Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Investor Day (December 2011)
63 slides from Delta Air Lines's investor day presentation, Dec 14, 2011
Slide 1: Delta Investor Day 2011
Sc | ADELTAS DELTA INVESTOR DAY 2011
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: State of the Airline
State of the Airline Richard Anderson Chief Executive Officer
Slide 4: Looking Ahead
Looking Ahead Ed Bastian President
Slide 5: 2011: Solid Results In Challenging Times
2011: Solid Results In Challenging Times Challenging Times Solid Results • 30% increase in fuel prices, resulting in $3 billion higher fuel expense • Economic weakness in the world’s two largest economies • On-going impact of the earthquake and tsunami in Japan • War and unrest in the Middle East •
Slide 6: Delta Has Built A Resilient Business Model
Delta Has Built A Resilient Business Model $1.4 B $1.1B Capacity discipline, strength in corporate revenues and hedging strategy have mitigated high fuel costs Note: All results exclude special items . Including special items, Delta’s net income was $0.6 billion in 2010 and is estimated to be $0.8 b
Slide 7: Strong End To The Year
Strong End To The Year December quarter 2011 Operating margin 6 - 8% Fuel price $2.96 Profit sharing expense $75 million Non-operating expense $275 - $300 million Capital expenditures $375 million Total unrestricted liquidity $5.3 billion December quarter 2011 vs. December quarter 2010 Passenger uni
Slide 8: The Landscape Ahead For 2012
The Landscape Ahead For 2012 The 2012 Landscape Solid earnings growth and continued free cash flow generation • Slow, but positive, global GDP growth • Anticipate recession in Europe • Fuel prices remain at historically high levels • Industry restructuring and capacity discipline allows for recovery
Slide 9: Delta's Path Forward
Delta’s Path Forward Grow Unit Revenues Improve Productivity Invest in the Business Delever the Balance Sheet Grow passenger and ancillary unit revenues through corporate revenue gains, fuel cost recovery, and technology-enabled merchandising initiatives Focus on total cost productivity, including f
Slide 10: Largest Corporate Sectors Leading Growth Rates
Largest Corporate Sectors Leading Growth Rates Last Four Weeks Booked Revenue Corporate booked revenues up 14% despite 4-5% reduction in capacity
Slide 11: Strengthening Position In Latin America
Strengthening Position In Latin America Latin America Has High Growth Potential Delta’s Expanded Latin America Presence Focused on building partnerships to leverage high growth potential in this region • Delta now accounts for nearly 20% of US carriers’ capacity to Latin America • Partnerships with
Slide 12: Maintaining A Competitive Cost Structure
Maintaining A Competitive Cost Structure YTD-September 2011 Non-Fuel Unit Costs (cents) Note: excludes special items, ancillary businesses, and profit sharing.
Slide 13: Non-Fuel Costs Present Opportunity
Non-Fuel Costs Present Opportunity • Wages and benefits - wage harmonization, industry standard rates, and pension 0.23 cents • LaGuardia/ATL concourse F 0.05 cents • Capacity reduction - fixed cost impact 0.15 cents 8.80 0.40 • Goal is to return non-fuel unit costs to adjusted 2010 levels • 2012 re
Slide 14: Structural Changes Necessary To Lower Costs
Structural Changes Necessary To Lower Costs • 737-900ER deliveries will reduce overall fleet maintenance costs; maintenance reductions in advance of those deliveries to begin in late 2012 • Simplification of fleet post- integration • Leverage AeroMexico joint venture to optimize maintenance opportun
Slide 15: Investments In The Business Are Paying Off
Investments In The Business Are Paying Off Multi-Year Investments in Products, Services and Facilities • Flat bed seats - more than 50% of widebody international seats complete by end of 2012 • Facilities - state of the art international terminals slated for Atlanta (2012) and JFK (2013) • Wi-Fi - e
Slide 16: Solid Progress On Debt Reduction
Solid Progress On Debt Reduction 12/31/11 - $12.9 billion 2013 - $10 billion Adjusted Net Debt Strong free cash flow generation has produced $4.1 billion net debt reduction in two years
