Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Deutsche Bank Industrials & Basic Materials Conference 2015
24 slides from Delta Air Lines's conference presentation, Jun 4, 2015
Slide 1: Delta: Setting A New Standard
Delta: Setting A New Standard Deutsche Bank Industrials & Basic Materials Conference June 4, 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: Evolution Over The Past Decade
Delta: Evolution Over The Past Decade • Through consolidation, restructuring, and innovation, Delta has emerged to earn a position among the leading S&P industrial companies • Leveraging network scale to produce better revenue efficiency Consolidation • Revenues have increased ~20% on 20% fewer depa
Slide 4: 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 5: 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 • LTM 1Q15 pretax margin expanded 350bps year over year to 11.5% (13.7% excluding hedges) • Lowered adjusted net debt by nearly $5 billion, while returning ove
Slide 6: Producing A Record June Quarter
Producing A Record June Quarter Business continues to generate top line growth, margin expansion and strong free cash flow June Quarter 2015 Forecast Operating margin 15.5% - 16.5% Fuel Price $2.40 - $2.45 Non-operating expense ~$120 million Passenger unit revenue change year over year Down 4% - 5%
Slide 7: Adjustments to Improve Unit Revenue Trajectory
Adjustments to Improve Unit Revenue Trajectory • Capacity reduction initiatives put company on path to achieve unit revenue growth by year end • Unit revenue performance being negatively impacted by foreign currency, lower international fuel surcharges and weaker than expected domestic yields Capaci
Slide 8: Fuel Tailwind Accelerates In Second Half 2015
Fuel Tailwind Accelerates In Second Half 2015 • 2H15 all-in price per gallon will be ~25% lower than 1H15, despite ~5% higher market fuel prices • Fuel is expected to be a $9.4 billion expense for Delta in 2015 – $1 move in crude impacts expense by $100 million annually Delta Jet Fuel Prices – At cu
Slide 9: 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 10: 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 • Completed $2 billion flow
Slide 11: Strong Cash Generation Funds Investment in The Future, Reductions in Leverage, and Capital Returns
Strong Cash Generation Funds Investment in The Future, Reductions in Leverage, and Capital Returns to Owners • Strong operating cash flow, combined with disciplined capital spending, produces sustainable free cash flow of $4-5 billion annually $8.0 Capital Spending and Operating Cash Flow ($B) $6.0
Slide 12: 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 Adjusted Net Debt –Balances EPS efficiency with fu
Slide 13: An Industry Focused On Shareholder Returns
An Industry Focused On Shareholder Returns • Capacity growth for the four largest carriers being funded by replacement aircraft and fleet modification, not purchase of growth aircraft • The US carriers have returned over $4.3B to shareholders over the last year, an amount that is expected to grow go
Slide 14: 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-March 31, 2015 350% Delta 279% 300% Airli
Slide 15: 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% 18.6 17.8 15%+ 13.1% 11.5% 10.2 20.1% Delta High Qual. S&P Delta High Qual. Ind. S&P Delta High Qual
Slide 16: Delta: A High Quality Company
Delta: A High Quality Company • Delta is a high-quality S&P Industrial that delivers growing value for employees, customers and investors • Proven track record of execution and effectively managing the business to America’s Best Run demand - maintaining capacity discipline in low fuel environment Ai
Slide 17: Non-GAAP Reconciliations
Non-GAAP Reconciliations 17
Slide 18: 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 19: Non-GAAP Reconciliations
Non-GAAP Reconciliations Total operating revenue, combined Delta presents total operating revenue, combined as if the company's merger with Northwest Airlines had occurred at the beginning of the period presented because management believes this metric is helpful to investors to evaluate the company
Slide 20: 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 21: Non-GAAP Reconciliations
Non-GAAP Reconciliations Net Income Per Diluted Share, adjusted for special items Delta adjusts for MTM adjustments and settlements, restructuring and other, loss on extinguishment of debt and Virgin Atlantic MTM adjustments to determine net income per diluted share, adjusted for special items, for
Slide 22: 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 23: Non-GAAP Reconciliations
Non-GAAP Reconciliations Average fuel price per gallon, adjusted The tables below show the components of fuel expense, including the impact of the refinery segment and hedging on average price per gallon. We then adjust for MTM adjustments and settlements (as described above under the heading Pre-Ta
Slide 24: Non-GAAP Reconciliations
Non-GAAP Reconciliations Capital Expenditures, net Delta presents net capital expenditures because management believes adjusting for these amounts provides a more meaningful financial measure for investors. This metric is adjusted for reimbursements related to build-to-suit leased facilities and oth
Delta Air Lines — Deutsche Bank Industrials & Basic Materials Conference 2015 on 6ix