Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Investor Day (December 2019)
81 slides from Delta Air Lines's investor day presentation, Dec 12, 2019
Slide 1: Delta Investor Day 2019
Slide 2: Investor Day 2019
Investor Day 2019 Jill Greer Vice President, Investor Relations
Slide 3: Agenda
Agenda Ed Bastian Chief Executive Officer Delta: The Industry Leader Glen Hauenstein President Ext ending our Competitive Advantages Gil West Sr. EVP and Chief Operating Officer The World’s Best Run Airline Tim Mapes Chief Marketing and Communications Officer Reinforcing Brand Loyalty Eric Phillips
Slide 4: Safe Harbor
Safe Harbor 4 Statements in this presentation that are not historical facts, including statements regarding our estimates, expectations, be lie fs, intentions, projections or strategies for the future, may be "forward - looking statements" as defined in the Private Securities Litigation Re form Act
Slide 5: Delta: The Industry Leader
Delta: The Industry Leader Ed Bastian Chief Executive Officer
Slide 6: Delivering Strong 2019 Performance
Delivering Strong 2019 Performance Note: Adjusted for special items; non - GAAP financial measures reconciled in Appendix 6 x Strong culture and employee engagement x On track for highest profit sharing in history x 6,800 new hires to support growth and improve service x Raised base pay for twelfth
Slide 7: Continued Momentum in 2020
Continued Momentum in 2020 Note: Adjusted for special items; non - GAAP financial measures reconciled in Appendix 7 Earnings Per Share Free Cash Flow Revenue ~ $47B ~ $49B 2019 Guidance 2020 Outlook 2019 Guidance 2020 Outlook 2019 Guidance 2020 Outlook 4% - 6% $6.75 - $7.25 $6.75 - $7.75 ~$4B ~$4B ~
Slide 8: Feedback We Hear From the Investment Community
Feedback We Hear From the Investment Community Note: Rivel perception study conducted in July 2019 8 Delta’s biggest weakness is that it’s an airline company – there are a lot of fears around margins, cyclicality and exposure to macroeconomic or geopolitical shocks. Top owner “ ”
Slide 9: Delta Leading a Growth Sector in a Stronger Airline Industry
x Consolidated structure x Returns - oriented with shareholder focus x Differentiated and improved product x Consistent profitability x Addressing environmental impact Attractive Industry Dynamics Source: Travel growth based on February 2019 World Travel & Tourism Council report 9 GDP Growth Travel
Slide 10: Feedback We Hear From the Investment Community
Feedback We Hear From the Investment Community Note: Rivel perception study conducted in July 2019 10 One way Delta could improve their valuation and change the way that the market sees them would be to improve the level of disclosures on profitability of the various business lines. Sell Side Analys
Slide 11: Delta's Strategic Priorities
Delta’s Strategic Priorities 11 Long - term value creation for Delta stakeholders Delivered by the best people and culture in the industry Run the Premier Global Airline Safe, reliable and customer - focused Grow our Brand Premium Enhance customer trust and loyalty Accelerate Globalization Grow our
Slide 12: Five Things to Take Away From Today
Five Things to Take Away From Today 12 Building on a record 2019 – with expectations for 4% to 6% revenue growth, $6.75 to $7.75 earnings per share and $4 billion free cash flow in 2020 1 Benefitting from favorable travel trends as the best performer within a structurally improved airline industry 2
Slide 13: Extending our Competitive Advantages
Extending our Competitive Advantages Glen Hauenstein President
Slide 14: Agenda
Agenda 14 Leveraging scale Investing for the future Extending our competitive advantages
Slide 15: Post-Merger Network Provided Limited Global Reach
Post - Merger Network Provided Limited Global Reach Note: Route map as of 2008 15 ATL SLC DTW MEM CVG JFK NRT Destinations: 549 Countries: 113 Joint Venture in transatlantic CDG MSP AMS
Slide 16: Unprecedented Network Transformation Creates Global Scale