Slide 17: Continued Strong Relationship with American Express
Continued Strong Relationship with American Express • New four-year agreement with American Express for annual SkyMiles pre-purchases of $675 million • Reduces seasonal volatility of cash flows • From cash perspective, net effect is to push out amortization of existing $1 billion agreement by two ye
Slide 18: Delta: Keep Climbing
Delta: Keep Climbing Focus on top-line growth Taking a disciplined approach Reducing risk across the business Growing and diversifying revenues through a broad global network, corporate revenue gains, fuel cost recovery and improved products and services Disciplined management of capacity, costs and
Slide 19: A Premium Revenue Carrier
A Premium Revenue Carrier Glen Hauenstein EVP Network Planning and Revenue Management
Slide 20: A Premium Revenue Carrier
A Premium Revenue Carrier Elevate Delta’s Brand in the Eyes of Our Customers Concentrate Capacity in High Potential Markets Expand Product Offerings Leverage Alliances Product and facility enhancements targeted to making Delta the airline of choice to, from and through the U.S. Grow annual merchandi
Slide 21: Delta Achieving Revenue Premium to the Industry
Delta Achieving Revenue Premium to the Industry Delta System Unit Revenue as Percentage of ATA Average Merger synergies, capacity discipline, focus on higher value customer and enhanced revenue management platforms allowing Delta to improve revenue performance versus its peers in all entities
Slide 22: Investments Targeted at Higher Value Passenger
Investments Targeted at Higher Value Passenger • Enhanced delta.com platform • Personalized sales programs • First Class Upsell Delta named Best Overall Airline by Business Travel News • New Atlanta international terminal opening in 2012 • JFK Terminal 4 opening in • Renewed Sky Clubs • Ability to s
Slide 23: Solid Gains In Corporate Revenues
KEEP CLIMBING ADELTA® Solid Gains In Corporate Revenues Diverse global network, combined with investments in products and services, producing solid corporate revenue gains despite lower capacity Quarter-to-Date Dec-11 Delta Corporate RevenueShare versus Prior Year 29.4% 10% 28.6% 28.2% 28.2% 27.0% 2
Slide 24: The Global Landscape
The Global Landscape North America Latin America Europe Asia • Slow, but positive, GDP growth • Continued industry capacity discipline • Volatility increased as competitors go through integration and restructuring • Delta capacity down 1-2%, driven by 60 small-gauge aircraft retirements • Anticipate
Slide 25: Capacity Shifting to Higher Potential Markets
Capacity Shifting to Higher Potential Markets Region 2012 Capacity Change Action Plan Domestic Down 1 - 2% • Focus on right-sizing capacity • Successfully implement LGA growth to reshape market and achieve top position in New York • Provide competitive first class, mainline product in core business
Slide 26: Rationalization of Transatlantic Capacity Driving Unit Revenue Improvements
Rationalization of Transatlantic Capacity Driving Unit Revenue Improvements U.S.-Europe Capacity Change, December Quarter 2011 vs Prior Year 0.90 0.92 0.96 Q408 Q409 Q410 Q311 Delta Atlantic RASM Index Rolling 4 Quarters Capacity discipline has translated into improved performance versus peers
Slide 27: Alliances Expand Profit Potential
Alliances Expand Profit Potential Delta Delta with Partners Destinations 343 1,164 Countries Served 63 187 Daily Flights 5,550 18,004 Ability to expand network breadth without significant fleet investment Schedule data for March 2012
Slide 28: Revenue Growth from Expanded Product Offerings
Revenue Growth from Expanded Product Offerings Seat Related Products Travel Products and Services Technology and Product Investments Target of $1 billion in annual merchandising revenue by 2013 • Economy Comfort • First Class Upsell • Sky Priority seating • Same day Confirmed • Hotel, car rentals an
Slide 29: Revenue Innovation Through Technology
Revenue Innovation Through Technology Tim Mapes Senior Vice President - Marketing
Slide 30: Vital Stats
