Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Investor Day (December 2013)
44 slides from Delta Air Lines's investor day presentation, Dec 11, 2013
Slide 1: Keep Climbing - Delta Investor Day 2013
KEEP CLIMBING A DELTA 4 DELTA INVESTOR DAY 2013
Slide 2: Setting A New Standard
Setting A New Standard Richard Anderson Chief Executive Officer
Slide 3: 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, that c
Slide 4: Setting A New Standard
Setting A New Standard Building a durable franchise that creates value for our employees, customers and investors 4 CUSTOMER SERVICE FINANCE REVENUE PEOPLE OPERATIONS Build a Better Airline Deliver Industry Leading Financial Results Build a Diversified, Profitable Global Network Work Together, Win T
Slide 5: Charting Our Course
Charting Our Course Ed Bastian President
Slide 6: Charting Our Course
Charting Our Course Building a durable franchise that will produce top line growth, margin expansion and capital returns for shareholders 6 2013 Another Successful Year Further Improvement in 2014 Charting a Course to Achieve Solid 2014 plan in line with our long - term goals to generate solid margi
Slide 7: 2013 – Continuing Our Climb
2013 – Continuing Our Climb A successful year for employees, customers, and investors 7 2013 Accomplishments • Best employee relations in the industry with employee engagement scores at all time highs • Set the industry standard in wages and benefits, including nearly $500 million in profit sharing
Slide 8: Taking Momentum Into 2014
Taking Momentum Into 2014 December quarter caps a successful year of earnings growth, margin expansion and free cash flow generation 8 …And We Delivered December 2013 Quarter Estimate Operating margin 7% - 9% PRASM change year over year Up 2% - 3% Fuel Price $3.03 - $3.08 CASM – Ex Fuel change year
Slide 9: Outpacing The Airline Industry
Outpacing The Airline Industry 9 $2,373 M $1,024 M $876 M $670 M $589 M $573 M $203 M LTM 3Q 2013 Pre Tax Income Delta is the leader in an evolving industry Note: Excludes special items
Slide 10: Taking Momentum Into 2014: Plan for 2014
Taking Momentum Into 2014 Plan for 2014 builds on our strengths to expand margins and cash flow, providing for debt reduction, capital returns for shareholders and investment in the future 10 Across the Industry At Delta • Modest global GDP improvement of 2 – 3% with strongest improvements in Latin
Slide 11: Charting Our Course: Long-Term Financial Targets
Delta - Goal High Quality Industrial Transports - 5 yr average Delta - Goal High Quality Industrial Transports - 5 yr average Charting Our Course • With four years of sustained profitability and free cash flow, Delta is now focused on taking performance to the next level • Developed a set of financi
Slide 12: The Path To Achieving Financial Goals
The Path To Achieving Financial Goals Leveraging Delta’s strengths produces a pipeline of initiatives to further our financial momentum and achieve long - term financial goals 12 • Domestic refleeting – upgauging fleet to more efficiently serve Delta’s expanded network • Product and Operational Inve
Slide 13: Upgauging Domestic Fleet To Expand Margins
Merger 2009 2010 2011 2012 2013E 2014E Profit margin Avg. total seats Avg. aircraft count Upgauging Domestic Fleet To Expand Margins Capital efficient restructuring of the domestic fleet provides for better revenue generation and improves cost efficiency 13 • Fleet restructuring replaces small regio
Slide 14: Corporate Customers Are Choosing Delta
Corporate Customers Are Choosing Delta Corporate momentums continue as corporate revenues have increased by 10% in last four weeks A diverse base of corporate customers…. …and strong gains in corporate revenue Leading customer satisfaction with business travelers… …producing strong gains in corporat
Slide 15: International Partnerships Expand Delta's Global Reach
International Partnerships Expand Delta’s Global Reach Leveraging experience with successful Air France/KLM joint venture to build on new partnerships with equity stakes in Virgin Atlantic, GOL, and AeroMexico 15 • Transatlantic joint venture is the model for successful international cooperation • J
Slide 16: Unique Opportunity With Virgin Atlantic
Unique Opportunity With Virgin Atlantic 16 Top 10 markets US - Europe Direct Service pre - JV Direct Service w/Partner New York – London 3 daily 7 daily Los Angeles – London New York - Paris Chicago – London Newark - London Miami – London Washington D.C. – London Boston – London San Francisco – Lond
Slide 17: Investments in New York Are Delivering Benefits
