デルタ航空（DAL）2026年第3四半期決算説明会：増収で燃料コスト増を相殺

要点

• デルタ航空が発表した9月期（第3四半期）の売上高は、供給量（キャパシティ）が前年並みとなったものの、16%増となりました。税引前利益は、燃料費が16億ドル増加したにもかかわらず、前年同期並みの15億ドルを確保しました。
• 1株当たり利益（EPS）は1.72ドル、営業利益率は9.4%となりました。年初来のフリーキャッシュフローは19億ドルに達し、投融資資本利益率（ROIC）は11%となりました。
• 総単位売上高（ユニット・レベニュー）は15.4%増加しました。国内線の単位売上高は16%増、国際線は12%増となり、メインキャビン（普通席）の単位売上高は10%台後半の伸びを記録しました。
• 多角化事業による売上高は総売上高の61%を占めました。プレミアムクラスおよびロイヤルティ事業の売上高はいずれも約20%増加し、貨物および整備・修理・オーバーホール（MRO）事業の売上高はいずれも約30%増加しました。
• 経営陣は、第4四半期の売上高が約3%の供給量増加に伴い、前年同期比で約20%増加すると見込んでいます。業績見通し（ガイダンス）では、EPSを1.15ドル〜1.65ドル、営業利益率を7%〜9%としています。
• 通期ガイダンスでは、年間燃料費が60億ドル増加すると見込まれるものの、EPSを5.10ドル〜5.60ドル、税引前利益を約45億ドル、フリーキャッシュフローを約25億ドルと予想しています。

主要財務データ

事業および運航実績

国内線の単位売上高は、イールド（座席当たり単価）の上昇と搭乗率が前年より1ポイント向上したことにより16%増加しました。国際線の単位売上高は12%増加し、特に中南米路線が22%増と牽引しました。大西洋路線の単位売上高の伸びは前四半期から4ポイント加速して11%となりました。

法人向け売上高は、全業界、全客席クラス、ハブ空港、事業単位で二桁成長を記録しました。デルタ航空によると、レイバー・デー（労働感謝の日）の翌週は、同社史上最高の法人売上高を記録しました。

プレミアムクラスとロイヤルティ事業は、引き続き売上成長の主要な原動力となっています。プレミアムクラスの供給量は6%〜7%増加し、搭乗率は約2ポイント上昇したほか、運賃も値上がりしました。経営陣は、「ファーストクラス」「プレミアム・セレクト」「デルタ・ワン」における座席アップグレード売上高の創出は、まだ初期段階にあると述べています。

デルタ航空がアメリカン・エキスプレスから受領する報酬額は、2026年に90億ドルを超え、100億ドルに向けて拡大する見込みです。カード新規入会数と利用額はともに二桁増となり、5年連続で年間100万人の新規カード会員獲得を達成する見通しです。経営陣は、ロイヤルティ事業の成長要因として、顧客の支出増加、プレミアムクラス利用の拡大、ならびにウーバー（Uber）、スターバックス（Starbucks）、ハイアット（Hyatt）などのパートナーシップを挙げています。

貨物およびMRO（整備・修理・オーバーホール）売上高は、それぞれ約30%増加しました。整備部門（TechOps）の年初来MRO売上高は前年同期比ほぼ60%増の10億ドルに達しました。経営陣は、二桁成長と継続的な利益率拡大に裏打ちされ、今後数年間でMRO売上高が2倍以上に拡大すると見込んでいます。

運航面では、運航乱れが発生した日数が過去平均の2倍以上に達したにもかかわらず、定時運航率の向上、受託手荷物処理の過去最高実績、リカバリー体制の改善が報告されました。9月は2026年で最高の主要路線（メインライン）就航率を記録しました。乗務員の運航回復力、テクノロジー、データ、運航プロセスへの投資により、第4四半期から2027年にかけて更なる改善が見込まれます。

経営陣による業績見通し（ガイダンス）

経営陣によると、第4四半期の予約の60%以上がすでに完了しており、需要減退の兆候は見られないとのことです。第1四半期の初期の予約指標も第4四半期と同水準であり、見通しは約90日〜120日先まで確保されていると述べています。

2027年に向けて、デルタ航空は、供給量の正常化、運航改善の継続、ならびに前年比較対象のコスト高水準化に伴い、燃料除く単位コストの伸びを1桁台前半に抑える目標を維持しています。2027年の供給量ガイダンスは提示されませんでした。経営陣は、成長の重点が国際線市場によりシフトする可能性があるとし、供給量の判断は引き続き利益率、需要、燃料価格に連動させると説明しました。

リスクと注目点

燃料費は引き続き最大の不確実要素です。デルタ航空は2026年の燃料費負担が前年比で約60%（60億ドル）増加すると見込んでいます。経営陣は燃料価格がいずれ下落すると予想しているものの、その時期や規模は不透明であるとしています。同社は、燃料価格の高止まりが長期化した場合、供給量の伸びが過去の成長パターンを下回る可能性があることを示唆しました。

燃料以外のコスト増加も依然として高水準です。経営陣は、コストが目標である「1桁台前半の増加」を上回っている主な要因として、運航投資、供給量の抑制（規律）、売上連動費用の増加を挙げています。稼働率、効率性、生産性の向上は見込まれるものの、絶対的な単位コストが低下することは期待されていません。

運航の乱れも引き続き注視すべき課題です。天候不良や航空交通管制（ATC）の遅延により、当四半期の運航乱れ発生日数は過去平均の2倍以上に達し、燃料除く単位コストの伸びを約1ポイント押し上げました。

また、デルタ航空はサードパーティ製AIショッピングエージェントに対して慎重な姿勢をとっています。経営陣は、エージェント型プラットフォームによって航空製品がコモディティ化され、ブランド差別化が弱まるリスクがあると認識しています。同社は、自社サービス「Delta Concierge」の機能を開発しつつ、在庫データへのアクセス管理を強化する方針です。