Unprecedented Network Transformation Creates Global Scale Note: Route map as of December 2019; WestJet JV subject to government approvals; LATAM equity stake subject to tender offer c omp letion and JV subject to government approvals 16 NYC BOS LAX SEA YYC SLC DTW MSP AMS CDG BOG MEX GRU LIM SCL FCO
Slide 17: Agenda
Agenda 17 Leveraging scale Investing for the future Extending our competitive advantages
Slide 18: Global Scale Creates Opportunities to Invest for the Future
Deepening customer, commercial and operational integration with partners Simplifying and upgauging fleet to drive substantial efficiency benefits Building digital tools, driving personalization, leveraging data to optimize operations Investing in key airports to improve efficiency and customer exper
Slide 19: Agenda
Agenda 19 Leveraging scale Investing for the future Extending our competitive advantages
Slide 20: Unmatched Competitive Advantages
Unmatched Competitive Advantages Culture Global Network Balance Sheet Operational Reliability Customer Loyalty Global Network Customer Loyalty Unmatched Competitive Advantages Culture Balance Sheet Operational Reliability Global Network Customer Loyalty Extending our Competitive Advantages 20 Global
Slide 21: Global Network: Scale Advantage Enables Growth Opportunities
GLOBAL NETWORK Scale Advantage Enables Attractive Growth Opportunities 21 Strengths Vision Domestic International Product & Service Fleet High - margin core hubs, coastal hub positions, strong local share Most efficient core hubs, higher - margin coastal hubs, expanded focus city presence Flexible f
Slide 22: Delta's Fleet Transformation is Multi-Faceted
22 GLOBAL NETWORK Delta’s Fleet Transformation is Multi - Faceted Sizable Fleet Replacement Opportunity Creating Value from Existing Fleet Fleet Simplification • Reduce complexity with fewer aircraft types Next - Generation Technology • Best - in - class economics and leading product Gauge Growth •
Slide 23: Continuing to Renew Our Fleet
GLOBAL NETWORK Continuing to Renew Our Fleet 23 Fleet Families 15 13 8 97 114 2009 2014 2020E Future State 127 150+ Evolution of Delta’s Fleet Gauge (average seats per aircraft) • Average gauge has grown 30% since 2009 • Gauge growth temporarily pauses in 2020/2021, returning in 2022 and continuing
Slide 24: Growing Loyalty and Trust in the Delta Brand
CUSTOMER LOYALTY Growing Loyalty and Trust in the Delta Brand 24 Strengths Vision SkyMiles Program Miles as Currency Co - Brand Card 2020 Top - ranked loyalty program with expanding membership base Loyalty currency in high demand Unique partnership with Amex and premium customer base Deeper customer
Slide 25: The Strategic Importance of American Express
CUSTOMER LOYALTY The Strategic Importance of American Express 25 • Two strong consumer brands with long - term partnership • Integrated model with attractive economics • Higher contribution driven by improved economics, accelerating acquisitions and strong spend growth • Source of diversification an
Slide 26: The Delta Difference
IN SUMMARY The Delta Difference 26 + A Powerful Brand Long - Term Value Creation Top - Line Growth Margin Expansion Balanced Capital Allocation Unmatched Competitive Advantages Culture Global Network Balance Sheet Operational Reliability Customer Loyalty
Slide 27: The World's Best Run Airline
The World’s Best Run Airline Gil West Sr. EVP and Chief Operating Officer
Slide 28: Agenda
Agenda 28 Improving operational reliability Growing portfolio businesses
Slide 29: Building Trust Through Operational Reliability
Building Trust with Customers Through Operational Reliability Note: DOT completion factor, on - time arrivals (DOT A14) and maintenance cancellations are preliminary YTD - Nov 2019; DOT missed b ag ratio (MBR) is YTD - Sep 2019; Domestic NPS is YTD - Oct 2019 29 Best Completion Factor More Customers
Slide 30: Managing Irregular Operations to Differentiate Customer Service