Investments in New York Are Delivering Benefits Building scale and improving the product to improve margin performance in the most lucrative travel market in the US 17 MD - 90 Virgin Atlantic • Work so far has improved Delta’s margins by 5 pts in New York – New York share gap has closed by 50%, but
Slide 18: Improving Profitability at the Trainer Refinery
- 20.00 - 15.00 - 10.00 - 5.00 0.00 5.00 10.00 15.00 Jan - 09 Jan - 10 Jan - 11 Jan - 12 Jan - 13 Improving Profitability at the Trainer Refinery • Initial impact of vertical integration strategy has lowered market jet fuel prices, reducing Delta’s total fuel expense • 2014 initiatives expected to p
Slide 19: Stronger Balance Sheet, Stronger Company
$ 17.0B $ 15.0B $ 12.9B $ 11.7B $ 9.6B $ 7.0B 2009 2010 2011 2012 2013E 2015 Target Stronger Balance Sheet, Stronger Company 19 Valuation Allowance On Track to Achieve $10 Billion of Debt Reduction by 2015 Strong cash flow generation allowing for additional debt reduction, which produces further imp
Slide 20: Charting Our Course
Charting Our Course Building a durable franchise that will produce top line growth, margin expansion and capital returns for shareholders 20 2013 Another Successful Year Further Improvement in 2014 Charting a Course to Achieve Solid 2014 plan in line with our long - term goals to generate solid marg
Slide 21: Running A Reliable, Customer-Focused Airline
Running A Reliable, Customer - Focused Airline Steve Gorman Chief Operating Officer
Slide 22: Operational Investments Are Paying Off
Operational Investments Are Paying Off 22 • Investments in operations have produced industry - leading operational metrics • Reliable operations drive revenue gains from improved customer satisfaction and loyalty • More than $80 million in annual cost savings from better operations 2010 2013(E) On -
Slide 23: Focus Areas For Continuous Improvement
Focus Areas For Continuous Improvement Industry leading operational performance in 2013; Goals for 2014 improve upon those results Completion Factor • Operations and Customer focus • Maintenance capture rate and planning • Fleet reliability projects • Parts allocation compliance On - Time Arrivals •
Slide 24: Building Our Revenue Momentum
Building Our Revenue Momentum Glen Hauenstein Chief Revenue Officer
Slide 25: Building On Delta's Revenue Momentum
Building On Delta’s Revenue Momentum 25 What We Provide Where And When We Fly What We Sell A quality product, top notch customer service and a reliable and efficient operation Capitalizing on our investments in the business to generate value from an improved customer experience Diversifying our netw
Slide 26: Diversifying The Network While Expanding Our Reach
Diversifying The Network While Expanding Our Reach 26 Pacific 12% of Total Capacity: Network adapting to yen economics, including building SEA as key Asian gateway Domestic 59% of Total Capacity: Capacity changes focused on reallocating capacity between markets and leveraging hub strengths Atlantic
Slide 27: Investments In New York Are Delivering Benefits
Investments In New York Are Delivering Benefits Building scale and improving the product to improve margin performance in the most lucrative travel market in the US 27 MD - 90 Virgin Atlantic • Work so far has improved Delta’s margins by 5 pts in New York – New York share gap has closed by 50%, but
Slide 28: Latin Growth To Leverage Partnerships
Latin Growth To Leverage Partnerships Relationships with GOL and Aeromexico are important to maximize reach in Latin America in 2014 and beyond 28 • Over next two decades, Latin America GDP growth rates are projected to nearly double those of Europe and U.S. • Delta currently accounts for 17% of U.S
Slide 29: Improving Asia Positioning And Profitability
Improving Asia Positioning And Profitability Rethinking our approach to Pacific flying in light of yen economics, liberalization of Haneda , and market demand for non - stop service to Asia 29 2013 Accomplishments Optimization of the Tokyo - Narita Hub Continued Development of Our Gateways Strong Pa
Slide 30: Selling Passengers An Experience, Not Just A Ticket
Selling Passengers An Experience, Not Just A Ticket The customer experience has a different value for each customer and by tailoring our approach for different customers, we can improve overall satisfaction and increase our revenues 30 Targeting $500 - $600 million in new product sales over the next
Slide 31: Giving Customers What They Value Drives Revenue Growth
