Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Investor Day (December 2022)
45 slides from Delta Air Lines's investor day presentation, Dec 14, 2022
Slide 1: Financial Outlook & Strategic Update
Delta Air Lines Financial Outlook & Strategic Update December 14, 2022
Slide 2: Julie Stewart
Julie Stewart VICE PRESIDENT, INVESTOR RELATIONS
Slide 3: Agenda
Agenda > Ed Bastian Chief Executive Officer 10:00-10:30am ET > Glen Hauenstein President 10:30-10:45am ET > Dan Janki Chief Financial Officer 10:45 - 11:00am ET P Q&A 11:00 - 12:00pm ET
Slide 4: Safe Harbor
Safe Harbor Statements made in this presentation that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections, goals, aspirations, commitments or strategies for the future, should be considered “forward-looking statements” under the Secu
Slide 5: Ed Bastian
° Ed Bastian CHIEF EXECUTIVE OFFICER
Slide 6: Key Takeaway: Delta Executing Well Against Three-Year Plan
Key Takeaway: Delta Executing Well Against Three-Year Plan DELTA IS THE INDUSTRY LEADER CONSTRUCTIVE INDUSTRY BACKDROP BUILDING FINANCIAL MOMENTUM Best-in-class people, service and operation Unique demand drivers EPS growing to $5 - $6 in 2023 and >$7 in 2024 Premium consumer brand with strong loyal
Slide 7: Industry Demand Continues To Recover To Long-Term Trend
Industry Demand Continues To Recover To Long-Term Trend Air Travel Revenue Below Long-Term GDP Trend 13% Industry Revenue To & From U.S. As % Of GDP Historical Average 15% 14% 14% 14% 14% 13% w 13% 13% 1.2% 1.2% | 11% 1980- 1990- — 2000- 1989 1999 2008 1.4% 1.4% 2009 2010 2011 2012 2013 2014 2015 20
Slide 8: Constructive Industry Backdrop Reinforces Confidence In 2023
Constructive Industry Backdrop Reinforces Confidence In 2023 Industry Capacity vs.2019 === "= Pre-Pandemic Analyst Estimates Post-Pandemi sst-Pandemic Lone 6% we--7777” Capacity 25 pts lower p> than pre-COVID estimates in 2022 92% 91% 51% 2017 2018 2019 2020 2021 2022E 2022 nominal US. GDPsourced fr
Slide 9: Industry Revenue Airline Industry Seats
Industry Revenue Airline Industry Seats
Slide 10: 2022 Performance Review
glassdoor BEST PLACES wWORK a2 2022 Performance Review FORE Capital Markets Day Priorities Year One Results Runbest-in-class operation titttssenestrveens > Disciplined restoration, swift operational recovery from May/June challenges with industry-leading full year performance Strengthen brand and el
Slide 11: Generating Meaningful Profitability
Generating Meaningful Profitability A. Operating Income $148 $158 $148 2022 3022 AQ22E ($0.88) Operating Margin > 12% 12% 11% vs. 2019 (6pts) (pts) (15 pts) Note: Adjusted for special items; non-GAAP financial measures reconciled in Appendix ‘Last twelve months CHALLENGING OPERATING ENVIRONMENT = Hi
Slide 12: Strong Financial Outlook For 2023 And On Plan For 2024 Targets
Strong Financial Outlook For 2023 And On Plan For 2024 Targets Revenue Growth Leverage 3x-3.5x 2x-3x Adj. Debt/ EBITDAR AY. site: Acustesforspecel items; non-GAAP financial measures recone in Appel 12
Slide 13: Strengthening Delta's Durable Competitive Advantages
Strengthening Delta's Durable Competitive Advantages PEOPLE OPERATIONAL GLOBAL CUSTOMER FINANCIAL & CULTURE RELIABILITY NETWORK LOYALTY FOUNDATION S&P Global Moopy’s FitchRatings = Forbes’ World's Best = Industry-leading operation = Best-in-class domestic = Trusted consumer = Industry-leading Employ