アナリスト質疑応答の主な内容

• 売上高の好調さ：経営陣は第4四半期の見通しについて、幅広い需要、プレミアムクラスの10%台後半の伸び、堅調な出張需要、規律ある供給量管理に裏打ちされていると説明しました。先売りキャッシュ売上高は2022年以来で最も強い四半期成長を記録しました。
• 供給量と業界の規律：デルタ航空は、アトランタやデトロイトなどの主要ハブ空港において競合他社の供給量が減少したと述べました。経営陣は、高燃料コストが持続した場合、業界全体で更なる供給調整が行われると予想しています。
• 運賃の持続可能性：経営陣は、ターゲット顧客層における健全な需要と旅行体験への継続的な選好を挙げ、燃料価格高騰期に達成した価格引き上げは維持可能であると考えています。なお、これは経営陣の見解であり、公式な業績予想ではありません。
• 2027年の利益率：デルタ航空は、持続的な売上成長、機材の刷新、国内線の大型化、運航改善、単位コスト伸び率の鈍化を利益率改善の潜在的要因として挙げました。経営陣は、これらの効果が利益に反映されるスピードは燃料価格の正常化に依存すると述べています。
• スカイマイルの所有権：デルタ航空は顧客関係の直接所有が戦略的に重要であると考えているため、マイレージプログラムの収益化や分社化には消極的な姿勢を示しました。同社は社内でロイヤルティエコシステムの拡大を継続する方針です。
• プレミアムクラス戦略：デルタ航空は2027年も、プレミアムクラスの成長とメインキャビンの緩やかな成長という同様のバランスを維持する計画です。経営陣は、プレミアム供給量の拡大によって割引販売が必要になっておらず、有償アップグレードも好調な初期実績を示していると述べました。

決算説明会文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good morning everyone, and welcome to the Delta Air Lines September Quarter 2026 Financial Results Conference Call. My name is Matthew, and I will 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 and Corporate Development. Please go ahead.

Julie Stewart

Thank you, Matthew. Good morning, everyone, and thanks for joining us for our September quarter 2026 earnings call. Joining us from Atlanta today are our CEO, Ed Bastian; our Chief Operating Officer, Dan Janki; our Chief Commercial Officer, Joe Esposito; and our Chief Financial Officer, Erik Snell. Ed will open the call with an overview of Delta's performance and strategy. Dan will cover the operation. Joe will provide an update on the revenue environment, and Erik will discuss costs and our balance sheet. After the prepared remarks, we'll take analyst questions. We ask you please limit yourself to one question and a brief follow-up so we can get to as many of you as possible.

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

Thank you, Julie. Good morning, everyone. We appreciate you joining us today. Our results demonstrate the structural durability that we have built and the strategic decisions that we have made over many years to reduce earnings volatility it enabled us to navigate today's high fuel costs. In the September quarter, revenue grew 16%, and we delivered pretax profit of $1.5 billion, consistent with last year, while absorbing $1.6 billion of higher fuel costs. Earnings were $1.72 per share on an operating margin of 9.4%. Our earnings are continuing to translate into strong cash generation and attractive returns for our shareholders. Year-to-date, we have generated $1.9 billion of free cash and our return on invested capital is 11%, well above our cost of capital. These results reflect disciplined capital allocation and the durability of our business model.

Operationally, Delta delivered another quarter of industry-leading performance across key metrics, including on-time and customer satisfaction. We continue to strengthen the resilience of our operation with good progress on weather recovery despite a challenging operating environment this summer. We expect to further improve recovery performance through the end of the year and into 2027. I want to thank the 100,000 members of the Delta team. They remain our greatest strength and deservedly are the most awarded aviation professionals in the world. Most recently, their efforts were recognized by the Skytrax World Airline Awards, where customers named Delta the best airline staff in North America for the fifth consecutive year. And consistent with our philosophy of share in our success, we've now accrued $900 million towards next year's employee profit sharing payout.

Looking at the current environment, demand remains strong, supported by a secular shift in consumer behavior. The top 40% of U.S. households, which make up the majority of Delta's customer base are nearly $40 trillion wealthier than they were just a few years ago and increasingly prioritizing experiences, including travel. At the same time, air travel remains one of the best values in the consumer economy with airfares still well below cumulative inflation over the last several years. That demand is evident across leisure and business travel and across all cabins. Premium growth remains robust and main cabin trends are continuing to improve, reflecting our measured approach to growth and broader industry actions to reduce unprofitable capacity.

This year's fuel spike has accelerated change across the industry. Resilient demand and greater focus on profitability are enabling the industry to recover higher fuel costs more quickly. Even when fuel prices eventually moderate and they will, we believe our underlying revenue strength is sustainable, giving strong preference for the Delta brand and the diversity of our high-value revenue streams. Regardless of the next move in fuel prices, the forces reshaping the U.S. airline industry will continue, with many carriers struggling to earn their cost of capital well before the run-up in fuel. Against this backdrop, Delta is operating from a position of strength.

In the December quarter, we expect revenue momentum to continue and nonfuel cost performance to improve, supporting pretax profits of $1.2 billion, even with fuel prices expected to double over last year. For the full year, we expect to deliver pretax profits of roughly $4.5 billion, fairly close to last year's profitability, even with our fuel bill expected to increase by 60% and or $6 billion. That's a picture of structural durability you have not seen in prior cycles or fuel spikes within this industry. We also expect to generate $2.5 billion of free cash flow funding more than $2 billion of debt reduction and bringing our 3-year cumulative free cash generation to over $10 billion. These results are expected to lead the industry by a good margin.

The consistent strength of our financial performance allows us to keep investing in our people, products and partnerships, compounding Delta's differentiation and extending our lead. Our growing loyalty ecosystem is one of the most important drivers of our structural durability. The Delta American Express partnership continues to deliver strong momentum, that we now expect remuneration of more than $9 billion this year on the way to $10 billion. The strength of the co-brand portfolio was recently reflected in J.D. Power's customer satisfaction survey last week of all airline co-brand cards where the Delta American Express SkyMiles card swept the top 3 positions, with our reserve card ranking #1. Hats off to our collective teams what a remarkable achievement.

We are also bringing more value to our customers through partnerships with leading brands. During the quarter, we announced a new strategic relationship with Hyatt, bringing together 2 leading premium brands. Customer response has been strong ahead of the launch later this year. At the same time, we're investing to extend the reach of the Delta brand through the global network. We recently announced new service to the Philippines and expanded service to Tokyo, Paris, Athens and Venice from key U.S. gateways. Our investments are elevating the customer experience throughout the travel journey with connectivity an important point of differentiation. Delta pioneered fast free WiFi on a global scale 4 years ago and established it as the standard that the industry has been required to opt.

Today, fast free WiFi is available across virtually our entire fleet far more than any other airline currently offers. We continue to work closely with Viasat and Hughes on meaningful enhancements to service, which we will see this quarter and are excited to launch Amazon Leo, beginning in 2028. In closing, the durability that we've built is differentiated and difficult to replicate. We are delivering industry-leading returns today and confident in our ability to deliver strong growth in earnings and cash flow in the coming year.

