Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Investor Day (December 2021)
60 slides from Delta Air Lines's investor day presentation, Dec 16, 2021
Slide 1: Capital Markets Day
Capital Markets Day December 16, 2021
Slide 2: Julie Stewart, Vice President, Investor Relations
Julie Stewart Vice President, Investor Relations
Slide 3: Agenda
Agenda Ed Bastian Chief Executive Officer Accelerating Our Climb Glen Hauenstein President Delta – The Premium Airline Brand Alain Bellemare President - International Building A Global Future Dan Janki Chief Financial Officer Creating Long-Term Value Fireside Chat: Ed Bastian and Stephen Squeri The
Slide 4: Safe Harbor
Safe Harbor Statements made in this presentation that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections, goals, aspirations, commitments or strategies for the future, should be considered “forward-looking statements” under the Secu
Slide 5: Accelerating Our Climb
Accelerating Our Climb Ed Bastian Chief Executive Officer 4
Slide 6: Five Key Takeaways
Five Key Takeaways Competitive Delta’s actions during the pandemic further strengthened its competitive advantages and 1 Advantages enhanced its position as a trusted consumer brand Industry Delta is leading the industry operationally and financially by demonstrating agility, 2 Leadership operationa
Slide 7: Our Competitive Advantages And Brand Have Strengthened
Our Competitive Advantages And Brand Have Strengthened People and Global Financial Culture Network Foundation Operational Customer Reliability Loyalty Unparalleled Competitive Advantages Support Our Trusted Consumer Brand 6
Slide 8: People And Culture – Powering The Delta Difference
People And Culture – Powering The Delta Difference Protecting Our People And Our Culture ✓ Dedicated and experienced team, including 9,000 new employees, that continue to deliver the best performance in the industry ✓ Avoided pandemic furloughs with high percentage of workforce participating in volu
Slide 9: Operational Reliability – Excellence That Sets Delta Apart
Operational Reliability – Excellence That Sets Delta Apart Cancellations By Airline 1 On Time Arrival By Airline 2 N o vemb er 2 021 Y T D N o vemb er 2 021 YT D 88.7% 33,901 85.2% 82.4% 23,922 80.4% 22,517 75.9% 5,325 Delta Pre - Covid Record Completion 99.6% 97.7% 97.9% 98.0% Factor Widened Our Op
Slide 10: Global Network – Strengthened And Accelerated Footprint
Global Network – Strengthened And Accelerated Footprint ▪ Improved local share in both core and coastal hubs by 3 points Domestic ▪ Accelerated generational airport investments in largest revenue centers ▪ Maintained and supporting our partners through restructuring International ▪ Fast-tracked roll
Slide 11: Customer Loyalty – The Power Of The Delta Brand
Customer Loyalty – The Power Of The Delta Brand Domestic Net Promoter Score Customer Engagement 1 Domestic Corporate Share 2 58 Co-Brand Spend 122% 35% Co-Brand Acquisitions 111% 32% 31% 48 30% SkyMiles Acquisitions 112% 2019 2021 YTD Fly Delta App Downloads 110% 2015-2018 2019 2020 2021E +10 Point
Slide 12: Delta Continues To Outperform Peers On Key Financial Metrics
Delta Continues To Outperform Peers On Key Financial Metrics Adj. Non-Fuel Unit Cost (3Q21 TTM) Adj. Pre-Tax Income (2H21) 2 N o n - Fu e l C A SM 1 , U S C e n t s $ B illio ns 14.15¢ $0.4 13.97¢ 12.09¢ $(0.2) 10.56¢ $(1.3) $(2.2) +24% +37% +11% +15% +2% (2)% (8)% (12)% vs. 2019 Adj. Pre-Tax Margin
Slide 13: Well Positioned To Manage Continued Volatility
Well Positioned To Manage Continued Volatility Approach to Managing Volatility ✓ Measured and agile approach to capacity VARIANT deployment RISK ✓ Fleet strategy gives us flexibility to optimize in a changing environment ✓ Well positioned to recapture fuel price increases given brand preference and
Slide 14: Building Momentum For The Next Phase Of The Recovery
