Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Investor Day (December 2016)
46 slides from Delta Air Lines's investor day presentation, Dec 15, 2016
Slide 1: Investor Day 2016
Investor Day 2016 Jill Sullivan Greer Vice President - Investor Relations
Slide 2: Safe Harbor
Safe Harbor Statements in this presentation that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995
Slide 3: Delta: America's Leading Global Airline
Delta: America’s Leading Global Airline Ed Bastian Chief Executive Officer
Slide 4: Delta: America's Leading Global Airline
Delta: America’s Leading Global Airline America’s Best Run Airline Leading Partnerships Throughout the World Setting the standard for financial, Sustainable Margins, operational and Returns, and Cash Flows service excellence in the airline industry Investment Grade Balance Sheet Provides Solid Found
Slide 5: Rounding Out A Successful 2016
Rounding Out A Successful 2016 Delivering on commitments to all Delta stakeholders results in another year of top-tier performance • Recognizing best-in-industry performance with top compensation, ~$1 billion of profit sharing, and ~$92 million of Shared Rewards Employees • Employee satisfaction at
Slide 6: Delta's Model for Long-Term Success
Delta’s Model for Long-Term Success Safe, Reliable and Customer- Enhance Our Accelerate Invest for the Focused Brand Premium Globalization Long Term Operation +1xx% +xx% +165% +185% All delivered by the best people and culture in the global industry 5
Slide 7: Changing Investor Perception
Changing Investor Perception Importance of Unit Sustainability of Current Ability to Achieve Long- Revenue Growth Performance Term Targets • More challenging pricing • More durable business model • 2017 is transition year – with environment than expected in with diversified revenue market fuel price
Slide 8: A Sustainable Revenue Premium
A Sustainable Revenue Premium Glen Hauenstein President
Slide 9: Driving to Positive PRASM is a Priority
Driving to Positive PRASM is a Priority Line of sight to achieve positive unit revenue growth through disciplined capacity and revenue management Year-Over-Year Unit Revenue Change • Goal of achieving positive unit revenue growth in mid-2016 was delayed by ~6 months – Lower fuel prices, domestic clo
Slide 10: The Path to Positive PRASM
The Path to Positive PRASM Commercial initiatives should result in flat PRASM in 1Q17 with improving trends Domestic Pacific • Capacity growth moderates to +2% in 2017 • 2017 capacity down 6% YoY; reductions focused on underperforming markets • Seeing very strong business demand following U.S. elect
Slide 11: Customer Focus Drives Revenue Premium
Customer Focus Drives Revenue Premium Achieving a revenue premium by focusing on the products and services that our customers value and want to purchase • Delta’s strong customer focus combined with investments in our fleet, network, product, and partners have driven a significant revenue premium to
Slide 12: Investing in Products and Amenities that Customers Value
Investing in Products and Amenities that Customers Value • New York LaGuardia project to replace • Introducing the A350- terminals C & D with 900 in the Pacific, state-of-the-art including the world’s facilities first all-suite business • Streamlined check-in, Delta One / class+ security, and baggag
Slide 13: Better Segmentation Drives Stronger Brand and Customer Loyalty
Better Segmentation Drives Stronger Brand and Customer Loyalty Further segmenting our product to give our customers an even more tailored experience • Matching the right product with the right customer • Introducing Premium Select as an additional product to further customize our offering Branded Fa
Slide 14: Maintaining Our Lead in Customer Segmentation
Maintaining Our Lead in Customer Segmentation Percentage of Domestic Markets Offering Basic Economy • Basic Economy domestic rollout expected to be complete by mid- 100% More 2017 • Broader international rollout to Markets follow in 2017/18 • Grew Comfort+ and First Class 38% seats by 13% and 3%, re
Slide 15: SkyMiles Buy More Than Tickets
SkyMiles Buy More Than Tickets Change to revenue-based program has created a currency that customers can now use to tailor their experience • After revolutionizing the way miles are earned with revenue-based accrual, we are giving our customers even more redemption options powered by SkyMiles: – Upg
Slide 16: Leading Co-Brand Partnership in the World
Leading Co-Brand Partnership in the World Stronger loyalty program has more value for all partners • Partnering with American Express since 1996 to create the world’s most valuable airline co-brand portfolio Delta-Amex Co-Brand Contribution • American Express partnership is expected to $4.0B produce