Now I'll turn it over to Joe to cover our commercial performance and outlook.

Joe Esposito

Thank you, Ed. September quarter results demonstrated sustained demand strength, clear preference for the Delta brand and the benefits of our measured approach to capacity. Revenue grew $2.4 billion, up approximately 16% over prior year on flat capacity. Total unit revenue growth of 15.4%, accelerated 3 points from the June quarter with gains in domestic and international. A key highlight was Main Cabin, where unit revenue grew high teens, marking the third consecutive quarter of improvement.

Domestic unit revenue grew 16% and driven by healthy yield growth on load factors that were 1 point higher than last year as we closely align our capacity growth with demand. International unit revenue grew 12%, led by growth of 22% in LATAM. Transatlantic unit revenue growth accelerated 4 points sequentially to 11%. Corporate sales were strong across all sectors, cabins, hubs and entities with each growing double digits over last year. The week after Labor Day was the highest corporate sales week in our history, underscoring the strength of business travel. Our diversified high-margin revenue streams remain a defining strength of Delta, enhancing the quality and durability of our earnings. Diverse revenue represented 61% of total revenue with premium and loyalty each growing nearly 20% over prior year.

Cargo and MRO revenue both grew nearly 30%. Our loyalty ecosystem is growing in scale and value. SkyMiles membership is growing faster than capacity and members are engaging more with Delta in the air and beyond the flight. That deeper engagement is driving growth across brand partnerships such as Uber and Starbucks in addition to travel products and our industry-leading co-brand card portfolio. Card acquisitions and spend both grew double digits, keeping us on track for a fifth concetive year of 1 million new card acquisitions and double-digit growth in AmEx's remuneration this year.

Now turning to outlook. Demand remains strong and broad-based as we enter the final quarter of the year. That strength is reflected in forward cash sales, which grew nearly 1% during the September quarter, the highest quarterly growth since 2022. These trends support our outlook for December quarter revenue growth of approximately 20% year-over-year on roughly 3% capacity growth. With seat growth below 2% and including a year-over-year reduction in main cabin seats. Our capacity positioning supports another sequential improvement in unit revenue growth as we continue to cover higher costs. This approach keeps our capacity decisions focused on margins, returns and cash generation.

Our results and outlook reflect an integrated commercial strategy that is extending our leadership. Investments in our fleet, global network, customer experience and loyalty ecosystems are strengthening our revenue premium, deepening engagement and creating long-term value. Los Angeles is a clear example of our integrated strategy driving profitable growth. Over several years, we have built a leading position through investments across the airport, network and customer experience. We're also expanding our global reach from Los Angeles, adding service to the South Pacific, Hong Kong and Manila, while enhancing connectivity across key U.S. markets. This has been enabled by generational airport investments at L.A. to create a modern, connected complex with additional gate capacity and seamless access to the international terminal. We now have the most premium ground experience with a dedicated curve to launch path for Delta One customers. Together with our leading position at L.A., 2 Delta One lounges and our award-winning Sky Club, these investments are strengthening customer preference in this high-value market and further opportunity ahead of the LA 28 Olympics.

Now I'll hand to Dan to discuss our operational results.

Daniel Janki

Thank you, Joe. Running a great operation is foundational to Delta's brand, and I want to thank the Delta team for the outstanding service they provide our customers every day. With a culture of continuous improvement and our investment in data and technology, our people keep raising the bar, strengthening reliability and driving efficiency while delivering better outcomes for our customers. Over the summer, we widened our industry leadership in on-time performance and delivered record baggage results and better disruption recovery. Those results were meaningfully given meaningfully important given persistent weather and ATC delays that are people navigated during the quarter, more than twice the number of disruption days compared to historical averages. These targeted investments are strengthening our resilience and recovery.

In September, we delivered our best mainline completion factor month of the year, and we expect further progress through the fourth quarter and into 2027. We are scaling new technology and process improvements across the operation to strengthen reliability, accelerate recovery and enhance the customer experience. Atlanta is an important example where these investments are driving record baggage performance, improving connection and making our largest, most profitable hub, even more reliable and efficient. The Delta people remain our most important differentiator, new tools, technology, giving them more time to do what they do best, care for our customers. We are pairing these technology investments with new training that equip our people to deliver even more consistent and personalized service.

One example is new hospitality certification program across our network of 60 lounges and clubs. The only program of its kind offered by a U.S. carrier. Today, operational reliability, people and technology deliver better outcomes for our customers and support Delta's leadership in Net Promoter Score. Domestic NPS continues to strengthen, driven by record interaction scores with our people, expanding digital capability and more proactive customer communication, particularly during disruptions. During the quarter, we further expanded self-service options in the Fly Delta app and completed the rollout of Delta Concierge to all SkyMiles members. Customer adoption is growing and new capabilities are scaling rapidly.

Our operational expertise also creates value beyond the core airline. I'm proud of the Tech Ops team for delivering $1 billion of maintenance, repair and overhaul revenue year-to-date, an increase of nearly 60% over last year, while expanding margins and growing our customer base. And over the next several years, we are positioned more than double MRO revenue while expanding margins.

Now I'd like to turn it over to Erik to cover our financial performance.

Erik Snell

Thank you, Dan. I want to start by recognizing the Delta people for their commitment to our customers through a busy summer travel season. In the September quarter, we delivered earnings of $1.72 per share and an operating margin of 9.4%. Pretax profit of $1.5 billion was in line with last year even with a $1.6 billion increase in fuel expense that was more than $500 million higher than guidance. For the quarter, our fuel price averaged $3.61 per gallon, including a refinery benefit of $0.13, with our refinery now fully online following the temporary outage discussed on our July call. We expect a greater benefit in the December quarter at roughly 3x the September quarter level.

Nonfuel unit costs increased 7.3% over the prior year on flat capacity. The primary drivers were higher crew and revenue-related costs on capacity growth, several points below our original plan and nearly 1 point of impact from the disruptions that Dan spoke about. We generated free cash flow of $460 million during the quarter, bringing the year-to-date total to $1.9 billion. Our financial performance allows us to continue investing while making meaningful progress on debt reduction. We ended the quarter with adjusted net debt of $13 billion and plan to pay down more than $2 billion of debt this year, positioning us to end the year with gross leverage of 2.2x. Delta's balance sheet is a strategic asset. We are investment grade at all 3 credit rating agencies and recently received a Fitch upgrade to BBB flat. We also ended the quarter with a $3 billion pension surplus and a substantial and growing base of unencumbered assets.

