Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Bank of America Merrill Lynch Transportation Conference 2015
19 slides from Delta Air Lines's conference presentation, May 14, 2015
Slide 1: Delta: Setting A New Standard
Delta: Setting A New Standard Bank of America/Merrill Lynch Transportation Conference May 14, 2015
Slide 2: Safe Harbor
Safe Harbor This presentation contains various projections and other forward-looking statements which represent Delta’s estimates or expectations regarding future events. All forward-looking statements involve a number of assumptions, risks and uncertainties, many of which are beyond Delta’s control
Slide 3: Delta: Setting A New Standard
Delta: Setting A New Standard • Delta has realized across the board improvements in the business, producing strong financial performance and cash generation Results have improved materially over the last few years: • Strategic growth, pricing enhancements, and cost productivity combined to generate
Slide 4: Across The Board Improvement In The Business
Across The Board Improvement In The Business • Delta continues to deliver industry leading operational reliability and customer satisfaction • Generated nearly $5 billion in pre-tax income in the LTM 1Q 2015,an increase of 54% YoY • ROIC expanded 6 points in the last twelve months to 22.3% • Lowered
Slide 5: The Path to Further Improvements
The Path to Further Improvements • Delta’s culture of continuous improvement drives benefits across the business Operational Excellence Revenue Generation Delivering top-of-industry operational performance in Continue to generate significant revenue premium to the industry completion factor, on-time
Slide 6: Fuel Declines Provide Earnings Tailwind
Fuel Declines Provide Earnings Tailwind • At current market prices, fuel declines will provide a net $2 billion benefit for Delta in 2015 Market Jet Fuel Prices $3.09 $3.05 $2.96 • Following the restructuring of our hedge book, the bulk of this year’s hedge losses $2.35 will be realized in the first
Slide 7: Strong Performance Relative To High Quality Peers
Strong Performance Relative To High Quality Peers • Establishing new framework to further build a franchise that generates solid margins and cash flow, an investment grade balance sheet, and sustainable shareholder returns • Strong progress drives the third upward revision to our targets in three ye
Slide 8: Balanced Capital Deployment Drives Long-Term Value
Balanced Capital Deployment Drives Long-Term Value Balanced approach to capital deployment has driven significant value for shareholders Reinvest In The Strengthen The Return Cash To Business Balance Sheet Shareholders • ~50% of operating cash • Nearly $10 billion in debt • Will complete $2 billion
Slide 9: Strong Cash Generation Funds Investment in Our Future, Reductions in Our Leverage, and Capital Returns
Strong Cash Generation Funds Investment in Our Future, Reductions in Our Leverage, and Capital Returns to Our Owners • Strong operating cash flow, combined with disciplined capital spending, produces sustainable free cash flow of $4-5 billion annually $8.0 Capital Spending and Operating Cash Flow ($
Slide 10: Setting Long-Term Adjusted Net Debt Target at $4B
Setting Long-Term Adjusted Net Debt Target at $4B • Goal is to achieve and maintain $4 billion adjusted net debt levels by 2017 • Determined $4 billion is optimal long-term debt level – Results in investment grade credit metrics and a manageable WACC – Balances EPS efficiency with future flexibility
Slide 11: Increasing Shareholder Returns
Increasing Shareholder Returns • Demonstrating a strong commitment to shareholder returns with 50% increase to the dividend and a new $5 billion share repurchase authorization • Plan to return at least 50% of free cash flow to shareholders through 2017 • On track to complete remaining $725M of 2014
Slide 12: Delta's Stock Has Outperformed the Industrial Peers…
Delta’s Stock Has Outperformed the Industrial Peers… • Delta’s strong financial performance and balanced capital deployment strategy has driven share price appreciation well in excess of the peer group over the last several years Stock Price Performance 2013-Present 350% Delta 279% 300% Airlines (XA
Slide 13: …But Valuation Remains at a Significant Discount
…But Valuation Remains at a Significant Discount • Plan targets compare favorably with other industrials and should help drive better valuations ROIC EPS Growth Forward Price to Earnings 20-25% 23.4% 18.5 17.2 15%+ 13.1% 11.5% 10.1 20.1% Delta High Qual. S&P Delta High Qual. Ind. S&P Delta High Qual
Slide 14: Non-GAAP Reconciliations
Non-GAAP Reconciliations 14
Slide 15: Non-GAAP Reconciliations
Non-GAAP Reconciliations Non-GAAP Financial Measures Delta sometimes uses information ("non-GAAP financial measures") that is derived from the Consolidated Financial Statements, but that is not presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”). Under the U.S.
Slide 16: Non-GAAP Reconciliations
Non-GAAP Reconciliations Pre-Tax Income and Pre-Tax Margin, adjusted for special items Delta adjusts for the following items to determine pre-tax income and pre-tax margin, adjusted for special items, for the reasons described below: Mark-to-market ("MTM") adjustments and settlements. MTM adjustment
Slide 17: Non-GAAP Reconciliations
Non-GAAP Reconciliations Return on Invested Capital Delta presents return on invested capital as management believes this metric is helpful to investors in assessing the company’s ability to generate returns using its invested capital and as a measure against the industry. Return on invested capital
Slide 18: Non-GAAP Reconciliations
Non-GAAP Reconciliations Free Cash Flow Delta presents free cash flow because management believes this metric is helpful to investors to evaluate the company's ability to generate cash that is available for use for debt service or general corporate initiatives. This metric is adjusted for hedge marg
Slide 19: Non-GAAP Reconciliations
Non-GAAP Reconciliations Operating Cash Flow, adjusted Delta presents operating cash flow, adjusted because management believes adjusting for these amounts provides a more meaningful financial measure for investors. This metric is adjusted for hedge margin for the same reason described above under t
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