Slide 14: Glen Hauenstein
Glen Hauenstein PRESIDENT
Slide 15: Strong Demand Environment Continues
Strong Demand Environment Continues A Revenue Recovery vs. 2019 107% - 108% 103% 2021 1022 2Q22 AQ22E Note: Adjusted for special items; non-GAAP financial measures reconciled in Appendix Robust holiday demand and continued consumer strength Corporate revenue steady at 80% recovered vs. 2019 Strong 1
Slide 16: Delivering On Long-Term Commercial Strategy
Delivering On Long-Term Commercial Strategy 2022 Accomplishments Position Us To Extend Our Lead In 2023 DEEPEN NETWORK EXPAND PREMIUM GROW LOYALTY INCREASE REVENUE ADVANTAGES REVENUE ECOSYSTEM DIVERSIFICATION A. 16
Slide 17: Fleet Evolution Enables Efficient Capacity Restoration
Fleet Evolution Enables Efficient Capacity Restoration System Capacity Restoration vs. 2019 98% 101% 86% 86% 85% 81% 2022E 2023E 2022E 2023E 2022E 2023E A A A Departures Seats ASMs A "By mid-2023 Achieving full ASM restoration on fewer departures in 2023 Mainline fleet larger than 2019 RJ fleet unde
Slide 18: Restoring Domestic Capacity Through Core Hubs
Restoring Domestic Capacity Through Core Hubs 2H22 Unit Revenue! Industry-Leading Hub Positions 2022 SHAPED BY UNIQUE 7 OPPORTUNITIES 220% #1 or #2 position in 66 of top 100 U.S. cities = Prioritized coastal ™ Protected local share hubs, securing leading in core hubs positions in largest revenue mar
Slide 19: Global Network Supported By Coastal Hubs And Leading JVs
Global Network Supported By Coastal Hubs And Leading JVs Partner JVs Unlock Commercial Value And Create A Seamless Customer Experience 4 Acromexico 2 LATAM #1US-MEXICO #1US-SOUTH AMERICA MARKET SHARE = Improved competitive position = Accessand scale to critical interior Mexico corporate markets "Six
Slide 20: Applying Proven Playbook To International
Applying Proven Playbook To International A. International Margin High Single Digits 2014 2019 2023E Note: Fleet metrics represent expected 2023 vs. 2019 Domestic Levels Long-Term Target RESHAPING GLOBAL NETWORK = Leading Pacific connectivity via Seoul with developing Korean JV = AccelerateLATAMJV t
Slide 21: Elevating Customer Experience Through Premium Products And Service
Elevating Customer Experience Through Premium Products And Service Premium Seat Growth Has Significantly Outpaced Main Cabin GROWING HIGH MARGIN PREMIUM PRODUCTS = Premium seat mix growing to 30% by 2024, a 2 pts vs.2019 and +21 5. 2009 10+ Point +2 pts vs. 2019 and +21 pts vs. 200: Differential = G
Slide 22: Delta's Loyalty Ecosystem Drives High Margin Revenue
Delta's Loyalty Ecosystem Drives High Margin Revenue “SKYMILES American Express Remuneration To Delta LOYALTY GROWTH OPPORTUNITIES $7B+ — Card & Spend Small Non-Air = $5.5B Growth Business Partnerships baud ss Premium Personalization Travel $3B Mix Related Growing SkyMiles + Increasing > Sustained M
Slide 23: Continuing To Increase Revenue Diversification
Continuing To Increase Revenue Diversification Total Revenue = Premium Products & Non-Ticket! == Main A +15%- 20% fm ia 47% 45% 57% 52% 53% 55% 44% 2014 2018 2019 2022E 2023E 43% | Non-Ticket includes loyalty program, MRO and other ancillary, cargo and travel-related services A Note: Adjusted for sp
Slide 24: Dan Janki
a BT VF aE CHIEF FINANCIAL OFFICER
Slide 25: Raising 4Q Earnings Guidance
