Delta Air Lines (DAL) Q2 2023 Earnings Call Transcript

Delta Air Lines (DAL 0.08%)
Q2 2023 Earnings Call
Jul 13, 2023, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, everyone, and welcome to the Delta Airlines June quarter 2023 financial results conference call. My name is Matthew, and I'll be your coordinator. [Operator instructions] As a reminder, today's call is being recorded. [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, 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 an 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 Fourth of July weekend, our people delivered a great operation, completing over 21,000 flights with a 99.5% completion factor, an industry-leading on-time performance. The Delta people continue to be recognized. During the quarter, The Points Guy ranked Delta as the best U.S. airline for the fifth year in a 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 a 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 will 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 for Delta and our customers.

As I've 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 No.

1 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 will 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 of 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 No. 1 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 a 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 trans-Atlantic 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 widebody 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 a 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 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'm 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 -- Chief Financial Officer

Great. Thank you, Glen, and good morning to everyone. For the June quarter, we delivered earnings of $2.68 per share and an operating margin of 17%, ahead of our guidance and a significant improvement over last year. Our nonfuel 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, and this is down from five 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. Nonfuel unit costs have reached an important inflection point. We expect nonfuel unit costs to 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, it 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 nonfuel unit costs is an enterprisewide 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 $0.04 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 break even 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 seven -- $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 three 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 per share while generating over $4 billion of free cash flow and 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 deliver 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. Now, with that, I'd like to turn it back to Julie for Q&A.

Julie Stewart -- Vice President, Investor Relations

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

Questions & Answers:

Operator

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

Helane Becker -- Cowen and Company -- 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, did you just say that you're going to do four -- 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 both? Thank you.

Dan Janki -- Chief Financial Officer

I'll start with the first one. And as it relates to free cash flow for the -- this year, 2023, at Investor Day, we raised our guidance from 2 billion to 3 billion, 3 billion, the number for this year. And we expect, as part of our three-year plan, we said that we'd be at 4 billion or greater in 2024. And Ed talked about the three-year collective plan that we're working toward, 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 are 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 capacity within the existing spend level for digital.

Helane Becker -- Cowen and Company -- 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. Morning, everyone. Glen, you commented on the fall. Any chance you can expand on those comments a little bit more, especially U.S.

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 [Inaudible] 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 in the earnings, and you've seen some inflection in terms of close and build where it's starting to look better as we move 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 -- I'm going to -- what's the next bar here? What's the next step? Are you looking at $10? And obviously, you just gave us kind of the long-term outlook at the -- beyond Analyst Day in terms of the initiatives out there. But what are we thinking in terms of kind of financial targets in the 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.

Dan Janki -- Chief Financial Officer

And we're only halfway through our three-year plan.

Ed Bastian -- Chief Executive Officer

Yeah. We've already just increased the current year guide. We will most likely, at some point next year, hopefully, the first half of the year, have our updated long-term plan conversation, where we can talk about where we see the long-term financial targets for the company going. But right now, we want to focus on dealing a very busy part of the year.

We want to deliver a great operation for our customers. And we'll talk more over the course of the next 12 months as to how far the EPS can get.

Ravi Shanker -- Morgan Stanley -- Analyst

It's a very high-quality problem to have. Thanks, all.

Ed Bastian -- Chief Executive Officer

Thank you.

Operator

Thank you. Your next question is coming from Katie 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.

You know, I did some quick analysis that shows that that data isn't very correlated to the industry's RASM or yield historically. But, you know, 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 field -- fare spectrum? I know you're guiding to a decel in 3Q versus 2Q, you know, better than what myself and the Street was forecasting, you know, but a deceleration. Is it as simple as that or are there flaws in how that CPI data is calculated where it's relevant to Delta? Thanks.

Glen Hauenstein -- President

Well, the methodology is a sample of a sample, and so we're not seeing the same, and, you know, 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.

Ed Bastian -- Chief Executive Officer

Yes.

Catherine O'Brien -- Goldman Sachs -- Analyst

Great.

Ed Bastian -- Chief Executive Officer

Yeah. You know, one thing for the call because I know we -- a lot of people had this question. You know, if you think about where we were last May and June, demand had just turned on in a crazy hot way. Supply was really low.

People didn't care where they were going or how much they spent. They just wanted to go someplace. And we were seeing fares of up 30%, 40%, 50% in a lot -- particularly in a lot of the domestic markets where they could travel to. That's obviously not sustainable, and that's the comp set that you -- that's in the 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 draw what that one CPI print was off of a survey of a survey and how that relates to Delta for the future.