Building Momentum For The Next Phase Of The Recovery Near-Term Trends Medium to Long-Term Trends Consumer Spending vs. 2019 1 ▪ Pent-up demand is evident ▪ Healthy economy and record consumer savings rates ▪ Impact of each variant on Consumer demand has been ▪ Rising demand for premium brands Spendi
Slide 15: Path To Full Recovery By 2023
Path To Full Recovery By 2023 Near-Term Financial Priorities Guidance On Key Metrics ▪ Achieve sustained and significant 2022E 2023E profitability and cash generation Capacity ▪ Grow revenue premium vs. 2019 ~90% ~100% ▪ Drive competitive cost structure Non-Fuel Up Low to Mid ▪ Reduce debt and inves
Slide 16: 2024 Financial Targets And Value Creation Framework
2024 Financial Targets And Value Creation Framework 2024 Financial Targets Delta People Adj. Revenue >$50B and Brand Adj. Earnings >$7.00 Return on per Share 1 Invested Capital Free Thoughtful Industry- Cash Flow >$4B Capital Leading Allocation Margins Balance Adj. Debt / EBITDAR 2.0 to 3.0x Sheet A
Slide 17: Strategic Priorities On Path To Recovery
Strategic Priorities On Path To Recovery Strengthening Our Trusted Restoring Our Financial Building A Better Future Consumer Brand Performance For Our People And Planet ▪ Continue to prioritize health ▪ Rebuild scale and drive ▪ Put our people first and invest and safety of our customers efficiency
Slide 18: Delta – The Premium Airline Brand
Delta – The Premium Airline Brand Glen Hauenstein President 17
Slide 19: Measured Approach To Managing Demand Environment
Measured Approach To Managing Demand Environment TSA Volume, DAL and OA Capacity vs. 2019 1 ▪ Expect December Quarter 2021 total adjusted 100% revenue to be 74% recovered versus 2019 90% ▪ Results driven by strong consumer demand 80% around Holidays with yields >2019 levels 70% ▪ International deman
Slide 20: Next Phase Of Recovery Driven By Return Of Business And Int’l
Next Phase Of Recovery Driven By Return Of Business And Int’l 2021 Exit Rate 1 Consumer >100% ▪ Delta is well positioned to capitalize on a Domestic changing demand environment Business ~60% ▪ Business recovery expected to accelerate in 2022 as offices continue to re-open Consumer ~60-65% ▪ Expect i
Slide 21: Extending Our Commercial Advantage
Extending Our Commercial Advantage Commercial Strategy Pillars ▪ Premium resilience leading the recovery Investing In ▪ Responding to increasing premium demand Premium Products ▪ Driver of high revenue and margin growth ▪ Providing value proposition to our customers Growing Loyalty ▪ Loyal customers
Slide 22: Demand For Premium Product Propels Our Strategy
Demand For Premium Product Propels Our Strategy Premium vs. Main Cabin Domestic First Class Paid Premium Revenue Mix Margin Load Factor 36% High 60% 63% 32% 55% 24% 10+ pt. differential in margin Main Cabin Margin Premium Cabin Margin 2014 2019 2024E Premium Product Resilience Has Led Us Through The
Slide 23: Fleet Transformation Driving Efficiency And Elevating The Product
Fleet Transformation Driving Efficiency And Elevating The Product Evolution of Fleet Gauge Growth in Premium Seats 1 150+ Premium Seats 131 Main Cabin Seats 97 2009 2021 Future State 2009 2021 Future State 15 11 8 9% 27% 30%+ Fleet families Premium mix 22 1 C o unt o f p r e mi u m a n d ma i n c a
Slide 24: Investing In The Customer Experience Across The Travel Ribbon
Investing In The Customer Experience Across The Travel Ribbon Shopping Booking Post-Purchase Airport In-Flight TBU ▪ Modernized display ▪ Advancing digital ▪ Flexible Policies ▪ Developing best-in-class ▪ Extending our lead platforms footprint and experience ▪ Improving digital self- airport facilit
Slide 25: Growing Our Loyalty Base Drives High-Margin Revenue