Raising 4Q Earnings Guidance Revenue Up 7%-8% Up 5%-9% Operating Margin 11% 9%-11% Secereeeneneieneneneieieieieeieisss ++ 1 pillar. Serer ee eee ee eeee eee eee Bp 1” 1 EPS $1.35 -$1.40 $1.00- $1.25 | rN Revenue measured vs, 2019; ASMs, Non-fuel CASM in line with prior guidance; expected fuel price
Slide 26: Non-Fuel Unit Costs Improving In 4Q
Non-Fuel Unit Costs Improving In 4Q Unit Costs Improving In December Quarter With Benefit Of Scale And Efficiency Non-Fuel Unit Cost! vs. 2019 ASMs vs. 2019 22% 22% Vv (10) pts 15% 12%-13% 1022 2022 3022 4022E > 83% 82% 83% 91% -92% yn ‘Non-Fuel CASM excludes fuel and profit-sharing expense, include
Slide 27: Non-Fuel Unit Cost
> Non-Fuel Unit Cost! 129¢ V (5%-7%) { ) V (2%-3%) Compared to 2019 2022E 2023E 2024E Non-Fuel Unit Cost > 18% 10% - 12% High Single Digits ASMs > 85% 101% >100% Non-Fuel CASM excludes fuel and profit-sharing expense, includes ancillary business expense Note: Adjusted for special items; non-GAAP fin
Slide 28: Driving Operating Leverage With Lower-Cost Capacity Growth
Driving Operating Leverage With Lower-Cost Capacity Growth Increasing Utilization And Gauge Rebuilding Int'l Long-Haul Mainline Fleet Utilization! System Capacity Mix Large narrowbodies half of mainline fleet Exiting 50-seat jets in ng 118 31% 30% 25% 2023 12 Domestic growth focused oncore hubs Low
Slide 29: Network Growth Focused In Cost Efficient, High-Margin Core Hubs
Network Growth Focused In Cost Efficient, High-Margin Core Hubs Restoring Core Hubs 2023E Daily Added Seats (K) vs. 2022 Scale andstrong local share in core markets High volume connecting traffic with 6 out 25 of every 10 core hub passengers connecting Delta's largest and highest margin hub - Atlant
Slide 30: Focused On Margin Improvement
Focused On Margin Improvement Operating Margin LONG-TERM 14.5% 13%-15% MARGIN DRIVERS 10% -12% . = Commercial strategy - Premium revenue - Loyalty ecosystem - International growth = Fleet renewal 2010-2014 2015-2019 2022E 2023E 2024E . Average Average = Operating leverage > Note: Adjusted for specia
Slide 31: Executing Against Three-Year Financial Plan
Executing Against Three-Year Financial Plan Significant EPS Growth Sustained Free Cash Flow Reducing Debt Earnings Per Share Free Cash Flow Adjusted Debt / EBITDAR >$7 >$4B 5x Pension $5-$6 Fully Funded $28 3x-3.5x $3 2x-3x | $0.18 L] 2022E 2023E 2024E 2022E 2023E 2024E 2022E 2023E 2024E Op. Margin
Slide 32: Delivering Long-Term Value Creation
Delivering Long-Term Value Creation ry ROIC a | i . Delta People wov\ AndBrand >... Mid-Teens - a +s 4 Low Double-Digits 4 4 A RETURN ON 5 8% A INVESTED Y p CAPITAL : Thoughtful Industry- Capital Leading Allocation Margins 2022E 2023E 2024E AX Note: Adjusted for special items; non-GAAP financial mea
Slide 33: Appendix
as sS = D a. a <—c
Slide 34: Appendix: Financial Guidance And Key Assumptions
Appendix: Financial Guidance And Key Assumptions Guidance Metric 2022 2023 2024 Revenue $45.5B-$45.6B +15%-20% YoY GDP+ YoY Operating Margin 7.7% 10% -12% 13%-15% Earnings Per Share $3.07-$3.12 $5-$6 >$7 Capital Expenditures $5.8B $5.5B $5B Free Cash Flow Positive >$2B >$4B Adj. Net Debt $228 $19B-$
Slide 35: Non-GAAP Financial Measures
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. Securities and Exchange
