Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Merger or Acquisition (December 2006)
29 slides from Delta Air Lines's merger presentation, Dec 19, 2006
Slide 1: Proposed US Airways/Delta Merger Would Be Highly Anticompetitive
Delta Air Lines Proposed US Airways/Delta Merger Would Be Highly Anticompetitive December 19, 2006
Slide 2: Safe Harbor
This presentation contains various forward-looking statements which represent the company’s estimates or expectations regarding future events. All forward-looking statements involve a number of risks and uncertainties that could cause the actual results to differ materially from the projected result
Slide 3: US Airways/Delta Merger Would Be Highly Anticompetitive
US Airways/Delta Merger Would Be Highly Anti competitive Proposed merger would substantially reduce competition • US Airways and Delta have overlapping networks •US Airways/Delta merger would reduce competition on thousands of city pairs -Nearly 2,000 incremental city pairs with over 90% US Airways/
Slide 4: US Airways and Delta Have Overlapping Networks
US Airways’ domestic network US Airways/Delta’s domestic network Delta’s domestic network US Airways and Delta Have Overlapping Networks Source:US Airways merger proposal Overlapping networks Overlapping networks A
Slide 5: US Airways/America West Merger Combined Two Geographically Distinct Hub Networks
Phoenix(PHX)Las Vegas (LAS) Charlotte (CLT) Pittsburgh (PIT) Philadelphia (PHL) Average distance between hubs: ~1,950 miles America West hubs “Southwest focus” US Airways hubs “East Coast focus” US Airways/America West Merger Combined Two Geographically Distinct Hub Networks Overlapping networks Ove
Slide 6: In Contrast, the US Airways and Delta Hubs Completely Overlap
In Contrast, the US Airways and Delta Hubs Completely Overlap Overlapping networks Overlapping networks A Merger of These Networks Would Result in Loss of Competition and Reduced Service Merger of These Networks Would Result in Loss of Competition and Reduced Service 368 miles Las Vega s(LAS) Delta
Slide 7: Atlanta and Charlotte Hubs are Redundant
Atlanta and Charlotte Hubs are Redundant90175778050100150200 Total cities served from Charlotte and Atlanta by US Airways and/or Delta Cities served only from Charlotte by US Airways and/or Delta Cities served only from Atlanta by Delta and/or US Airways Overlap cities Cities served Source: OAG Nove
Slide 8: Cincinnati and Pittsburgh Hubs are Redundant
Cincinnati and Pittsburgh Hubs are Redundant Source: OAG November 2006 411247310050100150200Total cities served from Pittsburgh and Cincinnati by US Airways and/or Delta Cities served only from Pittsburgh by US Airways and/or Delta Cities served only from Cincinnati by Delta and/or US Airways Overla
Slide 9: Salt Lake City, Phoenix, and Las Vegas Hubs are Redundant
Salt Lake City, Phoenix, and Las Vegas Hubs are Redundant Source: OAG November 2006 6411032122050100150200 Total cities served from Las Vegas, Phoenix, and Salt Lake City by US Airways and/or Delta Cities served only from Las Vegas by US Airways and/or Delta Cities served only from Phoenix by US Air
Slide 10: US Airways' and Delta's Main International Gateways are Redundant
US Airways’ and Delta’s Main International Gateways are Redundant Atlanta (ATL) / New York (JFK) vs. Charlotte (CLT) / Philadelphia (PHL) -Transatlantic routes overlap141803202550Total cities served from CLT/PHL and ATL/JFK by US Airways and/or Delta Cities served only from CLT/PHL by US Airways and
Slide 11: DOJ Defines Competitiveness on a City Pair Level
“The so-called "relevant market" in which we evaluate whether a particular merger will lessen competition is not the whole industry. Rather, we have to look at the markets in which passengers buy air travel. These markets are the particular origin and destination city pairs (and occasionally airport
Slide 12: Merger Would Create Nearly 2,000 Incremental City Pairs with More than 90% Share
Domestic International Total 1,4028.8 M $1.4 B Number of city pairs Passengers per year affected Associated annual revenue 5690.8 M $0.2B1, 9719.6 M $1.6B Merger Would Create Nearly 2,000 Incremental City Pairs with More than 90% US Airways/Delta Passenger Share Note: All share calculations are base
Slide 13: Merger Would Create 1,402 Incremental Domestic City Pairs Above 90% Share
Merger Would Create 1,402 Incremental Domestic City Pairs With More than 90% US Airways/Delta Passenger Share Reduced city pair competition Reduced city pair competition A ALLENTOWN ALBUQUERQUE ALBANY NANTUCKET AUGUSTA ALBANY To ANCHORAGE ALTOONA WATERTOWN ATLANTA AUGUSTA AUSTIN ASHEVILLE SCRANTON K
Slide 14: Merger Would Create Incremental International City Pairs Above 90% Share
Merger Would Create 569 Incremental International City Pairs With More than 90% US Airways/Delta Passenger Share Reduced city pair competition Reduced city pair competition A ALLENTOWN NANTUCKET AUGUSTA ALBANY ANTIGUA WATERTOWN ATLANTA ARUBA ASHEVILLE SCRANTON BARCELONA HAMILTON HARTFORD BAKERSFIELD
Slide 15: City Pairs Creating Presumption of Market Power Under DOJ Guidelines
148861,3131,4712,6251,9651,32101,5003,000100-200201-500501-1,5001,501-2,5002,501-4,000>4,000Absolute HHI increase Passengers affected/year Associated annual revenue 34.5 M $5.9 B 39.6 M $6.9 B 11.9 M $2.1 B 7.1 M $1.2 B 5.0 M $0.7 B Total 139.6 M $23.9 B 9,581 Note: Herfindahl-Hirschman Index (HHI)