Growing Our Loyalty Base Drives High -Margin Revenue 1 Grow Membership And 2 Make SkyMiles Currency Personalize Engagement More Valuable ▪ Generating record SkyMiles ▪ Extending status and benefits acquisitions ▪ Partnering with premier brands like ▪ Achieving record downloads of Fly Lyft and Airbnb
Slide 26: The Power Of The Delta And American Express Partnership
The Power Of The Delta And American Express Partnership Growth Opportunity Delta-American Express Contribution ($B) Less than 1/3 of our ~$7 SkyMiles members have a Co-Brand credit card >$5 ~$4 ~$4 Profile Of Co-Brand ~$3 Cardholders Trips / Year ~6 Avg. Spend vs. ~ 4-5x Non-Member 2017 2019 2021E 2
Slide 27: Leveraging Our Platform To Expand Our Revenue Ecosystem
Leveraging Our Platform To Expand Our Revenue Ecosystem >$50B Growth Opportunities ~$47B Adjusted Loyalty: Investing in product, marketing and capabilities Total accelerates loyalty revenue ~$40B Revenue 39% growth 47% Cargo: Leverage growing widebody capacity while 56% increasing share of premium p
Slide 28: Leveraging Strengths Of Our Industry-Leading Domestic Network
Leveraging Strengths Of Our Industry -Leading Domestic Network Core Hubs ATL ▪ Strong local passenger share ▪ High penetration of Delta loyalists ▪ Competitive cost position ▪ Extending gauge lead, driving efficiency Coastal Hubs NYC ▪ Presence in large revenue markets ▪ Growing relevance in interna
Slide 29: Unmatched Scale And Opportunity In International
Unmatched Scale And Opportunity In International Growing brand preference, strong Strong Delta relevance in Domestic markets Foundation and improving coastal presence Next-Gen aircraft with full suite Renewed of products, enhanced cargo Widebody Fleet capability and fuel efficiency Structural Change
Slide 30: Building A Global Future
Building A Global Future Alain Bellemare President - International
Slide 31: Best International Platform For Long-Term Profitable Growth
Best International Platform For Long -Term Profitable Growth The #1 Global Network Unique profit-sharing approach aligning Transatlantic Americas Pacific JV partner incentives #1 North America #1 Mexico and South #1 Transpacific JV To Europe JV1 American JVs1 Hub In Seoul2 1 B a sed o n 2 019 A S Ms
Slide 32: World’s Leading Equity Partner Portfolio
World’s Leading Equity Partner Portfolio Best-in-Class Partners Emerging Stronger Atlantic Gold Standard JV in Critical Access Transatlantic to UK Structural Cost Revamped Reduction Fleet Americas Premier South Largest U.S. – American Franchise Mexico JV Improved Strengthened Pacific Balance Sheet C
Slide 33: Unique Equity Strategy Unlocks Synergy Opportunities
Unique Equity Strategy Unlocks Synergy Opportunities Impressive Global Scale Joint Scale Drives 2019 Portfolio Equivalent To 3x Delta’s Size Synergy Opportunities Seamless Customer Experience Enhanced Loyalty Offering Strategic Sourcing / Investment Equity Partners Ancillary Businesses (MRO / Cargo)
Slide 34: International Margins Will Continue To Expand
International Margins Will Continue To Expand Value Evolution Over Time Margin Growth Drivers Delta’s International PRASM Index Premier Global Hub Structure 102% 100% Premium Product Expansion 99% Renewed Next-Gen Fleet 2014 2019 Delta’s International Margin Growth Strong Partner Portfolio Improved
Slide 35: Creating Long-Term Value
Creating Long-Term Value Dan Janki Chief Financial Officer
Slide 36: Financial Priorities For Value Creation
Financial Priorities For Value Creation 1 Cost Performance Efficiently rebuild the airline, capture fleet renewal benefits and drive operating leverage to produce a competitive cost structure 2 Cash Generation Unit revenue premium and competitive cost structure expected to drive industry-leading mar
Slide 37: 2024 Financial Targets
2024 Financial Targets 2024 Financial Targets 2024 Metrics And Assumptions Adj. ▪ Capacity 100%+ vs. 2019 >$50B Revenue ▪ Healthy growth in diverse revenue Adj. Earnings ▪ Non-Fuel CASM 2 up low-single digits vs. 2019 >$7.00 per Share 1 ▪ Operating Margin in Mid Teens Free ▪ Operating cash flow >$9