Slide 36: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjustments. These reconciliations include certain adjustments to GAAP measures, which are directly related to the impact of COVID-19 and our response. These adjustments are made to provide comparability between the reported periods, if applicable, as indicated below: Res
Slide 37: Operating Income, adjusted
Operating Income, adjusted Three Months Ended (Projected) (in billions) March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 Operating Income $ (0.8) $ 1.5 $ 1.5 $ ~1.5 Adjusted for: Restructuring charges (0.0) (0.0) 0.0 ~(0.1) MTM adjustments and settlements on hedges (0.0) (0.1) 0.0 ~
Slide 38: Total Revenue, adjusted
Total Revenue, adjusted Year Ended December 31, (Projected) 2021 vs 2019 % (in billions) 2019 2021 2022 restored Total revenue $ 47.0 $ 29.9 $ ~50.3 - 50.4 Adjusted for: Third-party refinery sales (0.1) (3.2) ~(4.8) Delta Private Jets adjustment (0.2) - - Total revenue, adjusted $ 46.7 $ 26.7 $ ~45.
Slide 39: Pre-Tax Income, Net Income, and Diluted Earnings per Share, adjusted
Pre-Tax Income, Net Income, and Diluted Earnings per Share, adjusted Year Ended Year Ended (Projected) (Projected) December 31, 2022 December 31, 2022 Pre-Tax Income Net Earnings (in billions, except per share data) Income Tax Income Per Diluted Share GAAP $ ~1.9 $ ~0.6 $ ~1.3 $ ~2.12 - 2.17 Adjuste
Slide 40: Average fuel price per gallon, adjusted
Average fuel price per gallon, adjusted Three Months Ended (Projected) December 31, 2022 Average fuel price per gallon $ ~3.24 Adjusted for: MTM adjustments and settlements on hedges ~0.01 Average fuel price per gallon, adjusted $ ~3.25 Non-Fuel Unit Cost or Cost per Available Seat Mile, adjusted ("
Slide 41: Return on Invested Capital
Year Ended (Projected) (in billions) December 31, 2022 Pre-tax adjusted income $ ~4 Tax effect $ ~(1) Tax-effected adjusted total pre-tax income $ ~3 Adjusted book value of equity $ ~12 Average adjusted gross debt ~31 Averaged adjusted invested capital $ ~43 After-tax Return on Invested Capital ~8%
Slide 42: Free cash flow
Year Ended (Projected) (in billions) December 31, 2022 Net cash provided by operating activities: $ ~5.9 Net cash used in investing activities: ~(6.4) Adjusted for: Net redemptions of short-term investments ~(0.4) Strategic investments and related ~0.7 Net cash flows related to certain airport const
Slide 43: Gross capital expenditures
Year Ended (Projected) (in billions) December 31, 2022 Flight equipment, including advance payments $ ~4.4 Ground property and equipment, including technology ~1.8 Adjusted for: Financed aircraft acquisitions ~0.2 Net cash flows related to certain airport construction projects ~(0.5) Gross capital e
Slide 44: Adjusted Debt to EBITDAR
(Projected) (in billions) December 31, 2022 Debt and finance lease obligations $ ~23 Plus: Operating lease liability ~8 Plus: Sale leaseback liability ~2 Adjusted Debt $ ~33 Year Ended (Projected) (in billions) December 31, 2022 Operating income $ ~4 Adjusted for: Depreciation and amortization ~2 Fi
Slide 45: Adjusted net debt
(Projected) (in billions) December 31, 2022 Debt and finance lease obligations $ ~23 Plus: sale-leaseback financing liabilities ~2 Adjusted debt and finance lease obligations ~25 Plus: 7x last twelve months' aircraft rent ~4 Adjusted total debt $ ~29 Less: cash, cash equivalents and short-term inves