Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Investor Day (May 2016)
21 slides from Delta Air Lines's investor day presentation, May 16, 2016
Slide 1: Delta: Delivering Sustainable Results
Delta: Delivering Sustainable Results May 16, 2016
Slide 2: Safe Harbor
Safe Harbor Statements in this presentation that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995
Slide 3: Delta: Delivering Sustainable Results
Delta: Delivering Sustainable Results • Delta has successfully transformed the business model to differentiate itself operationally, financially, and with best in class products and services in order to drive sustainable results through the cycle • Reducing planned capacity growth to below 2% for 2H
Slide 4: Strong Brand Drives Revenue Premium
Strong Brand Drives Revenue Premium • Building a brand that embodies what customers value, improves loyalty, enables segmentation, and drives a sustainable revenue premium to the industry • The investments Delta is making in the business will enhance the customer experience while also improving effi
Slide 5: Continued Momentum With Corporate Travelers
Continued Momentum With Corporate Travelers • Volumes across most corporate sectors remain positive, although fares continue to be depressed Corporate travelers are recognizing Delta’s …Resulting in solid increases in volumes high quality product and service… this year Business Travel News Survey YT
Slide 6: Reducing Capacity Plan For The Second Half Of 2016
Reducing Capacity Plan For The Second Half Of 2016 • Removing ~1 point of planned capacity growth for 4Q16 to address rising fuel prices and improve our unit revenue trajectory System Capacity Growth YoY • Capacity growth slows to below 2% for 2H16 ~5% driven by actions across all regions ~3% 2-3% D
Slide 7: The Path To Positive PRASM
The Path To Positive PRASM • Broad commercial initiatives should result in Delta being the first network carrier to return to positive unit revenue growth later this year - an important indicator that margins and cash flows are sustainable regardless of the direction of fuel prices Domestic Latin •
Slide 8: Consistently Improving Our Performance
Consistently Improving Our Performance • Delta’s focus on its long-term financial goals has driven improving returns and materially de- risked the balance sheet, while allowing for increasing shareholder returns Return on Adjusted Capital Returns Invested Capital Net Debt to Shareholders $17.0B $2.9
Slide 9: Continuing To Raise The Bar
Continuing To Raise The Bar • Delta’s EPS growth, ROIC, and Free Cash Flow are in the top 10% of S&P Industrials 2013 Goals 2015 Goals 2016 – 2018 Framework Operating 10-12% 14-16% 17-19% Margin EPS 10-15% 15% + 15% + Growth ROIC 15% + 20-25% 25% + Cash $7-8B op cash flow; $8-9B of Operating Cash Fl
Slide 10: The Path To Continued Outperformance
The Path To Continued Outperformance • Delta has a strong track record of solid execution with a large pipeline of initiatives in place to deliver solid top-line growth, while maintaining our cost discipline Targeting revenue growth through a continued unit revenue premium driven by network and prod
Slide 11: Strong Cash Generation Differentiates Delta
Strong Cash Generation Differentiates Delta • Plan contemplates continued strong cash generation, with ~$25 billion of operating cash flow produced over the next three years • Strong cash generation funds investments in the future, reductions in leverage, and capital returns to Operating and Free Ca
Slide 12: Fleet Strategy Driving Improving Efficiency
Fleet Strategy Driving Improving Efficiency • Fleet strategy focused on narrowbody replacements to drive improved efficiency; deferring 4 widebody deliveries from 2018 to 2019/20 • Recent orders aimed at narrowbody fleet Average Network Gauge replacement 7% – C Series, 737-900s, and A321s offer bett
Slide 13: Cash Taxes Well Below Book Tax Expense
Cash Taxes Well Below Book Tax Expense • Delta currently expects to utilize its $9 billion of NOLs and is well positioned to absorb cash taxes in 2018 • Taxable income is expected to be significantly lower than pre-tax book income over the next five years driven by, among other things: – Accelerated
Slide 14: Continuing To Reduce Debt At A Measured Pace
Continuing To Reduce Debt At A Measured Pace • Investment grade balance sheet provides Delta with flexibility, reduces financial risk, and should drive sustainable results through the economic cycle • Targeting $4B adjusted net debt by 2020 – Pace allows for more focus on pension funding, while cont
Slide 15: Proactively Addressing Pension Obligation
Proactively Addressing Pension Obligation • Delta’s pension contributions are above required levels and should result in Delta getting to an 80% funded status by 2020 Pension Funded Status • Plan to contribute ~$1.2B annually to the 120% Funded status at current discount pension through 2020 rate (4
Slide 16: Commitment To Consistent Shareholder Returns
Commitment To Consistent Shareholder Returns • Announcing 3rd consecutive 50% increase to the dividend since initiated in 2013 • Plan to complete remaining $3B of 2015 share repurchase authorization by May 2017, including $375M ASR in the June 2016 quarter Regular dividend increased to Plan to compl
Slide 17: Delta Is A Compelling Investment
Delta Is A Compelling Investment • Performance is consistent with high quality industrial peers, but current valuation overprices risk Implied Delta Stock Price at High Quality Industrial Transport Valuation Multiples $111 $104 $105 $42 +150% +155% +165% ~$5B $1.4B of FCF of FCF Current DAL @ High D
Slide 18: Non-GAAP Reconciliations
Non-GAAP Reconciliations 18
Slide 19: 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 20: Non-GAAP Reconciliations
Non-GAAP Reconciliations Operating Cash Flow, adjusted Delta presents adjusted operating cash flow because management believes adjusting for the following items provides a more meaningful measure for investors. Adjustments include: Hedge deferrals. During the March 2015 quarter, we effectively defer
Slide 21: Non-GAAP Reconciliations
Non-GAAP Reconciliations Free Cash Flow (cont.) Year Ended December 31, (in billions) 2015 2014 2013 2012 2011 Net cash provided by operating activities $ 7.9 $ 4.9 $ 4.5 $ 2.5 $ 2.8 Net cash used in investing activities (4.0) (2.5) (2.7) (2.0) (1.5) Adjustments: Hedge deferrals 0.4 - - - - Hedge ma