Welcome back. President Trump says oil is flowing freely once again through the Strait of Hormuz. He posted on Truth Social this morning, writing a record 19 million barrels of oil went through the Strait yesterday alone. Oil prices this morning are lower once again and now breaking $74 a barrel. Crude oil down three quarters of 1% at 73.27 right now. The conflict in Iran sending consumer costs higher. Airlines dealing with surging jet fuel costs. Analysts warning costs are likely to remain high despite the recent ceasefire. Joining me now is the CEO of Delta Air Lines, Ed Bastian back with me. Ed, great to see you.
What has been the impact of the spiking oil situation on business at Delta?
Well, it went up and it's come back down meaningfully and we'll see where the rest of the year goes. But for us in the current quarter, which we're in, our second quarter, it impacted our costs almost $2 million, so it had a meaningful impact on costs, had an impact on revenue as well as we needed to price some of that. We absorbed a lot of it. We were able to price some of it as well.
Do you expect prices to go higher?
I don't think so. Prices went up 10 to 15%, not just Delta, across the airline industry and I think that was probably the right level. Oil prices have come down now so I think we're in a pretty good spot.
Such a good window into the broad macro story to look at Delta Air Lines, look at your business. How would you assess the economy right now?
There's not just one economy. There's the high end of the economy is really strong. We talk about the K-shaped economy and spending is up. Spending by the way is up across all categories, not just at the higher premium ends.
But the more premium you are, the more demand there is for the products which is our Delta One services, our opportunities to go just about anywhere in the world any time you want to go. The low end of the economy, they're struggling. But that's largely not our consumer. Our consumer is at a bit higher level.
Are you surprised that people have seen through the war in Iran and they're spending and they're still... the sentiment is high, markets are at record highs?
I'm not. A little bit of this is the post-COVID effect. People, particularly in our business, travel and the experience business.
People had so much taken from them. They're a little bit immune to the daily headline change and they're saying I'm not going to wait for the right time to go, I'm going to take advantage of it. It's not just air travel. It's going to a show, going to a concert. Whatever you're going to do to invest in yourself, that's where the economy is. If you're buying something, maybe not so much, but if you're investing in yourself, that economy is very, very strong.
We've seen services... services revenue has gone higher in a number of categories. Summer travel season in full swing, looking ahead to the end of the next couple of months, domestic, international travelers. What are you seeing in terms of bookings? What are you expecting toward end of summer into fall?
Bookings have continued to be very resilient. We've had to raise prices because of the high fuel prices. But that has not impacted bookings at all. Because people want to go and the higher end such as Delta allows for us to be able to do that. As we get out into the fall, I expect the full year is going to be really healthy.
And you've got a pretty good bump because of the World Cup. We've got a million and a half visitors, foreigners in the country right now. We're heading into the July 4th celebrations, America 250. Any impact?
It's all good. People want to go. People want to experience. People hear about these opportunities and they want to participate and the international in-bound travel, which was probably the softest the last several years, it's starting to pick up again and the World Cup has been an impetus for it. I'm proud of how the country hosted people from around the world, celebrating, having fun, whether New York or Atlanta. You see tens of thousands of people out in the streets, enjoying themselves.
That's great. And I know Delta has expanded international routes. We just were talking about Sardinia in the commercial break. You're doing Boston to Madrid, France's Nice to Seattle, Rome and Barcelona and New York JFK to Sardinia. It includes multiple lounges to boost the travel as well.
We're a large U.S. airline. We celebrated the past year the 100th anniversary, the first U.S. airline to reach 100, we reached it last year.
Thank you. We're starting the second century of flight and it will be around the world. When you think about air travel, people come to me and say where is the growth going to be. The U.S. air travel is ubiquitous. You can jump on a plane to almost anywhere you want to go. One in five people in the world have ever stepped foot on an airplane, that tells you where the opportunities are. So expanding to regions not just in Europe but Southeast Asia, going to South America, the Middle East, we're launching a flight direct to Riyadh, first U.S. airline back into Riyadh in decades. We're going from Atlanta directly to Riyadh.
One of the analysts said when you look at Delta you're talking about growth in Asia and the Middle East, the most attractive long-term opportunity for Delta supported by the strength of the LAX hubs.
The West Coast has been strong, we're the number one airline in LAX and we launched direct service back to Hong Kong out of LA. We'll be going to Manila and other parts of the Pacific.
That's great with the international plans, Ed. Look, I think you've also got significant flexibility when it comes to capacity. 200 aircraft scheduled for retirement over the next decade. You've developed durable competitive advantages in where and how you generate profits in that regard. Tell us about Delta Tech Ops, this is evolving into a multibillion dollar business, 11,000 employees in that division alone.
We're the largest airline technical operation in the world right here in the U.S. So it's a great business for us to be in. We operate and serve as many of our other airlines' engines as we do our own and our people love continuing to grow that line of business.
What a business that is. So you've got maintenance, repair and overhaul for third party, for other airlines and you're talking about potential revenue all the way up to $1 billion in that one segment?
Yeah, we're over a billion already. I think this is probably going to get closer to 3 billion over the next three to five years because you've got a lot of new engine technologies that have come out. We have licenses or exclusive across all of the main new engine platforms and when you think about supply chain, one of the things that hurt our business over the last five years, post-COVID, is getting the supply chain back up with new engine technologies. Our team is there to support all forms of engine technologies you can imagine.