ADELTA®S Vital Stats * Over 1M people visit delta.com OTA Booking Share Delta.com Booking Share every day 36% * Alongwith Reservation Sales, 41% of customers now book directly with Delta 26% * 84% of Delta’s 160M annual 23% customers check in digitally 32% * Mobile will account for 10% of check in t
Slide 31: A Brief History
A Brief History “Impose” • Bag Fees • Meals for Sale • “Service” Fees “Involve” • Amex Co-Brand Card Acquisition • Coach Up-sell to First Class • Sky Club Day Pass “Improve” • Economy Comfort • Paid Preferred Seats • Segmented offerings PHASE 3 PHASE 4 PHASE 2 PHASE 1 “Inspire” • Customization of tr
Slide 32: Strategic Building Blocks
Strategic Building Blocks Customer Segmentation Product Differentiation Leveraged Technology Global Scale Enterprise-wide clarity on varying levels of customer value Differentiated products, services based on customer value Simple, intuitive, reliable technology - across platforms Billions of annual
Slide 33: Trip Summary
Travel nfrmationy Sy Trip Summary ‘You selected these fights: Total forall passengers (1): $1,054.00 ADELTA%
Slide 34: Improving Direct-Booking Revenue
Improving Direct-Booking Revenue
Slide 35: Seizing Opportunities for Up-Sell
Seizing Opportunities for Up-Sell
Slide 36: Delta.com Economy Comfort Booking Screen
ADELTA # SkyMiles o El i SE eee a —— New York-Kennedy, NY (FI) to Los Angeles, CA (LAX) P money ECONOMY COMFORT a MODIFY SEARCH iw cubeundhenentgeter © Vew ouboindhetn ‘ouTBOUND srg $928.00 7" em Ls tent som oar
Slide 37: Targeting Distinct Market Segments
Targeting Distinct Market Segments
Slide 38: Monetizing Delta's "Media" Audience
Monetizing Delta’s “Media” Audience terminals airplanes WEB ENABLED ASSETS TRADITIONAL AIRLINE OUT OF HOME ASSETS AIRLINE UNIQUE ASSETS www.delta.com/skymedia
Slide 39: Delta.com As Global "Store Front"
Delta.com As Global “Store Front”
Slide 40: Financial & Customer Benefits
Financial & Customer Benefits A quality “base” product with a range of offerings from which to choose to enhance your experience on Delta. $1 Billion of incremental revenue by 2013 Differentiated bundles of new products and services customers want - and will pay for. Re-defined use of the term “netw
Slide 41: Winning in New York
Winning in New York Gail Grimmett Senior Vice President - New York
Slide 42: Delta's Plan To Win In New York
Delta’s Plan To Win In New York By simply getting a “fair share” of New York revenue, Delta’s revenue would increase by more than $200 million. The path to achieving this includes: • Building a leading network position by capitalizing on the LGA expansion and more efficient use of the JFK hub • Impr
Slide 43: Building New York's Leading Network Position
Building New York’s Leading Network Position LGA Slot Position (Summer 2012) • With over 250 flights per day, Delta will be the premier carrier from LaGuardia • Nearly 50% of daily departures from New York’s preferred business airport • Improved schedule • New slots will allow 100 new flights and 29
Slide 44: Winning New York Corporate Customers
Winning New York Corporate Customers +3.5 pts New York Corporate Share • In just three years, Delta has increased its corporate share in NY by 3.5 points • Future growth will be driven by: • Broader network offering, with more than 500 daily flights from New York to key destinations • Expanded facil
Slide 45: Making Significant Investments in New York
Making Significant Investments in New York Improved Customer Products and Services ADELTA% JFK Terminal 4 * Construction underway with ramp work complete, remains on target to open in Spring 2013 * Will include 9 new gates, a 23,000 sq. ft. SkyClub, and state of the art bag system + Placing flat-bed
Slide 46: Winning In New York
Winning In New York Leading Network Position Winning Corporate Customers Significant Investments Underway • With the best-positioned slot portfolio and an international gateway to all regions, Delta has built an unmatched network position in New York • Delta’s improved travel offering - network, pro
Slide 47: Benefits of Operational Investment
Benefits of Operational Investment Steve Gorman Chief Operating Officer