Slide 38: Progression Of Non-Fuel Unit Costs
Progression Of Non -Fuel Unit Costs Non-Fuel CASM 1 vs. 2019 Up ~11% Up 7% - 10% Up low to mid Up low single digits single digits 10.88₵ 2019 2021E 2022E 2023E 2024E Capacity vs. 2019 71% ~90% ~100% 100%+ 1 N o n - Fuel C A SM e x c lu d e s f u e l a n d p r ofi t - sh a r in g e x p e n se , i n c
Slide 39: Non-Fuel Cost Framework And Drivers
Non-Fuel Cost Framework And Drivers Non-Fuel CASM Impact vs. 2019 2021E 2022E 2024E Transition Costs required to re-build and restore our network and operation ~4 pts ~1-2 pts ~Flat Underlying Scale, fleet-related, maintenance, suppliers and Delta workforce ~6 pts ~5-6 pts ~(1) pt Business Investmen
Slide 40: Transition Costs Moderate As We Approach 2019 Scale
Transition Costs Moderate As We Approach 2019 Scale Recovery-Related / Transition Costs and Drivers ~$900M ▪ Aircraft Reactivation 1H22: ~60% 2H22: ~40% ▪ Hiring 9,000 in 2021 ~$380M ▪ Training & Overtime ▪ Reservations Volume $0M 2021E 2022E 2023E Non-Fuel CASM vs. 2019 ~4 pts ~1-2 pts - Aircraft A
Slide 41: Multiple Factors Impacting Underlying Business
Multiple Factors Impacting Underlying Business Non-Fuel CASM Impact vs. 2019 2021E 2022E 2024E Impact of capacity, asset utilization, efficiency, entity mix and Scale selling-related expense ~13 pts ~4 pts ~(4) pts Fleet-Related Upgauging and simplification savings ~(1) pts ~(1) pts ~(2) pts Mainlin
Slide 42: Driving Operating Leverage And Efficiency As We Scale
Driving Operating Leverage And Efficiency As We Scale Improving Efficiency 1 ▪ As we rescale, we will drive Workforce Productivity Aircraft Utilization operating leverage on fixed 100%+ ~100% costs and improve efficiency 87% 87% across our workgroups ▪ Scale and efficiency expected to inflect to tai
Slide 43: Fleet Transformation Drives Significant Multi-Year Benefit
Fleet Transformation Drives Significant Multi -Year Benefit Driving Significant Value vs. 2019 ▪ Premium seat growth continuing Fuel Savings Non-Fuel Savings Revenue to outpace main cabin ~$1.3B ▪ Expect 2024 gauge to be 6 ~$650M points higher than 2019 $400M ▪ Expect 2024 fuel efficiency to be 2021
Slide 44: Investing In The Customer Experience And Diversifying Revenue
Investing In The Customer Experience And Diversifying Revenue Investment Drivers Accelerated redevelopment of key Non-Fuel CASM Impact From Airport airports to improve customer Facilities experience, operations and market Investments vs. 2019 position ~3 pts Industry-leading cleanliness Clean standa
Slide 45: Margin And Cash Flow Focus Underpins Our Financial Success
Margin And Cash Flow Focus Underpins Our Financial Success ▪ Measured capacity, premium focus and increasing revenue diversity support growing unit revenue premium ▪ Focused on driving competitive cost structure to support industry -leading margins ▪ Growing American Express contribution and unique
Slide 46: Restoring Our Balance Sheet
Restoring Our Balance Sheet Adj. Net Debt Adj. Debt/EBITDAR ~$21B 2.0x – 3.0x ~$15B 2.0x 2021E 2024E 2017 - 2019 Avg. 2024E GAAP net Liquidity 1 ~$14B ~$5-6B ($6B) $0B pension liability No Equity Dilution During The Pandemic Enables Shareholders To Fully Participate In Upside 1 L iq uid it y inc lu
Slide 47: Strategically Investing To Extend Our Leadership Position
Strategically Investing To Extend Our Leadership Position Gross Capital Expenditures $Billions Pre-Covid Covid-Induced Restore to Pre-Covid 1 Avg. CapEx 2 Deferred Spend 3 CapEx Levels ~$6.0 ~$5.0 ~$5.0 - $5.5 ~$4.5 - $5.0 ~$2.9 $2.2 2017 - 2019 Avg. 2020 2021E 2022E 2023E 2024E % Aircraft / 80% 78%
Slide 48: Maintaining Flexibility And Remaining Nimble Through Recovery
