Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Investor Presentation (March 2010)
28 slides from Delta Air Lines's investor presentation, Mar 9, 2010
Slide 1: Delta: A Solid Flight Plan
Delta: A Solid Flight Plan Ed Bastian, President March 9, 2010
Slide 2: Safe Harbor
1 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 cou
Slide 3: Delta: A Solid Flight Plan
2 Delta: A Solid Flight Plan At market fuel prices, Delta was the only profitable network carrier in 2009 Well positioned for 2010 Creating a financially successful airline for the long term Strong financial foundation, premium revenue opportunities, low cost structure and merger synergies position
Slide 4: Delta's Performance Is Distinguished From Its Peers
3 Delta’s Performance Is Distinguished From Its Peers 2009 Pre-Tax Income, at Market Fuel Prices ($M) 2009 EBITDAR, at Market Fuel Prices ($M) Note: All results exclude special items. Results adjusted to a common fuel price of $1.80 per gallon. At market fuel prices, Delta was the only profitable ne
Slide 5: Liquidity Key to Weathering the Economic Storm
Liquidity Key to Weathering the Economic Storm Note: Liquidity balance includes cash, short term securities and revolving credit facilities. Unrestricted Liquidity December 2008 vs. December 2009 ($B) Unrestricted Liquidity Balance 12/31/08 Unrestricted Liquidity Balance 12/31/09 Net Debt Issuance $
Slide 6: Unit Revenue Momentum is Building
5 Unit Revenue Momentum is Building Improvement driven by prior year comparisons, capacity discipline and economic recovery Passenger Unit Revenue - YoY Change (23%) 16% Note: Forecasted value for March 2010
Slide 7: Corporate Sales Trends Improving
6 Corporate Sales Trends Improving Ticket Volume Revenue Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb 34% 32% 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2010 2010
Slide 8: Delivering on Merger Benefits Moving Forward in 2010
7 Delivering on Merger Benefits Moving Forward in 2010 $6 billion in free cash flow over next three years to delever balance sheet Strengthening the Balance Sheet Generating a Revenue Premium Integration substantially complete and on track to deliver $2 billion in run-rate synergies by the end of 20
Slide 9: Integration Of The Airlines Substantially Complete
8 • Complete rebranding of Northwest regional aircraft • Resolve open employee representation for flight attendants and airport workers • Drive revenue premium Integration Of The Airlines Substantially Complete Remaining Integration Items • Single operating certificate received • Reservations system
Slide 10: Targeting $600 Million in New 2010 Synergies
9 Targeting $600 Million in New 2010 Synergies Revenue - - $350 million Cost - - $250 million • Expand fleet movements across network • S-curve benefits • Integrated revenue management technology • First fully coordinated schedule with Air France/KLM • Improved vendor terms from renegotiated contrac
Slide 11: Delta: Generating Revenue Premium
10 Delta: Generating Revenue Premium • Optimize fleet allocations • Integrated revenue management technology • Corporate and agency sales contracting • S-curve market benefits Targeted market initiatives provide additional revenue growth opportunities • New York strategy • Pacific network restructur
Slide 12: Realigning Delta's Fleet Drives Network Synergies
11 Realigning Delta’s Fleet Drives Network Synergies Ability to maximize fleet allocations drives incremental value International cross fleeting builds on successful 2009 routes by adding: Atlanta-Paris Detroit-Frankfurt New York (JFK)-Athens New York (JFK)-Tel Aviv Memphis-Amsterdam SLC MSP A320 M9
Slide 13: Leveraging Trans-Atlantic Joint Venture To Maximize Profits
12 JFK ATL CDG AMS DTW MSP MEM CVG SLC • First fully coordinated DL/AF/KL summer schedule will enhance JV profitability in 2010 - Fully leveraged hubs & beyond network • Joint revenue management • Capitalizing on point-of-sale presence in each region Leveraging Trans-Atlantic Joint Venture To Maximi
Slide 14: Investing in Customer Experience, Not Re-Fleeting
13 Investing in Customer Experience, Not Re-Fleeting Operating cash funds $1B investment in customer experience and fleet efficiency • All international widebody aircraft to have full flat-bed seats in BusinessElite • Expanding in-seat audio and video on demand for customers on all wide- body aircra