Turning to our outlook. Based on the forward curve as of October 2, our all-in fuel price for the fourth quarter is projected to be $4.25 per gallon, including a refinery benefit of approximately $0.40 per gallon. With slightly higher capacity and continued operational efficiencies, we expect nonfuel unit cost growth to improve 1 to 2 points sequentially. Looking to next year, we remain on track for low single-digit unit cost growth as capacity normalizes, operational improvements continue and lap higher costs in our baseline. Combined with our revenue outlook, we expect fourth quarter earnings of $1.15 to $1.65 per share and an operating margin of 7% to 9%. For the full year, we now expect earnings of $5.10 to $5.60 per share with free cash flow of approximately $2.5 billion.

Our outlook includes a refinery benefit of more than $700 million underscoring its unique value. Delivering this level of performance despite a roughly $6 billion increase in fuel expenses this year reflects the power of Delta's strategic advantages and demonstrates financial durability that is meaningfully stronger than in prior cycles and differentiated from the industry. Looking ahead, our focus remains on profitable growth and achieving our long-term financial targets. High-value revenue growth, fleet renewal and a more efficient cost structure provide a clear path to expanding both margins and returns to the mid-teens. Our capital allocation priorities remain unchanged. We invest in high-return opportunities and continue strengthening the balance sheet. As we move toward our long-term gross leverage target of 1x, we remain committed to increasing returns to shareholders.

Now I'll turn it back to Julie for analysts Q&A.

Julie Stewart

Thank you, Erik. Matthew, can you please allow for analysts to now queue up questions.

Operator

[Operator Instructions] Your first question is coming from Andrew Didora from Bank of America.

質疑応答

Andrew Didora

Erik, I guess, just on fourth quarter CASM, we were modeling some more sequential improvement than you guided to, just given the IROP issues this summer. I know we're -- I know capacity is not where you want it to be, and you've been investing back in the operation. But can you maybe just help us quantify why CASM mix just kind of continues to deviate from that low single-digit target as we end the year here?

Erik Snell

Yes. Andrew, there are 3 buckets of investment versus low single digit. Number 1 is operational investments, improvements that we're making. Number 2 is capacity discipline and number 3 is we're seeing higher revenue-related costs. And on our operational investments and capacity discipline, these have been deliberate choices and the right decisions. We're improving reliability and supporting revenue quality. And the third is just a function of stronger revenue that Joe and team are delivering. We're managing the business for profitable growth and returns and as capacity normalizes and we continue to see the improvements in our operational reliability, specifically controllable completion factor, we have a path back to low single-digit cost growth.

Andrew Didora

I guess on that, just in terms of 2027 on that low single-digit cost growth. But if we're in an environment where maybe fuel stays higher for longer and maybe capacity takes longer to normalize how should we think about capacity in that type of -- I'm sorry, how should we think about CASM in that type of environment?

Erik Snell

Well, we'll continue to be disciplined on capacity, and we'll -- we're going to manage the business for margin, so we'll take out costs that we can if capacity wanes, but we'll be focused on continuing elevate returns.

Operator

Your next question is coming from Savi Syth from Raymond James.

Savanthi Syth

Maybe the acceleration in the year-over-year revenue and RASM is quite impressive here based on the guide. And especially kind of given that you have some tougher comps and the industry capacity stepping up. Could you talk a little bit about what's driving that strength and your confidence around that outlook?

Daniel Janki

Thanks for the question. Yes, when you look at where we are in closing the third quarter, we saw a very strong demand from our customer base. When you look at the fourth quarter on the sequential improvement and 20% revenue growth, we're already greater than 60% booked for the quarter. our demand in premium products continues to be high teens, and that's leading us also to our corporate -- pulling our corporate travelers. We see no cracks in that demand for the fourth quarter. And the economy is really strong. So we're set up for a really strong fourth quarter. And I think the improvement in unit revenues and revenue is well within our reach.

Savanthi Syth

Good. That's helpful. And Joe, if I had to ask on the loyalty program, now it's been really strong loyalty revenue within that revenue guide? It's been stronger than past years and stronger than some of your peers. Curious what's driving that and the ability of that momentum into 2027.

Joe Esposito

Yes. We've got -- you got fares have gone up, you've got greater engagement from our customers. And when you look at how they engage through not only our own SkyMiles program, but the Amex and partnerships and products you're really seeing a very strong ecosystem of spend in all categories. And so I think it's -- and especially in premium products from our loyalty program, our capacity in premium was up 6% to 7%, and our load factors actually were up almost 2 points where you got really strong engagement in premium cabins and products.

Operator

Your next question is coming from Mike Linenberg from Deutsche Bank.

Michael Linenberg

Just one question here, kind of multi-part to Joe. Just on competitive capacity, what are you seeing in the domestic market? And as energy prices rise, do you anticipate further cuts by your competitors? And if you can sort of touch on international because I think one of the things we're watching closely are that hedge books are rolling off from many of your international competitors and likely to see changes on the capacity front there. So overall, just kind of what you're seeing capacity both domestic and international from competition.

Joe Esposito

Yes. Thanks. When you look at the domestic system, quite a bit of capacity has come out as carriers have worked to improve their own margins and operations. So -- and in our hubs, competitive capacity is actually positioned down. And we're not seeing any impact from capacity in other airlines hubs across the domestic network. So all in all, very, very positive and Atlanta is down in competitive capacity, Detroit is down. And you've seen the lower end improving quite a bit.

On the international front, you're right, hedges will start coming off. And I think while we've had a strong international performance this quarter. I think that's only going to get better as we see carriers globally have to get -- have to manage their businesses for margins as well. So I see the competitive environment in a really positive light as we go into the fourth quarter.

Ed Bastian

Mike, this is Ed. If I could add one other data point to Joe's summary as we were pulling our materials together as one put out a point really stood out for me. You know the importance of generating a proper return in this business, and ROIC is probably the most important measure that we also be held accountable to. Our ROIC, as I mentioned earlier, is 11% above cost of capital and moving towards 15%, which is our goal here for the business. If you look at the rest of the domestic industry ex delta, that number is 3%, that means every day, there is a fair bit of the industry continues to destroy its shareholders' capital. And that cannot sustain. So when you talk about competitive capacity, it's great to have little skirmishes in other people's markets. But in a high-cost environment, you cannot grow your way out of it. you must actually take action. And we've seen some action, but there's obviously more to come, particularly next year.

Operator

Your next question is coming from Conor Cunningham from Melius Research.

