Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Investor Presentation (June 2008)
20 slides from Delta Air Lines's investor presentation, Jun 18, 2008
Slide 1: Challenging Times Require Aggressive Action
Delta Air Lines: Challenging Times Require Aggressive Action Ed Bastian President and Chief Financial Officer June 18, 2008
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: Only the strongest will survive the industry crisis
Only the strongest will survive the industry crisis Fuel and economy present serious challenge to cash flow Unprecedented fuel prices Mitigate $4 billion impact from fuel run-up Recreate business model through strategic initiatives Maintain a strong liquidity position Delta’s Action Plan Delta - - C
Slide 4: Jet Fuel Expense Will Break 2007 Record
Jet Fuel Expense Will Break 2007 Record Note: Expense and consumption are for US passenger and cargo airlines; Source: Air Transport Association, Energy Information Administration, Department of Transportation High Fuel Costs Are An Industry Reality $22.7 $33.1 $38.5 $41.2 $61.2 $16.4 $14.8 $12.7 $1
Slide 5: Aggressive Actions Cover $3 Billion of $4 Billion Fuel Impact
Passenger Revenue Increases $1.3B Fuel Hedging Benefits $0.8B Revenue/Cost Initiatives $0.6B • Strong top-line growth • RASM gap to the industry closed a year ahead of schedule • 13% reduction in domestic capacity for 2H08 • Benefits from 3+ years of international network investment • Multi-year hed
Slide 6: Delta Is Delivering Strong Top-Line Growth
Capacity Change Summer 2005 - Summer 2008 RASM improvements driven by domestic capacity reductions, international network investment, and aggressive yield management Delta Is Delivering Strong Top-Line Growth RASM as % of Industry Average 2005 - 2008 Capacity Change 2H 2008 vs. 2H 2007 -13% 14% -4%
Slide 7: Hedges To Offset $1 Billion In Fuel Price Impact
Hedges To Offset $1 Billion In Fuel Price Impact 2Q 3Q 4Q Percent Hedged Jet Fuel Equivalent Cap 49% 46% 40% 22% 5% $2.76 $2.88 $3.30 $3.45 $3.05 Total value of $1.5 billion • Hedges also bolster cash balance - approximately $900 million of margin on fuel hedges held in cash at May 31 Note: Hedge po
Slide 8: Initiatives Target All Areas Of Delta's Business
Domestic capacity reductions Employee programs Aggressive changes to business model • Increased passenger fees and charges • Growth in cargo and ancillary revenues • Leverage technology and strict cost discipline to drive savings in every area of the business • Over 4,000 employees chose to particip
Slide 9: Expecting A Profitable June Quarter
Expecting A Profitable June Quarter Current Previous Operating Margin 3 - 4% 3 - 5% Fuel Price, all-in $3.18 $3.13 Mainline Non-Fuel CASM (vs. PY) Up 1 - - 2% Up 1 - - 2% System Capacity (vs. PY) Up 1 - - 2% Up 0 - - 2% Domestic Down 6 - 7% Down 5 - 7% International Up 16 - - 17% Up 15 - - 17% Note:
Slide 10: Fuel Prices Require Incremental Capacity Reductions
Fuel Prices Require Incremental Capacity Reductions Targeting flat mainline ex-fuel CASM by fourth quarter Commitment to pulling out associated costs
Slide 11: Delta Maintains A Strong Liquidity Position
Delta Maintains A Strong Liquidity Position Note: Liquidity balance includes cash and short term securities and $1B of undrawn revolver, and operating cash flow excludes fuel price increase from 2007 to 2008 Cash Flow December 2007 vs. December 2008 ($B) Fuel Price Impact, Net of Hedges Unrestricted
Slide 12: Creating America's Premier Global Airline
Creating America’s Premier Global Airline Delta/Northwest Merger Is A Game-Changing Transaction • Revenue-generating potential of global network combined with best-in- class cost structure makes Delta a formidable competitor for the long- term • Combination brings together unique, non-replicable ass
Slide 13: Delta / Northwest Combination Creates A Powerful Competitor
Unique Northwest Strength Difficult to Replicate Delta Strength Asia slot portfolio & 787 order book Optimized & enhanced Tokyo hub US-Japan treaty governs air-service rights Extensive domestic network KLM JV 4-way JV initiated Largest immunized JV with 31% of transatlantic capacity Air France JV As
Slide 14: Over $1 Billion in Annual Synergies Modeled
Over $1 Billion in Annual Synergies Modeled … …With Room for Upside • Fleet optimization • Joint venture • Network presence • Affinity card • Selling expenses • Loyalty program • Information Technology • Regional flying portfolio • Overhead reduction • Growth of ancillary businesses • Facilities and
Slide 15: Merger On Track to Close By The End of 2008
Complete regulatory process Shareholder approval Close merger Begin integrating airlines File Hart- Scott-Rodino with Department of Justice and make other regulatory filings April Fall/Winter INTEGRATION PLANNING Merger On Track to Close By The End of 2008
Slide 16: Strategically Positioned for Long-Term Success
Mitigate impact from fuel prices Strengthen foundation with Northwest merger Maintain a strong liquidity position Increased revenues, improved productivity and aggressive hedging will mitigate $3 billion of the $4 billion impact from fuel in 2008 … continue to transform business model Revenue-genera
Slide 17: Non-GAAP Reconciliations
Non-GAAP Reconciliations
Slide 18: Length of Haul Adjusted PRASM
Length of Haul Adjusted PRASM
Slide 19: (Node: Delta excludes retmetuing and rlaed items becanse management elias the ercusicnof these
(Node: Delta excludes retmetuing and rlaed items becanse management elias the ercusicnof these Stee is Delp b invests to evaluate the company’ ecu operational pnformarce Dasing the March 2008 quate, Delta coved a noncashclunge of $6. billimb sed ons pelininany ‘ssesmentof gcodvil impainrent. As prev
Slide 20: Mainline CASM projection
‘Mainline CASM projection tens exchide: ‘Aiveafl maintenance and staffing services to thd parti ‘Mainline CASM projection exculing tems not ‘dated io generation ofa seat nile tents exchide: ‘Resucturirg and wlated items ‘Total itne encadad ‘Mainline CASM projection excding special items Fue expense