Slide 15: Targeting Flat Unit Costs Excluding Fuel in 2010
14 Targeting Flat Unit Costs Excluding Fuel in 2010 Consolidated CASM ex Fuel (¢) 8.25 8.28 2009 2010 Key cost synergies/productivity initiatives • Improved vendor contract terms • Further streamlining overhead and technology • Airport efficiencies • Savings from grounding older, less efficient airc
Slide 16: Managing Fuel Price Risk Through Systematic Hedging
Managing Fuel Price Risk Through Systematic Hedging Downside Participation 76% 78% 86% 91% 83% Note: Hedging portfolio data as of March 5, 2010 • Use of call options will allow for downside price participation but will protect against upward cost pressures Avg. Crude Call Projected fuel price $2.22
Slide 17: Free Cash Flow Will Drive Balance Sheet Delevering
16 Free Cash Flow Will Drive Balance Sheet Delevering Operating Cash Flow Capital Expenditures $3 - $4 billion Total Three Year Projection 2010 - - 2012 $9 - $10 billion Adjusted Net Debt ($B) 12/31/09 12/31/12 Free Cash Flow ~$6 billion Strong operating cash flow, coupled with minimal capital requi
Slide 18: Revenue Strength Driving Improved March Quarter Expectations
17 Revenue Strength Driving Improved March Quarter Expectations March quarter 2010 January 26 guidance Operating margin 1 - 2% Breakeven Fuel price $2.22 $2.22 Total unrestricted liquidity $5.5 billion $5.6 billion March quarter 2010 vs. March quarter 2009 Consolidated non-fuel unit cost Up 1 - 2% F
Slide 19: Progress Being Made … More Work To Do
18 Progress Being Made … More Work To Do Encouraged with ability to withstand economic headwinds, but improvements remain to achieve our shareholder return goals Generate 10% return on invested capital - - 12% operating margin $2.5 - - $3.0 billion in operating cash flows Minimize capital reinvestme
Slide 20: Non-GAAP Financial Measures
Non-GAAP Financial Measures Delta completed its merger with Northwest Airlines on October 29, 2008. Accordingly, Delta’s financial results prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) include the results of Northwest Airlines for 2009.Under GAAP, Delta does
Slide 21: Pre-tax income reconciliation
nv mitions) Pre-tax oss Agjustmens: Restructuring and merger-rlatd items ‘Loss on extinguishment of debt Fuel hedge losses Pre-tax income excluding spes items and fuel hedge loses
Slide 22: EBITDAR reconciliation
(nitions) Pre-tax loss Depreciation and amortization (Other non-operating expense, net Aircraft rent Wem exchadd Restructuring and merger-rlated items EBITDAR excluding special tems Adjustment Fuel hedge losses EBITDAR excluding special items and fuel hedge losses
Slide 23: Net investing reconciliation
nbiltions) Cash used i investing et Adjustments: “Aircraft purchases under seller financing Decrease in shorterm investments Proceeds from sle offi Netinvesting activities (GAAP) Year Ended December 31,2009 s 10)
Slide 24: Net debt issuance reconciliation
Cin btlions) Payments on logsterm debt and capital lease obligations (GAAP) Proceeds fom fogsterm obligations (GAAP) Adjustments Alrcraft purchases under seller financing ‘Undrasn credit isles Debt issuance costs Netidebt issuance Year Ended
Slide 25: Combined 2008 operating revenue
Givmitions) ‘Total operating revenue (GAAP) Northwest total operating revenue forthe period from January | to Ostober 29,2008, ‘Combined 2008 foal operating revenue
Slide 26: CASM excluding fuel reconciliation
casMt ems excluded: ‘Ancillary businesses Restrctring and merger-clated items Fuel expense and related taxes CASM excluding fuel expense and related taxes and spect Available eat miles (in millions) B03
Slide 27: Mainline CASM reconciliation
Year Ended December 31, Gn mitions, except percent daa) 2009 Consolidated operating expense 3 387 ‘Less regional carers operating expense Mainline operating expense Mainline CASM Tems exclude: ‘Ancillary businesses Restructuring and merger-rlated Puc expense and related taxes Maintine CASM excluding
Slide 28: Adjusted net debt reconciliation
Gn billons) Debt and capital lease obligations Plus: unamortzed discount, net fom purchase accounting and fesh start reporting Adjusted debt and capital lease obligations lus: 7 lst swelve months aircraft rent Adjusted total debt [Less cath and cash equivalents and shorttrm investments Adjusted net