Unknown Analyst

Maybe take you back on that answer there, Ed. I was hoping if we could just take a step back and talk a little bit about the long-term targets. Over the past couple of years, obviously, earnings has been ranged from -- there's been a ton of tuck of the structural change in the industry, but macros obviously eroded some of that. So as you look into the future, what changes do you see that gives you confidence in this mid-teens framework going forward?

Ed Bastian

Conor, I think the biggest one is a bit what I just referred to. And what we have seen over this last year, the ability of the industry to get much greater value for the product that we offer. And unfortunately, it took a fuel spike to -- in a short order to move people in that direction. But as we see the customer response, candidly, the limited amount of resistance that we see, the fact that our product continues to be seen in a consumer basket as reasonably affordable, even at a 20% price increase, which largely we have taken this year. I think that's a very good sign for the future. Fuel prices will recede, how much, how fast, I don't know, but they will. And the test for us at Delta, and I think for the industry is to ensure that we sustain revenue that we have created, and I don't see any reason why we shouldn't.

And so I think that -- and as we said in our remarks, that's masking today, high fuel prices are mask and some of that inherent margin improvement. But -- and it's really hard to show margin improvement when fuel prices are doubling on you. But we'll get to the other end of this. And I think you're going to see a different environment, and I think you'll see structural changes that will continue to occur because there's no other option here, but the carrier going to have to justify why they're putting capacity and supply out into the marketplace. On the other hand, we have a lot of things that are within our control. We've invested heavily in getting our reliability and our resilience back that's been costly, and the changes we're making operationally, the investments we're taking, both in technology and in people and process are going to make a difference. So I think you're going to see -- also see a more sustainable nonfuel cost from us, too. The last year has been a bit painful. And I think we're -- I know we're at the peak of that and we're going to start coming down. So those are 2 of the things I see over the next several years that give me reason to believe that mid-double-digit margin target and 15% ROI for Delta is a framework that we should hit.

Conor Cunningham

Great. And then maybe, Joe, I was hoping you could talk a little bit about the importance of striking a balance between load factors and yields. I suspect you're going to be one of the few, if not the only one with the load factor is flat to up. So if you could just talk a little bit about how you view that? And just do you think it's important for the industry to make the right choice on protecting yields right now rather than going after the factors on the dinner.

Joe Esposito

Yes. No, thanks. Yes, it's always a balance. And I said, we're managing the business for margins. And I really think that if you keep your -- if you keep centered on that, you'll supply and demand then will come in as how we look at the markets. And I think it's also where we're supplying the marketplace. We're supplying it in premium seats, not Main Cabin seat and getting even improvements higher-than-average improvements in the main cabin average fares and load factors. So I think it's also where you're supplying it. When we're flattening capacity for the third quarter, I think the outcome was really favorable for us of how we manage through it. So we absolutely have to kind of look at where it's going for the future. And running an 86 load for the quarter, we still have a little bit of room to put people on our planes as well. So there's -- so I think we've struck the right balance between yield and capacity. And when you look at the fourth quarter with 3%, it's to think it's -- when you look at real absolute seats, that's below 2%. And half of that capacity is going into long-haul international, which has been very resilient as well.

Operator

Your next question is coming from Tom Fitzgerald from TD Cowen.

Thomas Fitzgerald

I'm curious if you could speak to how you're thinking about the mix across your cabins next year in terms of premium seats and Main Cabin seats and just any impact of the delivery schedules on how the mix could change next year?

Joe Esposito

Yes. Thanks, Tom. We'll see a very similar balance between the premium cabins and Main Cabin will be -- we don't -- we're not announcing any capacity yet for next year. But that balance of growing premium and keeping main cabin at a modest level will be similar to how we go into the future. And we'll see where deliveries are right now, we're always flexible and those move around. And we have pretty good line of sight as to what's being delivered next year.

Thomas Fitzgerald

Okay. That's really helpful. And then just as a quick follow-up for Dan. You mentioned MRO doubling over the next several years. I'm just curious any early color on how you're thinking about the MRO business in 2027.

Daniel Janki

No. I think if you just look back the last '24, '25, '26, accelerating revenue growth and margin expansion. And when we think about the tube, we always want to run it where we believe with their backlog at record levels and what our commercial pipeline has, you should see really good double-digit revenue growth and a continued focus on steady margin expansion. I like to always see at least 100 basis points in the year with an outsized amount this year. Some of that's a little bit depending on your customer and engine mix that you're dealing with in any given quarter or year, but that's a focus with an eye long term that this really has the opportunity to double and then keep growing from there.

Operator

Your next question is coming from Duane Pfennigwerth from Evercore ISI.

Duane Pfennigwerth

Just a short term and a longer-term one for me. First, as you think about the fourth quarter playing back last year, mid-November had a pretty big headwind from the government shutdown, forced cancellations, lots of crazy media coverage around that. Can you speak to maybe the acceleration that you expect to see, and more interestingly, maybe exit rate on RASM relative to the guide that you're giving for the entire quarter?

Joe Esposito

Yes. Thanks, Duane. For the noise we had last year, last year, we had said it was about 2 points of headwind for the quarter. So we expect to have unit revenue progression from third quarter to fourth quarter, even net of that headwind. So as we exit -- so November will obviously be a very strong month as we lap the government shutdown. We saw the pressure from the government shutdown went from October 1 to mid-November, really in the top of November as we -- as the cancellations went in place. So we'll see some good exit rates for the end of the month of October and into November.

Duane Pfennigwerth

Great. And then longer term, I know it's always tricky to use a term like algo. But if we think about the growth of non-ticket overall, things like travel products, MRO, which has come up a few times on this call, your increasing non-airline partnership revenue. How do you think about the growth of these buckets overall relative to capacity? And is there any way to link that to say maybe a point or 2 of RASM expansion independent of what PRASM might be doing?

Joe Esposito

Yes, I think you're seeing that today. Right now, we're 60% -- higher than 60% of our revenue is coming from diversified revenue streams. We call that premium and other and Main Cabin is now at 39%. And those revenue streams have grown high -- very high teens that we're going through. When you look at a cargo of 29% and loyalty up 18% in this quarter, insurance, while it's a small amount of money, those are growing at much higher rates than capacity. So I think you're seeing that embedded this year in our revenue performance as the as we continue to diversify those streams and getting even stronger as you keep bringing better partners and product into the fold in the ecosystem.

Ed Bastian

And Duane, it's important to note that those revenue streams that Joe mentioned, all come at much higher contribution margin, not just RASM to the business. And so that's also very important for us.

Operator

Your next question is coming from John Godyn from Citigroup.