Glen Hauenstein -- President

Yeah.

Catherine O'Brien -- Goldman Sachs -- Analyst

I very much agree. Maybe one more for Dan, too. You know, Dan, you're well on your way on your 3 billion free cash flow target. I understand fuel is invaluable 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? You know, is that at all capped by your level of prepayable debt or you're happy to pay prepayment penalties? That means you take down that interest cost burden faster and [Inaudible] the business. Thank you for all the time.

Dan Janki -- Chief Financial Officer

Certainly. Any -- we -- as we've talked about, paying down debt is a priority here. Generating cash, paying down debt, the 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 of gross debt paydown. And our team's 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 going to 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 want to touch back on, I think, Ed, you talked about summer being strong, maybe Glen also added to it, for international, like 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 or May, it seems like they're coming back in early March, maybe even in February. What is -- is there a secular shift that is going on here where you're just picking up more and more international? It's a 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's the load factor points that are being driven by international? Is it five points of load, eight points of load factor that are on a connecting itinerary? Thanks for answering my questions.

Glen Hauenstein -- President

Sure. On the seasonality, you know, 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 want to accomplish for most of our markets is at least a full season of summer [Inaudible] which is, of course [Technical difficulty] And so, you've seen a lot of extensions into that period. You know, 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 -- we're going to have a really great summer, and our goal is to have a great winter as well. And so, that's what we're doing right now. And on the domestic portion of international journey, I think, in the last call, we said it was about 10, 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 hauls out of that, it would be a lower number.

Mike Linenberg -- Deutsche Bank -- Analyst

OK. Thank you so 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 to 12% for 2023. That implies 100 basis points of improvement in the second half.

How much of that is coming from fuel and nonfuel costs? You mentioned that down to one to three points. Is it all just cost benefits or are you assuming some continued yield strength in that Atlantic like we were just talking about and benefit from domestic hubs restoration?

Dan Janki -- Chief Financial Officer

Yeah. When you think about it first half to second half, a couple of things to think about. Certainly, nonfuel is the biggest driver of that. We were up in the first half, going to be down low single digits in the back half.

That's your real benefit related to that on a -- 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 a first quarter performance in that half performance. And when you put all that together, that also drives that margin performance first half versus the 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 and should we think about the skyline at 43 aircraft for the year given you mentioned some delivery constraints?

Dan Janki -- Chief Financial Officer

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 the 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

Yeah. On the seasonality between 2Q and 3Q, we had some of the day shift. The outbound Fourth 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 than 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 midpoint of minus three. Last year's international RASM went between 2Q and 3Q. It 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 the seasonal norms are.

Scott Group -- Wolfe Research -- Analyst

OK. 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 this year, that's still with a pilot deal. So, as we look ahead to next year, I know you've already said down low single digits, but am I wrong in thinking that the first half is going to be better than that?

Dan Janki -- Chief Financial Officer

Well, the pilot deal you have throughout this year, and as we've talked about, you have it 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 what we've talked about is the 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'll benefit from. So, we get efficiency.

You won't have the 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 of points when you think about pilots and wages into next year. And that's what gets you to the low single digits. It's the general framework associated with the drivers there.

Scott Group -- Wolfe Research -- Analyst

OK. All right. Thank you, guys.

Operator

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

Jamie Baker -- JPMorgan Chase and Company -- 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 or 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 say 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 history of competing well in New York, and we're really confident how 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. So --

Jamie Baker -- JPMorgan Chase and Company -- Analyst

And on the -- and thank you. And on the corporate survey work, any shifts in how individual sectors are responding? You know, for example, is the messaging from your tech customers unchanged from what it's been? That sort of thing.

Glen Hauenstein -- President

Well, I think -- we pointed out that the laggards are the ones that are most encouraged as you get to the fall. And I think -- you know, Ed's 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 trying to get back into -- the corporations are 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 -- JPMorgan Chase and Company -- Analyst

That's great.

Ed Bastian -- Chief Executive Officer

And, Jamie, I'd like to add one additional comment there. You know, 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 is 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 improvement here this fall, and you're hearing it from the travel managers as well.

Jamie Baker -- JPMorgan Chase and Company -- Analyst

Good. We happen to agree. 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 -- like 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

OK. 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 and coastal investments kind of coming in at higher unit revenues? Just trying to understand, maybe back to Katie's question like the differences between, you know, 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 in the -- 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 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.

Savi Syth -- Raymond James -- Analyst

Hey. Good morning. Just curious on the international capacity. You know, 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 capacity trends down, as we head out of 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.