Maintaining Flexibility And Remaining Nimble Through Recovery Approach to Managing Volatility ▪ Fleet flexibility is our largest lever ✓ Measured and agile approach to capacity deployment ▪ Flex fleets, aircraft utilization and network ✓ Fleet strategy gives us flexibility to deployment are levers t
Slide 49: Value Creation Framework
Value Creation Framework Positioned To Deliver Industry-leading Margins And Return To Investment Grade Metrics Delta People and Brand Return on Invested Capital Thoughtful Capital Industry-Leading Allocation Margins 48
Slide 50: Five Key Takeaways
Five Key Takeaways Competitive Delta’s actions during the pandemic further strengthened its competitive advantages and 1 Advantages enhanced its position as a trusted consumer brand Industry Delta is leading the industry operationally and financially by demonstrating agility, 2 Leadership operationa
Slide 51: The Power Of The DAL / AXP Partnership
The Power Of The DAL / AXP Partnership CEO Fireside Chat Ed Bastian, Chief Executive Officer Delta Air Lines Stephen Squeri, Chairman and Chief Executive Officer American Express
Slide 52: Non-GAAP Financial Measures
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. Securities and Exchange
Slide 53: Non-GAAP Financial Measures
Non-GAAP Financial Measures Pre-Tax Income, adjusted and Pre-Tax Margin, adjusted. In the current period, pre-tax income, adjusted and pre-tax margin, adjusted exclude the following items directly related to the impact of COVID- 19 and our response for comparability with the prior period: • Governme
Slide 54: Non-GAAP Financial Measures
Non-GAAP Financial Measures Non-Fuel Unit Cost or Cost per Available Seat Mile, adjusted ("CASM-Ex"). In the current period, CASM-Ex excludes the following items directly related to the impact of COVID-19 and our response: restructuring charges, as discussed below, and government grant recognition,
Slide 55: Non-GAAP Financial Measures
Non-GAAP Financial Measures Total Revenue, adjusted and Total Unit Revenue Per Available Seat Mile ("TRASM"), adjusted. We adjust total revenue and TRASM for third-party refinery sales and the impact of Delta Private Jets for the reasons described above under the heading CASM-Ex. Three Months Ended
Slide 56: Non-GAAP Financial Measures
Non-GAAP Financial Measures Operating Margin, adjusted. We adjust operating margin for MTM adjustments and settlements on hedges for the reason described below. We adjust for third-party refinery sales for the reason described above under the heading CASM-Ex. • MTM adjustments and settlements on hed
Slide 57: Non-GAAP Financial Measures
Non-GAAP Financial Measures Operating cash flow, adjusted. We present operating cash flow, adjusted because management believes adjusting for the following items provides a more meaningful measure for investors: • Hedge deferrals, including early settlements. During the March 2015 quarter, we effect
Slide 58: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted Net Debt. Delta uses adjusted total debt, including aircraft rent, in addition to adjusted debt and finance leases, to present estimated financial obligations. Delta reduces adjusted total debt by cash, cash equivalents and short-term investments, resulting in ad
Slide 59: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted Debt to Earnings Before Interest, Taxes, Depreciation, Amortization and Rent ("EBITDAR"). We present adjusted debt to EBITDAR because management believes this metric is helpful to investors in assessing the company's overall debt profile. Adjusted debt includes o
Slide 60: Non-GAAP Financial Measures
Non-GAAP Financial Measures Capital Expenditures, net. We adjust capital expenditures for the following items to determine capital expenditures, net for the reasons described below: • Financed aircraft acquisitions. This adjusts capital expenditures to reflect aircraft deliveries that are leased as