John Godyn

On capacity, you guys used the phrase normalized for capacity growth next year. I'm just hoping you could talk a bit more about the contours around that, given how depressed it was this year, and you guys did a great job reacting quickly to the market. Normalized for next year could be interpreted as a pretty wide range if we're catching up on 2 years of growth, but I don't think that's what you're suggesting. So maybe anything you can clarify there would be great.

Ed Bastian

John, it's Ed. I normalize in an abnormal environment is kind of hard to make too many comments around. Obviously, we're running the business for margins. And so that's always one of the first considerations. So we'll have, hopefully, a better view in a few months' time as to the direction of oil prices. I think that's -- it's a really important part of our deliberations. And to the extent that these product prices are here with us for longer than we were thinking you can expect our capacity is not going to be normal by past measures, but it's going to be adapted to the environment. We're going to continue to pay close attention to the underlying health of our consumer, the health of the economy. We're going to be mindful of looking at the international picture. I think you're going to probably see more of our growth international than domestic.

And of course, going forward, you're going to hopefully not beginning of next year, but mid to late next year, you're going to start to see some gauge return to the domestic system, which will be welcomed because that's the most efficient capacity that we can create. So you put those things into the hopper. I think that in the environment we're in, we're going to -- there's -- we're going to be adaptive to what we're seeing happen. We're hoping that things will normalize, and then you'll get back to a rate of growth from Delta that you could look at historically is pretty much tied to GDP. But we're going to be cautious, I'd say, going into the next year. And so we see the all clear sign, particularly on fuel.

John Godyn

It's great to hear that. And if I could just ask one more. You alluded to some of the capacity hotspots that are out there. you've been able to avoid those. But now in Seattle, your Seattle-based competitor is talking about quite a lot of growth, product investment, international expansion, sort of channels the battle for Seattle teams from 10-plus years ago. I was hoping maybe you could just plug us into Delta's long-term plan in Seattle and how you see this developing.

Joe Esposito

Yes, thanks. We've very pleased with Seattle, especially the business atmosphere of the Pacific Northwest, the corporate environment. Our products sell very well up into the marketplace. And Delta, we do our own strategy in Seattle. It has both a domestic purpose as well as a great Pacific gateway. So we're going to continue to do -- invest in that marketplace, not only from capacity, but also in the products we put out, we have a Delta One Lounge. We have 2 Sky Clubs and continuing to focus on that premium traffic for Seattle is really our northern star. And we're going to continue to add in international because it's a great gateway for us.

Ed Bastian

And John, I wouldn't -- I wouldn't suggest there's a battle for Seattle. Seattle is a big and growing market. It's certainly a market that is large enough for us and our principal competitor out there. And when you see the changes they're announcing, I think they're smart. I think that's where the future is going. And -- but we don't have to own every market we fly in. I think you can collaborate a little bit too. And I think that's about being disciplined.

Operator

Your next question is coming from Chris Wetherbee from Wells Fargo.

Christian Wetherbee

I maybe wanted to get sort of your updated thinking on sort of the stickiness of fare increases we've seen so far this year. Obviously, fuel has been elevated and maybe will be for a period of time from here. But I guess as you think about gains you've gotten versus what sort of other parts of the leisure market look like, generally speaking, how do you think about that in 2027, assuming at some point, Ed, like you said, we do get normalization of fuel?

Ed Bastian

I'll start, Chris, and I'll turn it to Joe for additional color. Our consumer is really healthy. And yes, fuel has been the impact for the industry to move quickly to adjust the pricing environment. But given the fact that it has the market has accepted at these price points, and we still consider in the overall basket of consumer product and service that air travel is reasonably affordable, certainly below the rate of inflation going back either pre or post COVID that you've seen in the consumer economy more broadly. The health of our targeted consumers. The thing we mentioned about top 40% of U.S. households is accumulated $40 trillion of wealth. And travel is one of their very top priorities. I think where we're at is very sustainable. We'll work at it.

But when you think about loyalty, when you think about growth in experience economy, when you think about the opportunities that we have to continue to invest to make the product stickier and the relationship is even more powerful. I think we're going to be fine as you look forward. And hopefully, we will see fuel receipt into the next year at some point. And that's when I think you'll see the real earnings power of this franchise be amplified.

Christian Wetherbee

Very helpful. Appreciate that. And then maybe just a quick follow-up on the CASM-Ex commentary, particularly as you think about next year, the operational investments we're making this year. Is this something where we could see sort of the absolute cost come down as we think about '27? Or is it you sort of maintain the cost and so the growth rate is normalized next year?

Joe Esposito

Yes, I think we're certainly seeing an improvement. We're at the peak of our CASM right now, but we'll begin to lap the investments we've made these investments and costs are in our baseline. So I would be planning on a low single-digit kind of number for now as we continue to make the right investments to take care of our customers.

Ed Bastian

I don't think you'll see the absolute number of CASM come down. That would be pretty hard. But I think you'll see the utilization of that absolute our value in terms of efficiency and productivity, certainly have hopefully an outsized impact.

Operator

Your next question is coming from Michael Goldie from BMO.

Michael Goldie

Just one question for me. Corporate continues to be very healthy. Can you talk a bit about where the corporate franchise sits today in respect the Transpacific and how you think of that opportunity, but also competitive intensity for business travel to Asia as you expand in the region?

Joe Esposito

Yes. Thanks, Michael. The corporate demand, yes, has been very resilient, and we're great to see that there's no cracks in it as we go into the future. And the economy is very strong. So business wants to travel. And I think when you think about the transpacific, there's been quite a few economies that we don't participate in. So that corporate piece, and there our customers are forced to take other airlines in that space in the corporate side. So as you add these economies on that moves that corporate traffic to Delta, and we've seen really good. Our corporates move over to us when we go to markets like Type A in Hong Kong, and continue to expand. That's what our corporates are asking for. So it's good to be able to make sure we offer the biggest economies in the world.

Operator

Your next question is coming from Jamie Baker from JPMorgan.

Jamie Baker

So Ed, our estimates of Air Canada's loyalty program is valued at $10 billion. I'm sure you saw the recent transaction there. then given Delta's scale and margins, SkyMiles is, I don't know, let's call it a number of more than $75 billion, okay? Any new thoughts here on why it does not make sense to pursue some sort of personal monetization? I haven't asked you about this in a couple of years. But Air Canada has gotten is thinking about this topic again.

