the tariff situation and the potential impact to Delta? And is it new aircraft orders? Is it order aircraft as they deliver? Any color around this topic would be great. Thanks.

Executive
Edward H. Bastian

Thanks, Mike. It's aircraft as they are being delivered, which we have expressed our concerns that this is kind of a retrospective tariff on the decisions taken in the past. That said, we're evaluating all of our options. We do not expect the cost to incur any cost of tariffs through the end of this year. We are expecting some deliveries out of mobile in terms of 321s and those do not carry a tariff.

And looking forward, we're examining our options next year to make sure that we mitigate any increase to the prices that we had already negotiated with Airbus. So at this point, we're looking at our options. I'm not going to get into any details around the options, since it's still pretty fluid at the moment. But we do not expect this is going to be a material cost to Delta, certainly not in the near term.

Analyst
Michael Linenberg

Okay, great. And then just a quick follow-up to Paul. I just -- I'm not sure if I heard it right. You talked about the capex associated with the LATAM A350s and I -- maybe that was just the amount that hits in 2019. Did you say $100 million or did I hear that right?

Executive
Paul Jacobson

Mike, you heard that correct. That's expected in the fourth quarter of '19.

Analyst
Michael Linenberg

Okay, great. Thanks everyone.

Operator
Operator

[Operator Instructions] Moving onto Duane Pfennigwerth with Evercore.

Analyst
Duane Pfennigwerth

Hey, thanks. So, just playing back the summer, it feels like you tried to flex up and respond to the environment and that has obviously driven some expense, some over time, some airport costs. Can you comment on the quality of the incremental traffic that you picked up? Was it high quality or was it low yielding? And is this something that you plan to repeat in 2020? If not, why isn't it a tailwind to the 2020 cost outlook?

Executive
Edward H. Bastian

Hey, Duane, this is Ed. I've said number of times, second quarter as well as the third quarter, we certainly were a beneficiary of the MAX not operating. That said, we don't believe we've got a significant amount of new incremental growth coming from that. The majority of the growth, clearly, was the strength of our own brand, strength of our product and the services which continues to outperform anything that we've seen historically.

And the cost that we talk about are not just due to the high demand. Remember, we ran a load factor of 90% from April all the way through August pretty much. But