Slide 17: Leveraging the Best Alliance Partners Around the World
Leveraging the Best Alliance Partners Around the World • Relationships with world-leading partners make Delta stronger in every geography and help diversify our top line • With our SkyTeam and alliance partners, we cover markets comprising 98% of US - international passenger demand • 49% equity stak
Slide 18: A Sustainable Revenue Premium
A Sustainable Revenue Premium Strong Investments in Better Leading Focus on the Products and Customer Partners Around Customer Services Segmentation the World +1xx% +xx% +165% +185% Maintaining Our Revenue Premium 17
Slide 19: Running A Reliable, Customer-Focused Operation
Running A Reliable, Customer-Focused Operation Gil West Chief Operating Officer
Slide 20: Delivering Top Tier Performance and Continuous Improvement
Delivering Top Tier Performance and Continuous Improvement November YTD Performance1 DOT Completion Factor DOT Missed Bag Ratio On-Time (A0) Delta 99.5% Delta 1.80 Delta 74.7% United 99.0% United 2.53 United 70.8% Southwest 98.8% Southwest 2.96 American 62.7% American 98.8% American 3.43 Southwest 6
Slide 21: Setting New Standards
Setting New Standards Perfect 100% Completion Factor Days System 100% Completion Factor Domestic 100% Completion Maintenance Cancellations1 Days1 Factor Days2 222 222 5,212 +222 days (98%) 143 3,057 67 79 78 1,212 36 748 7 14 404 240 123 0 6 5 Delta 2010 2011 2012 2013 2014 2015 2016 DL DC Connectio
Slide 22: Delta Connection Performance
Delta Connection Performance Connection Performance Innovation • 67% reduction in mechanical cancellations • Summer/winter seasonal reliability prep coming off record breaking 2015 speedlines • 171 100% Maintenance completion factor • Targeted reliability visits between carriers days; 130 more than
Slide 23: Customer Experience
Customer Experience Domestic Net Promoter Score1 Flight Attendant Interaction NPS1 37.8% 40.2% 31.1% 33.5% 48.7% 27.2% 43.0% 20.0% 39.6% 15.3% 34.7% 22.1% 2010 2011 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Innovation Product Awards and Recognition • Sophisticated customer • Free entertainme
Slide 24: Our Culture Fuels Our Success
Our Culture Fuels Our Success Joanne Smith Chief Human Resource Officer
Slide 25: Balanced Investments, Leading Results
Balanced Investments, Leading Results Delta’s virtuous circle – a balanced investment in its employees, customers, and shareholders – has produced industry-leading results. It begins with meaningful investments in employees. Sustainable Margins, Returns, and Cash Flows Industry’s Best Operational Pe
Slide 26: Investments Beyond a Paycheck
Investments Beyond a Paycheck Engagement Technology Creating opportunities to connect with Making work faster, friendlier, and more and celebrate our people efficient with better technology Care and Wellness Development and Inclusion Providing tools to increase physical, Fashioning, cultivating, and
Slide 27: Culture: Our Greatest Competitive Advantage
Culture: Our Greatest Competitive Advantage Drive the Business Support our Communities Servant leadership and results We don’t just fly there - caring for orientation are core values and and giving back to each other key differentiators and the communities we serve is in our DNA Breast Cancer Resear
Slide 28: A Great Place to Work
A Great Place to Work 2016 Employee Engagement scores at an all time high Annual Employee Survey 89% 88% 86% 84% 81% 2012 2013 2014 2015 2016 27
Slide 29: A Durable Business Model
A Durable Business Model Paul Jacobson Chief Financial Officer
Slide 30: A Durable Business Model
A Durable Business Model Cost productivity, investment grade balance sheet, and balanced capital deployment are the foundation for long-term, sustainable financial results • Productivity benefits to offset cost pressures from fuel, Cost Productivity lower capacity, and investments in product and ser
Slide 31: Productivity to Help Mitigate Cost Pressures
Productivity to Help Mitigate Cost Pressures Delta remains committed to delivering non-fuel unit cost growth of 2% or less over the long-term • 2013-2017 non-fuel unit cost CAGR of 2.5% includes ~50 basis points of pressure from profit sharing given robust pre-tax earnings growth Historical Non-Fuel
Slide 32: More Runway for Upgauging Benefit
More Runway for Upgauging Benefit Continuing to develop a larger-gauge, more cost-efficient fleet • Increasing average seats per departure on narrowbody fleet by ~5% between 2016 and 2018 – more efficient capacity production drives margin and cost productivity – Continued retirement of 50 seat aircr