Ed Bastian

Jamie, yes, I haven't heard that a bit. So to pause before I respond here. The most important thing that we have is the brand premium that we deliver to the marketplace. And it comes from lots of avenues, whether it's the reliable service, great service of our people or the strength of our commercial network and technology. And one of the other things, as you know, that's really important to us is that the loyalty itself arrangement with principally American Express, but we have other partners that we are increasingly building out a bigger ecosystem of experiences as well. And if you think about that question, just back a few years ago and whatever values were being discussed my guess is the value that was ascribed to the Delta loyalty plan was meaningfully less than it is today, which means we've grown the franchise, both our own market cap as well as the value of loyalty, and we'll continue, I think, doing that going forward.

I'm really reticent to put a third party, a financial investor between us and our best customers and preference. And when you think about the world of AI, about the Agentic economy, where -- to me, at some level, it sounds like the LTA is returning to the scene here, trying to commoditize your product and your premiums. I think it's even more important that we hold tight and continue to ensure that we're focused on premium, we're focused on service and not getting distracted by trying to cash out along the journey. At some point in time, this company very well may consider that as the best opportunity for shareholder value creation. But we're doing a pretty good job, I think, to date of shareholder value creation. We see a lot of controllable improvements that we can make to get to our framework. And should we get to our framework in the next couple of years as I hope we will, I think this question will answer itself that we've made the right decision to keep that in-house.

Jamie Baker

Okay. Perfect. Thanks for bringing in that topic. And then just quickly for Joe, sort of a geeky pricing question, if you will. I've noticed that some of your international competitors are beginning to levy different fuel surcharges based on the day of the week, so higher surcharges on peak travel days. One, I'm just curious if you consider this to be widespread in 2, and I'm not asking about future delta pressing, but at an industry level represent sort of another pocket of untapped pricing power. I just don't recall seeing this in the past.

Joe Esposito

No, I don't recall seeing it in the past. And it's a rather new phenomenon on peak days fuels are just -- we haven't moved in that direction. So I don't think we'll see where the industry where the industry moves on it, it would be something very different than what's happened in the past.

Operator

Your next question is coming from Atul Maheswari from UBS.

Atul Maheswari

Two questions, one long term, one short term. First, the longer-term question, Ed, I wanted to follow up on your recent comment that you made in an answer to one of the previous questions about the emergence of these AI-powered shopping assistance this has become a bit of a topic in the investment community. What is your overall take on it? Do you think this is a net positive or negative for airlines? And how do you ensure that you are present in that space if needed while also protecting the Delta brand that your customers now?

Ed Bastian

Well, we'll say, I think it's early days of -- but I -- you probably gather from my comments, we're going to be a little cautious about who we give access to our inventory with. We have I think, done a good job of getting out ahead of it when we built Delta Concierges that we announced 1.5 years ago, and it's fully up and running today, which is our Agentic solution to taking care of our best customers, and we've -- we are -- we've got a lot of work still to go to make it even more adaptable and more useful to our customers, but letting our customers engage with our agents to handle their needs and have the agent at our customers with steps. I do think the -- this question of brand will be very important in the agent economy for the future and brand loyalty and preference is going to be one of the ways in which the strong will stay strong and the agents who are looking to shop view and continue to try to compete us all against ourselves will be a danger that we need to be mindful of. And I think you see it across many aspects of the consumer economy and I think all the companies of our size and focus are looking at it and being careful. I think there's opportunities when you're working maybe in the corporate space directly with our corporate customers, where it's a known agent to provide access and provide opportunity. But broad speaking, I'm not a big fan of the idea, and we'll be very cautious as we think about the future. .

Atul Maheswari

Got it. That's very helpful. And then as my second question, Joe, if you can provide some color on what you're seeing out there for the early 1Q bookings. That would be very helpful.

Joe Esposito

Yes, thanks. Like I said, fourth quarter is booking very well. Early indications from 1Q are very similar to 4Q. And so we're continuing to see good strength we're assuming the economy is strong as it is and our corporates continue to book. So we'll be very -- we feel very good about forward bookings. We have good visibility probably for the next 90 to 120 days. which gets into the first quarter and all indications are very positive.

Operator

Your next question is coming from Brandon Oglenski from Barclays.

Brandon Oglenski

I guess I wonder if I could follow up on the operational reliability issues this year and the costs that you guys are adding into that baseline, especially as you think in the 2027. It sounds like maybe you're having more reserve crews, but I'm not quite sure what's driving that baseline increase. And then maybe as a follow set and longer term, maybe this is for you or Ed or Dan. But as we think back to like the last round of negotiations with labor and specifically your pilot group and others as well, that's been pretty consequential here for airline cost inflation, which for the industry has been pretty much above the average across the economy. So I guess, how do you balance the need for service, for employee pay as well as getting margins back in line, especially in light of CASM.

Joe Esposito

Yes, Brandon. Good to hear from you. As it relates to operational reliability and that resilience and Erik mentioned it, that controllable completion factor has been the focus and certainly been investing and taking actions across the system, but the real focus has been on that crew resiliency. How do we ensure that we improve that and we improve it, especially in periods of disruption. So it's been a focus around investing around the process, the technology, the data and the resources associated with that, so that you ensure that you more effectively manage the demand and the churn and resources as you go through those operational disruptions and you better marry it with supply. And the actions that the team has been taking, you're seeing consistent improvement from -- in second quarter from first quarter then again in the third quarter. We anticipate that transpiring here as we go into fourth quarter and next year related to that. So that's been the primary element of the investment in the areas of focus for us and the teams.

Ed Bastian

And on the question of negotiations, obviously, we're not going to comment on that, Brandon. But I can tell you, our priority is getting the resilience that Dan mentioned and the reliability of the crews back, and it's hard for us to even think about getting too far out into a contract negotiation until we have the baseline of reliable operation that we -- we have confidence in established.

Operator

Your next question is coming from Catherine O'Brien from Goldman Sachs.

Catherine O'Brien

I just wanted to start with a bit of a follow-up to Sari's question. So loyalty revenue growth has really stood out the last couple of quarters. And you noted that engagement, particularly in premium cabins, is driving a part of that. But I was just wondering, could you provide some further color on how maybe changes in the card portfolio or some of these partnerships are also factoring in or how market share gains, maybe uptick in wallet share might be contributing? Just trying to get a more detailed look at what's driving this growth and how sustainable these trends are? Or if we could even expect further acceleration?