Savi Syth -- Raymond James -- Analyst

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

Glen Hauenstein -- President

Yeah. I -- 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 gains they did in the early part of the recovery.

Savi Syth -- Raymond James -- Analyst

Thanks, Glen. 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 these strong results. On your trans-Atlantic JV, I just wondered if there's any new approaches, maybe any learnings through the pandemic that will, you know, change the way you operate going forward versus maybe what you've done in the past. You know, how much each side flies? You know, things like that.

Glen Hauenstein -- President

You know, we have a great trans-Atlantic joint venture. It was the first one and the most integrated and one that we think has huge customer benefits. And it's always evolving, you know. And that's the great -- and we have great partners that want it to evolve.

So, you know, we'll continuing evaluating how we approach the marketplace together. You've seen some swaps in the fall from things that we have flown to the 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

OK. And then maybe just for my follow-up on seasonally shaping capacity, it looks like nominally ASMs peak in July. They step down a little bit in August, and they step 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, you know, 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 1st of August. And so, we're through the summer travel period in the South, whereas 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, 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, I guess, you know -- and I know we're not guiding to 4Q here, but implied revenue in 4Q maybe feels a little bit softer than 3Q for the full year -- given your full year guidance, sorry. You know, is that conservatism around the off-peak periods like we were talking about back in 1Q with booking trends that have just changed and, you know, cancel fees that -- or the lack of cancel fees that have changed consumer behavior?

Glen Hauenstein -- President

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

Brandon Oglenski -- Barclays -- Analyst

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

Glen Hauenstein -- President

Well, I think what we have left to go in the year is 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 the year. 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, is does business will travel more, return more than we expect? 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

OK. I appreciate it. Thank you.

Julie Stewart -- Vice President, 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 question.

Tim Mapes -- Chief Marketing and 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'll jump in with members of the media.

Operator

Certainly. [Operator instructions] Thank you. Your first question is coming from Alison Sider from Wall Street Journal. Your line is live.

Alison Sider -- Air Travel Reporter

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

Ed Bastian -- Chief Executive Officer

Hi, Ellie. Obviously, we were 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 that 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 -- Air Travel Reporter

OK. 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 toward pilot experience hours. If that's something you'd do favorably or if Delta would have any plans 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, Chief Legal Officer, and Corporate Secretary

Hey, Alison. It's Peter. You know, 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 -- Air Travel Reporter

Thank you.

Operator

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

Leslie Josephs -- Airline Reporter

Hi. Good morning, everyone. I'm 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 expecting any changes it has to make? Thanks.

Glen Hauenstein -- President

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, Chief Legal Officer, and Corporate Secretary

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 -- Airline Reporter

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'll 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. And so, combine that, 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 -- Airline Reporter

OK. Thank you very much.

Operator

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

David Slotnick -- Senior Aviation Business Reporter

Thanks very much. Good morning, everyone. I wondered if Delta has any contingency planning or views surrounding the legislation potentially affecting credit card fees and charges. I know that would probably have a significant impact on your Amex revenue.

Or are you planning for if that works its way through or how to make up for that or anything else? Thanks very much.

Peter Carter -- Executive Vice President, Chief Legal Officer, and Corporate Secretary

Hey, David. It's Peter. Obviously, that's legislation that we're watching carefully. And if, in fact, it becomes the law, we will adjust accordingly.

But we don't really think it has a good opportunity to be ultimately signed into law.

David Slotnick -- Senior Aviation Business Reporter

Thank you.

Tim Mapes -- Chief Marketing and Communications Officer

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

Julie Stewart -- Vice President, Investor Relations

All right. Well, 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 signoff]

Duration: 0 minutes

Call participants:

Julie Stewart -- Vice President, Investor Relations

Ed Bastian -- Chief Executive Officer

Glen Hauenstein -- President

Dan Janki -- Chief Financial Officer

Helane Becker -- Cowen and Company -- 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 -- JPMorgan Chase and Company -- Analyst

Conor Cunningham -- Melius Research -- Analyst

Savi Syth -- Raymond James -- Analyst

Duane Pfennigwerth -- Evercore ISI -- Analyst

Brandon Oglenski -- Barclays -- Analyst

Tim Mapes -- Chief Marketing and Communications Officer

Alison Sider -- Air Travel Reporter

Peter Carter -- Executive Vice President, Chief Legal Officer, and Corporate Secretary

Leslie Josephs -- Airline Reporter

Mary Schlangenstein -- Airline Reporter

David Slotnick -- Senior Aviation Business Reporter

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