Slide 33: Operational Efficiency Drives Cost Savings
Operational Efficiency Drives Cost Savings Delta’s leading operational reliability and maintenance strategy drive cost benefits • Delta has made significant investments to support its strong operational performance – Line maintenance stations added in 9 non- hub cities including recent openings in D
Slide 34: 2017 Fuel Prices Expected to be Higher for First Time Since 2014
2017 Fuel Prices Expected to be Higher for First Time Since 2014 Rising fuel price environment underscores importance of unit revenue growth and strong cost controls Brent Prices ($/BBL) • Market jet fuel prices forecast to increase nearly 30% and drive ~$1.2 billion in incremental cost for Delta in
Slide 35: Sustainable Capital Deployment Strategy
Sustainable Capital Deployment Strategy Balanced approach to capital deployment supports sustainable earnings and shareholder returns Reinvest In The Strengthen The Return Cash To Business Balance Sheet Shareholders • Capital spending targeted • Targeting $4 billion in • Expect to return at least no
Slide 36: Disciplined Investment Strategy
Disciplined Investment Strategy Capital spending plan allows Delta to address upcoming fleet retirements and invest in high return opportunities Capital Spending as a % of Operating Cash Flow • Capital expenditure targeted not to exceed 50% 85% of operating cash flow 64% 60% 56% – Improved profitabi
Slide 37: Proactively Managing Our Pension Obligations
Proactively Managing Our Pension Obligations Pension contributions are above required levels and expected to result in an 80% funded status in 2020 Pension Funded Status 120% Funded status at current discount • Delta plans to continue contributing ~$1.2 billion rate annually to the pension plan thro
Slide 38: Maintaining Our Investment Grade Balance Sheet
Maintaining Our Investment Grade Balance Sheet De-risked balance sheet has driven an investment grade rating and will allow for consistent shareholder returns Debt/EBITDAR 8.2x • Balance sheet progress recognized with investment grade rating by Moody’s and Fitch • Continue to target $4 billion adjus
Slide 39: Delta Committed To Consistent Shareholder Returns
Delta Committed To Consistent Shareholder Returns Plan to return 70% of free cash flow to owners, with an increasing focus on the dividend Regular dividend run-rate of Plan to complete $5 billion share $615 million per year repurchase authorization by mid-2017 • Dividend represents a long-term commi
Slide 40: Opportunity In Proving Durability
Opportunity In Proving Durability Delta’s stock price implies significant opportunity in reinforcing earnings sustainability Free Cash Flow Conversion ~98% Implied Delta Stock Price at High Quality Industrial Transport Valuation Multiples ~55% $115 Delta High Qual. Ind. Transports $95 Shareholder Re
Slide 41: Non-GAAP Reconciliations
Non-GAAP Reconciliations 40
Slide 42: Non-GAAP Reconciliations
Non-GAAP Reconciliations Non-GAAP Financial Measures Delta sometimes uses information ("non-GAAP financial measures") that is derived from the Consolidated Financial Statements, but that is not presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”). Under the U.S.
Slide 43: Non-GAAP Reconciliations
Non-GAAP Reconciliations Free Cash Flow and Free Cash Flow Conversion We present free cash flow because management believes this metric is helpful to investors to evaluate the company's ability to generate cash that is available for use for debt service or general corporate initiatives. Adjustments
Slide 44: Non-GAAP Reconciliations
Non-GAAP Reconciliations Non-Fuel Unit Cost per Available Seat Mile, Including Profit Sharing (“CASM-Ex”) We adjust CASM for the following items to determine CASM-Ex for the reasons described below: Aircraft fuel and related taxes. The volatility in fuel prices impacts the comparability of year-over
Slide 45: Non-GAAP Reconciliations
Non-GAAP Reconciliations Unhedged Fuel Price per Gallon The tables below show fuel price per gallon. We then adjust for the impact of hedging on the price per gallon to show our total unhedged fuel price. Removing hedging activity allows investors to better analyze the company's fuel costs in compar
Slide 46: Non-GAAP Reconciliations
Non-GAAP Reconciliations EBITDAR, Adjusted Earnings before interest, taxes, depreciation, amortization and aircraft rent ("EBITDAR") has been presented as management believes it is helpful to investors in analyzing the core operational performance of the company. We adjust for the following items to