Joe Esposito

Thanks, Catie. No, I think when we start out with talking about the strength of the consumer as the foundation for this and how much wealth they have. We've seen great spend on the Amex card and great -- when you look at the awards of being 1, 2 and 3 on the most valued card, there's a lot of value in what we're offering our consumers and that relationship comes back to their spend. which has been incredibly strong this year when you think about the environment everybody is in with over double-digit spend and really strong remuneration back to Delta. So the engagement with the customer is has never been stronger. And I think when you add up any individual one is good, but when you put the portfolio of partners we're working together now adding Hyatt, those are really concrete products and partnerships that drive that ecosystem even faster. So not only are we providing the right level of capacity in the cabins they want to spend, but also wrapping it around great partnerships. And so the wealth, the spend, the engagement with us is really what's driving an outsized growth in the loyalty program.

Ed Bastian

Catie, if I could add to Joe's comments, one of the things about loyalty, that's really important. And I think it's changing as we go, is that we're trying to broaden the aperture across all demographics. And obviously, very focused on our younger generations Gen Zs and millennials and those that look to loyalty aspirationally. And in doing that, I think you're going to see a move of certainly a Delta, and I think maybe other leading consumer brands to be more -- at least as focused on the experiential as the transactional because let's say, historically, it's been very transactional. It's been very commercial. And that's important, and I don't see that changing.

But I think the consumers of tomorrow and the people that are attracted to loyalty and preference want to feel that they have some level of ownership in the experience and the relationship at a deeper level, which is why we're bringing more brands to the table, and we're creating more opportunities for our loyalty members to not just experience the brands, but utilize the brands and include Starbucks, include DraftKings, include many other brands that are within our ecosystem. It's one of the reasons why Amazon is really important to us out into the future. So the core loyalty and Jamie's question in terms of the value of our portfolio, I don't dismiss the the notion that our loyalty plan could be $75 billion or higher. That's really important that we continue to grow that. And so it's not just pumping out more cards, it's actually the quality of the experience that our customers are getting. And that's what we're very, very focused on here at Delta. So it's kind of a higher-level consideration set, but I think you're going to see that play more and more into our thinking as we roll out new partners and opportunities.

Catherine O'Brien

That's really interesting. And maybe just one last quick one on wire here, but you've got a number of commercial initiatives, including the loyalty discussion we're just having underway. Aircraft will bring over the next couple of years that should drive further benefits to the P&L and then you're all involved in the network. Just high level as you look into 2027, can you walk us through what you see as the key puts and takes on margin progression from here? Obviously, fuel is a huge question mark. I mean putting that aside, if we can.

Ed Bastian

Yes. Yes. We have a lot of tools in our arsenal for '27 and no, we're not going to walk for next year's margin. I'd love to -- love to, but I'm not going to site. But the biggest thing is trying to get to the other end of this volatility that we've seen in fuel and see where that normalizes. I do believe it's going to recede. I don't know what level it receives or the case. I think we all hope it happens sooner rather than later. But that's going to be the, I think, the overarching question on '27 margins. And I think for that, we don't have any crystal ball better than you do or anyone else does.

But when we start to see a break there, I think the value of the revenue and the new baseline that we've established and sustainability is important, and we intend to hold that. And whether it's up-gauging, whether it's new fleet efficiencies, whether it's the operational improvements with crews, there's a long list of opportunities within our control that we are working regardless of fuel that will also help our forward view. So I'm bullish about hitting our long-term framework of double-digit operating margin mid double digit. And you can see the threats really starting to come into alignment, but we do need a little bit of assistance on fuel along the way to accelerate and amplify that.

Operator

Your next question is coming from David Vernon from Bernstein.

David Vernon

Thanks for having me out here. So Joe, can you maybe talk about how paid premium demand and the premium to Main Cabin fare differentials evolving as you're adding more premium seats into the mix? Just trying to see if you've seen any evidence that the premium for departure is having an impact on buy up.

Joe Esposito

Yes. Thanks for the question. Overall, we've seen very strong demand in premium. As we said, as we're growing capacity 6 to 7, our loans went up almost 2 points and fares were going up as well. We weren't discounting fares. So fares continue to move in the right direction and the value that we're offering, I think, has been well received in the marketplace, especially when you now -- when you're rolling out merchandising, not only in the Main Cabin, but also into the -- into first class and Premium Select and Delta One, the upgrade take has been very positive, especially what they perceive as the value that we're offering for the extra and classic off of our basic fares. So -- and we're really in the early stages of those -- of that upgrade revenue. So it's been very positive from an overall and it's also now as we've merchandised all of the cabins, we'll continue with that and annualize it as we get into 2027.

David Vernon

And as you think about sort of like load factor, like when the passenger sort of buys the Main Cabin and goes to Main Cabin Extra, does that all stay in Main Cabin or does the portion of that go into premium? I'm just trying to get some -- a better understanding of how the math works on what you consider premium versus main cabin and kind of what is the true premium sale versus an upgrade sale.

Joe Esposito

Yes. All Main Cabin, all 3 merchandising sets stay in Main Cabin for recognizing that revenue. So the premium is clearly different cabin.

Julie Stewart

Now we will now take our final analyst question. .

Operator

Our final question is coming from Dan McKenzie from Seaport Global.

Daniel McKenzie

Joe, if I can go back to your commentary around the upsell revenue. It seems like a really big revenue bucket. But I'm wondering if you can provide some perspective of put some size around? Is it 10% of total revenue? Is it 20%? It just -- it seems like a fast-growing segment, of course.

Joe Esposito

It is a fast growing -- thanks for the question. This is a fast-growing segment, and we're really early in this process of understanding the cabins, so I'm going to stay away from giving you an exact number as we -- but it is very powerful and the early indications on the premium side of upgrading has been very strong. So we're really pleased with it. And -- and we really have only started the premium side only this past quarter and getting into full scale by the time we get into the first half of next year.

Daniel McKenzie

Yes. Okay. A second question here on the cost side of the business, it's really Delta as an IT company. It's a Delta as an IT company question. Is there a cost savings opportunity to, say, update legacy systems or potentially to go in-house with some of your outsource software needs. And I guess I'm just wondering if that's something you're looking at? And if so, what those savings might look like 2 years from now, of course, software has been a big topic in the market. And of course, AI and programming self-programming software has been topic.

Ed Bastian

Dan, this is Ed. We moved to the cloud a few years ago. And so that is been a very significant source of savings in terms of efficiency, productivity on our software development and technology. We do work with outside contractors and development companies, and we have partners in that space. So the key, I think, in this AI generation is to continue to drive faster seeds and more efficient and effective solutions. And our team is doing a good job of that. .

Julie Stewart

All right. Well, thank you. That will wrap up today's call. I hope everyone has a great day. I appreciate you joining.

Operator

That concludes today's conference. Thank you for your participation today.