Slide 16: Overlapping Nonstop Domestic Routes, 12 Becoming Monopoly Routes
US Airways and Delta Have 31 Overlapping Nonstop Domestic Routes12 of Which Would Become Monopoly Routes due to Merger Reduced city pair competition Reduced city pair competition A US Airways/Delta merger would directly reduce competition on these routes, impacting 11.6M annual passengers and accoun
Slide 17: US Airways/Delta Would Dominate U.S. Cities
US Airways/Delta Would Dominate 71 U.S. Cities (1) No competitive low cost carrier presence (>5% passenger share) at any of these cities No competitive low cost carrier presence (>5% passenger share) at any of these cities (1) Cities not shown: Yuma, Lake Havasu City, Flagstaff, St. George, Cedar Ci
Slide 18: Merger Would Substantially Reduce Competition at Boston, LaGuardia, and Reagan National
Merger Would Substantially Reduce Competition at Boston, New York-La Guardia, and Washington-Reagan National Airports US Airways/Delta passenger share position Number of non-stop routes where merger would reduce competition from...BOSDCALGA38.417.039.624.548.516.62.9x1.6x2.3xNearest competitor US Ai
Slide 19: US Airways and Delta Would Operate 52% of Slots and 40% of Gates
US Airways and Delta Would Operate 52% of Slots and 40% of Gates at Major East Coast Airports (1) Analysis shows slots operated (and not slots owned) after shuttle divestiture (assuming all divestitures will come out of Delta’s current slots) (2) New York-LaGuardia includes Marine Air Terminal; gate
Slide 20: Combined Entity Would Dominate LaGuardia and Reagan National Airports
Combined Entity Would Dominate New York-LaGuardia and Washington-Reagan National Airport sNote: One slot refers to one arrival or one departure; AA -American Airlines; CO -Continental Airlines; DL -Delta Air Lines; NW -Northwest Airlines; UA -United Airlines; FL -AirTran Airways; B6 -JetBlue Airways
Slide 21: Divestiture of Slots Would Reduce Service to Small Communities
Dominated cities Dominated cities A Divestiture of US Airways/Delta Slots Would Reduce Service to Small Communities Delta and US Airways are the Only Significant Providers of Small City Service From LGA and DCA Small/Non-hub cities served from New York-LaGuardia Small/Non-hub cities served from Wash
Slide 22: Proposed Merger is Far More Anticompetitive Than Rejected US Airways/United Merger
(1) Highly concentrated markets have a HHI of ≥1,800 (2)HHI = Herfindahl-Hirschman Index Source:DB1B data YE 2Q 2001 and YE 2Q 2006; OAG 2Q 2001 and November 2006 Criteria Incremental city pairs with more than 90% passenger share City pairs creating presumption of market power under DOJ Merger Guide
Slide 23: US Airways/Delta Would Be the Largest Carrier in Small Communities
US Airways/Delta Would Be the Largest Carrier in 127 Small Communities More than Any Other Carrier Pasco/Kennewick Jackson Elko Cedar City Bakersfield Lake Havasu City Flagstaff Yuma Farmington Grand Junction St George Lovell/Powell Idaho • Idaho Falls • Pocatello • Sun Valley • Twin Falls Montana •
Slide 24: Only 14 of These 127 Small Communities Have Low Cost Carrier Service
Note: Calculation based on departing passenger share in the respective regions; small communities” as categorized by the FAA (small and non-hub airports); low cost carrier service defined as >5% passenger shareSource:DB1B data -YE 2Q 2006 • Likely reduction of service for these 127 small community a
Slide 25: Low Cost Carriers Avoid Serving Small Communities
Low Cost Carriers Avoid Serving Small Communities (1) Measured by average daily departures Note: Includes all markets served by Southwest, AirTran, Frontier, and JetBlue; airport segmentation in accordance to the FAA classification Source:OAG 1Q 2000 and November 2006 Despite significant growth in n
Slide 26: US Airways' Claimed Efficiencies Do Not Justify Reduction in Competition
“The merger will create over $1.65B in synergies that greatly outweigh any theoretical antitrust concerns ”US Airways plans to accomplish this by: • Combining 2 overlapping networks • Eliminating significant capacity-Approximately 180 aircraft • Reducing competition substantially at more than 70 air
Slide 27: US Airways/America West Merger Led to Reductions of Service in Small Communities
5 26 66 97 0 50 100 Small/non-hub cities with service gains Small/non-hub cities with no change in service Small/non-hub cities with service decreases Total small/non-hub cities served US Airways/America West Merger Led to Reductions of Service in Small Communities Cities (#) Claimed efficiencies wi
Slide 28: Since Its Merger with America West, US Airways Has Raised Fares More
(1) Based on average fare increases for American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines, United Airlines Source:D B1 B data -2Q 2005 and 2Q 2006; US Airways 8k filing, November 17, 2006 Claimed efficiencies will not be accepted Claimed efficiencies will not be accepted C
Slide 29: Conclusion: Proposed Merger Would Likely Be Challenged by Regulators
Proposed Merger Would Likely Be Challenged by Regulators Conclusion • Proposed merger is anticompetitive because of-Overlapping networks-Significant reduction of competition on thousands of city pairs-Domination of more than 70 cities and 3 key East Coast airports • Proposed merger would be more ant
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