Giving Customers What They Value Drives Revenue Growth 31 Investments in network, product, and operations have already produced solid, sustainable revenue gains with more room for growth Network Product Service • Reallocating capacity to leverage hub strength and serve in - demand destinations • Ref
Slide 32: Building A Solid Financial Foundation
Building A Solid Financial Foundation Paul Jacobson Chief Financial Officer
Slide 33: Building A Solid Financial Foundation
Building A Solid Financial Foundation Building a durable franchise with consistent cost performance, a strong balance sheet and balanced capital allocation Sustainable momentum lowered our unit cost trajectory, with 2013 costs 2.5 points better than original expectations. Good line of sight on the w
Slide 34: Delta's Cost Performance Is Sustainable
3% 5% 4% 1.5% 2011 2012 1H13 2H13E 2014 + beyond Delta’s Cost Performance Is Sustainable 34 Valuation Allowance $1 billion structural cost program stemmed rate of growth in costs; next phase leverages strengths across the business to keep annual cost growth below inflation Non - Fuel Unit Cost Growt
Slide 35: Fleet Strategy Produces Better Returns For Delta
Merger 2009 2010 2011 2012 2013E 2014E Profit margin Avg. total seats Avg. aircraft count Fleet Strategy Produces Better Returns For Delta Balancing the right mix of aircraft leverages Delta’s maintenance cost advantage, lowers ownership costs and generates higher return on invested capital 35 • Fle
Slide 36: Driving Non-Ticket Revenue From Ancillary Businesses
Driving Non - Ticket Revenue From Ancillary Businesses Ancillary businesses leverage our core strengths and generate solid profitability and cash flow 36 2013 Accomplishments Capital efficiency – little to no incremental capital required Profitability – solid incremental margins Cash flow – business
Slide 37: Continuing To Strengthen The Balance Sheet
Continuing To Strengthen The Balance Sheet Achieving $7 billion adjusted net debt by 2015 will further the drive toward investment grade balance sheet metrics 37 11.6% 22.7% 2012 2013 2015E S&P Industrial Average Median BBB 34% BB 25% B 12% S&P Industrial Average Median BBB 8.2x BB 4.8x B 2.3x S&P I
Slide 38: Addressing Our Pension Obligations
$0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 2012 2015 2018 2021 2024 At 2012's GAAP Interest Rate of 4% At current discount rate At historical 7% discount rate Addressing Our Pension Obligations • Balance sheet liability estimated to decrease by more than $3 billion to $10 billion by the end of 2013
Slide 39: Reversal Of Tax Valuation Allowance
YE 2012 YE 2013E Financial Strength Results In A Reversal Of Our Tax Valuation Allowance Reflects third - party confidence in our ability to realize the value of the $8.5 billion deferred tax asset 39 • Projection for sustainable future profitability combined with consistent and strong profitability
Slide 40: A Balanced Capital Deployment
2009 – 2012 Operating Cash Flow: Average: $2.5 billion Cash flow split between reinvesting in the business and debt reduction 2013E Operating Cash Flow: $4.6 billion Cash flow used to reinvest in the business ($2.7B), reduce debt ($2.1B), incremental pension funding ($250M),and return cash to shareh
Slide 41: Capital Discipline Key To Sustained Free Cash Flow Generation
Capital Discipline Key To Sustained Free Cash Flow Generation Operating cash flow improvements, combined with a disciplined approach to investment, expected to produce $2 billion of free cash flow annually for debt reduction, incremental pension funding and capital return to shareholders. Historical
Slide 42: Maintaining Our Capital Investment Discipline
Maintaining Our Capital Investment Discipline Targeting capital expenditure at no more than 50% of operating cash flow • Rigorous decision process for capital projects – senior leadership involved in all decisions of $1 million or higher to ensure that projects meet minimum 15% return target with le
Slide 43: Shareholder Returns To Grow Over Time
Shareholder Returns To Grow Over Time 43 • Moving quickly with our balanced capital deployment plan, with an initial $350 million returned to shareholders in the first six months of our program – Capital returned to date through $100 million of dividends and $250 million of share repurchases • Plan
Slide 44: Achieving Our Goals Is The Path To Value Creation
Achieving Our Goals Is The Path To Value Creation Continued execution of our plan to produce earnings growth, solid returns on invested capital, and capital returns to shareholders should result in improved valuations 44 5.3 6.6 7.2 7.9 8.7 9.3 9.8 12.5 12.8 16.2 24.0 Note: Data source is Thomson On