Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Merger or Acquisition (April 2012)
16 slides from Delta Air Lines's merger presentation, Apr 30, 2012
Slide 1: Delta to Acquire Trainer Refinery: Addressing Rising Jet Fuel Risk
Delta to Acquire Trainer Refinery: Addressing Rising Jet Fuel Risk April 30, 2012
Slide 2: Safe Harbor
2 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, that
Slide 3: Delta To Acquire Trainer Refinery To Address Rising Jet Fuel Risk
3 Delta To Acquire Trainer Refinery To Address Rising Jet Fuel Risk Addresses Increasing Jet Fuel Risk Leverages Expertise of Strategic Partners Delivers Solid Financial Benefits • Jet fuel prices have risen significantly with limited offset from fuel conservation and hedging • Elimination of refini
Slide 4: Jet Fuel Costs Have Risen Significantly In Recent Years
3.14 3.78 1.22 8.28 8.53 0.41 2009 2011 4 Jet Fuel Costs Have Risen Significantly In Recent Years • In 2011, Delta’s annual fuel expense was $12 billion, a $3.5 billion increase over 2009 • Of Delta’s $12 billion fuel bill for 2011, $2.2 billion was for jet crack spreads • Crack spread unit costs ha
Slide 5: Shifting Global Oil Market Demand Adding To Pressure on Jet Fuel
5 Shifting Global Oil Market Demand Adding To Pressure on Jet Fuel • Amid high prices and conservation policies, the demand for gasoline in developed countries is declining • Demand growth in developing nations like India and China is more concentrated in diesel and jet than gasoline With global dem
Slide 6: Refinery Closures Further Tightening the Market for Jet Fuel in the Northeast
6 • East Coast refineries are primarily weighted toward gasoline production, which has pressured margins • As a result of shifting market dynamics, over 50% of East Coast refinery capacity has been closed, idled or put up for sale since 2010 • Additional East Coast supply removed with closing of the
Slide 7: Delta To Acquire Trainer Refinery Complex
7 Delta To Acquire Trainer Refinery Complex • Trainer is a 185,000 barrel per day (bpd) refinery located in Philadelphia • Refinery will produce 52,000 bpd of jet fuel • Purchase includes all assets required to produce and distribute jet fuel and products from the facility • After receipt of $30 mil
Slide 8: Shifting Trainer Output to Maximize Jet Fuel
8 Shifting Trainer Output to Maximize Jet Fuel • Monroe will modify Trainer to maximize production of jet fuel • Requires limited capital investment ($100 million) • Modifications focus on shifting existing equipment from gasoline production to jet fuel production • Leadership team has proven track
Slide 9: Why Trainer Will Work For Delta
9 Why Trainer Will Work For Delta Benefit comes from increasing production of highest margin outputs with a natural end user Trainer will be Monroe’s only refinery, not part of a larger system. Because of this, Monroe can focus solely on optimizing Trainer and its contribution to Delta rather than o
Slide 10: Partnerships With Leading Energy Companies Further Improve Value
10 Partnerships With Leading Energy Companies Further Improve Value Leveraging our partners’ energy sector expertise to supply crude oil and to market all non - jet refined products • 52,000 bpd produced • Used in Delta’s Northeast operations BP sources and delivers crude oil REFINERY JET FUEL GAS/D
Slide 11: Impact of Changing Crack Spreads to Refinery Economics
11 Impact of Changing Crack Spreads to Refinery Economics If gasoline crack spreads rise… If gasoline crack spreads fall… If gasoline crack spreads maintain current levels… • Delta benefits from lower jet fuel prices • Delta receives better jet fuel exchanges on Trainer’s gasoline production • Refin
Slide 12: Refinery Generates Significant Financial Benefits
12 Refinery Generates Significant Financial Benefits For $250 million total investment, Delta expects to achieve $300 million annual cash savings, reduced exposure to fuel volatility and accretion to earnings, free cash flow and returns on invested capital Value of refined products Less: Cost of cru
Slide 13: Historical Analysis Shows Sustainability of Benefits
-50 0 50 100 150 200 250 300 13 Back testing the refinery model validates annual fuel savings of ~$300 million Historical Analysis Shows Sustainability of Benefits Estimate of historical refinery benefits by quarter Q1 2007 Q1 2008 Q1 2006 Q1 2009 Q1 2011 Q1 2010 Average savings = $550 MM/year Avera
Slide 14: Savings Equivalent to Multi Billion Dollar Purchase of New Aircraft
14 Savings Equivalent to Multi Billion Dollar Purchase of New Aircraft Equivalent cost savings would require the purchase of more than 60 new aircraft Two alternatives to reach $300 million annual savings: 60 new generation narrowbody aircraft* $2.5+ billion capital investment Trainer Refinery $250
Slide 15: Delta To Acquire Trainer Refinery To Address Rising Jet Fuel Risk
15 Delta To Acquire Trainer Refinery To Address Rising Jet Fuel Risk Addresses Increasing Jet Fuel Risk Leverages Expertise of Strategic Partners Delivers Solid Financial Benefits • Jet fuel prices have risen significantly with limited offset from fuel conservation and hedging • Elimination of refin
Slide 16: Non-GAAP Financial Measures
Non-GAAP Financial Measures We sometimes use information that is derived from our Consolidated Financial Statements, but that is not presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”). Certain of this information are considered “non-GAAP financial measures” un