Slide 48: Delta: Performance Continues to Climb
Delta: Performance Continues to Climb Making Delta an airline of preference Top tier completion factor, on-time and baggage performance Customer service focus Positive feedback from our customers ü ü ü
Slide 49: Delta: Completing Our Customers' Flights
Delta: Completing Our Customers’ Flights ü Tech Ops action plans • Added stations • Technicians • Parts • Planning *Preliminary 1 pt
Slide 50: Delta: Arriving On Time
Delta: Arriving On Time ü Cross-functional action team • Awareness and promotion • D-3 door closure • Gate-checked bags *Preliminary 9%
Slide 51: Delta: Bags Arrive with Customers
Delta: Bags Arrive with Customers ü Five-year positive trend • Infrastructure • Technology • Process %
Slide 52: Delta: Customer Service Call to Action
ADELTA®% Delta: Customer Service Call to Action Mwave their backs V timely, honest communication Y situational Flexibility E-mail surveys for direct feedback * Accountability * Incentives 52
Slide 53: Delta: Our Customers Have Noticed
Delta: Our Customers Have Noticed Making Delta an airline customers prefer +30% +64% +34%
Slide 54: Solid Financial Foundation
Solid Financial Foundation Hank Halter Chief Financial Officer
Slide 55: Solid Financial Foundation
Solid Financial Foundation Focus on Operating Costs Disciplined Capital Spending Improved Balance Sheet • Measured capital spending, with focus on projects with high rate of return • Reducing fuel price volatility through hedging and supply management • Addressing non-fuel unit cost pressures to mai
Slide 56: Maintaining A Total Cost Advantage
Maintaining A Total Cost Advantage September 2011 Quarter Unit Costs (cents) Note: excludes special items, ancillary businesses, and profit sharing. Despite recent cost pressures, Delta maintains the lowest unit costs of the network carriers
Slide 57: Delta Actively Managing Fuel Cost
ADELTAS Delta Actively Managing Fuel Cost © Every cent matters—a 1¢ change in fuel price equatesto $40 million of annual fuel expense sopemierouener2otl «© Utilizinga dynamic fuel hedging strategy to All-In Fuel Cost per Gallon mitigate both price and volatility $3.18 * More effective than previous
Slide 58: Pressure on 2012 Non-Fuel Unit Costs
Pressure on 2012 Non-Fuel Unit Costs 8.53-8.55 Costs pressured by inflation, capacity reductions, and customer and operational investments Non-Fuel Unit Cost Note: excludes special items, ancillary businesses, and profit sharing.
Slide 59: 2012 Initiatives Will Partially Offset Cost Pressures
2012 Initiatives Will Partially Offset Cost Pressures Productivity Maintenance and Fleet Distribution and Technology • Increase employee productivity • Benefits from voluntary headcount reduction • Improve facility utilization and rates • Streamline merit organization • Drive channel share to lower-
Slide 60: Delta Actively Managing Liquidity
Delta Actively Managing Liquidity Significant Free Cash Flow Generation $5 Billion Targeted Liquidity Minimize Liquidity Carrying Costs • A $5 billion target level for total liquidity provides sufficient cushion to handle the inherent volatilities in the industry • Industry leading $1.8 billion of a
Slide 61: Disciplined Capital Spending
ADELTA % Disciplined Capital Spending Keeping investments across the business below $1.5 billion annually Fleet Modifications strategic + Flat-bed seats on international aircraft Investment: ; ahora New Aireraft + Seat density projects % 14% ~~ + MD90 inductions Technology 12% + Winglets Technology
Slide 62: Derisking the Business through Debt Reduction
Derisking the Business through Debt Reduction Solid Progress On Debt Reduction… …Producing Interest Expense Savings and Enhanced Flexibility $17B 12/31/11 $12.9B $10B On track to achieve $10 billion adjusted net debt target in the next 18 months Mid-2013
Slide 63: Delta: Keep Climbing
Delta: Keep Climbing Focus on top-line growth Taking a disciplined approach Reducing risk across the business Growing and diversifying revenues through a broad global network, corporate revenue gains, fuel cost recovery and improved products and services Disciplined management of capacity, costs and