(15%) 3% 8% Average 2010-2017 2018 2019 YTD Managing Irregular Operations to Further Differentiate Customer Service Note: IROP cancellations are preliminary YTD - Oct 2019; 100% completion factor days is FY 2010 - 2018 30 Irregular Operations (IROP) Cancellations • Best - in - class operational perf
Slide 31: 2020 Operational Priorities
2020 Operational Priorities 31 Continue to Improve IROP Recovery & Process Improvement Grow Portfolio Businesses Leverage Technology & Infrastructure • Facilitate quicker recovery through predictive tools • Reduce passenger stress through the travel ribbon • Security and processing wait time reducti
Slide 32: Agenda
Agenda 32 Improving operational reliability Growing portfolio businesses
Slide 33: Unlocking Value from Portfolio Businesses Through Partnerships
Unlocking Value from Portfolio Businesses Through Partnerships 33 • DPJ combining with Wheels Up to create one of the world’s largest owned and managed fleets of private aircraft - Brings together complementary businesses representing best consumer brands in private and commercial aviation - Delta e
Slide 34: Pursuing Growth Opportunities in Core Competencies
Pursuing Growth Opportunities in Core Competencies 34 Expanding product lines and pivoting to external sales growth • Manufacturing subsidiary established to create value for Delta in the cabin interior − Focus on supplier risk mitigation, Delta brand attributes and cost leverage − Currently produci
Slide 35: MRO Positioned to Meet Growing Global Maintenance Demand
MRO Positioned to Meet Growing Global Maintenance Demand Source: AeroDynamic Advisory & Alton Aviation 35 • Largest airline MRO in America with long - term OEM relationships • Guarantees for 7,000+ engine shop visits over the next 30 years • Contracts with Rolls Royce and Pratt & Whitney cover next
Slide 36: Delta: The World's Best Run Airline
IN SUMMARY Delta: The World’s Best Run Airline Operational Excellence − Building trust with customers through industry - leading operational reliability Continuous Improvement − Improving performance during irregular operations to minimize disruption and improve customer experience Unique Value Driv
Slide 37: Reinforcing Brand Loyalty
Reinforcing Brand Loyalty Tim Mapes Chief Marketing and Communications Officer
Slide 38: Delta Has a Leading Consumer Brand that Transcends Travel
Delta Has a Leading Consumer Brand that Transcends Travel 38 Corporate Partner Award
Slide 39: A Culture of Service at the Center of Everything we Do
A Culture of Service at the Center of Everything we Do 39 Apply our basic business principles Know our business and improve it constantly Demonstrate honesty, integrity and respect Drive for results Build great teams The Rules of The Road
Slide 40: Committed to Industry-Leading Safety and Reliability
Committed to Industry - Leading Safety and Reliability 40
Slide 41: Never Satisfied With the Status Quo
Never Satisfied With the Status Quo 41 Modernizing the airport experience • Terminal investments, biometrics, RFID expansion Enhancing service • Single View of the Customer enables more personalized experiences Investing in Customer & Operations Recovery • Enabling proactive recovery during irregula
Slide 42: Values-Led and a Force for Positive Change Worldwide
Values - Led and a Force for Positive Change Worldwide 42 But that’s just the start, the heart of our business is about … – Connecting people with each other – Increasing cultural understanding – Fostering economic growth – Strengthening communities Better connecting global communities starts with t
Slide 43: Delta is Addressing Climate Change
Delta is Addressing Climate Change 43 11% emissions reduction since 2005 ~2% annual fuel efficiency improvement 12 million carbon offsets purchased Fleet Renewal Fuel Savings Initiatives Carbon Offsets x More than 300 new aircraft in last 5 years x New aircraft are 25% more fuel efficient x Turbulen
Slide 44: Trust Drives Key Behaviors Including Buying and Staying Loyal
Trust Drives Key Behaviors Including Buying and Staying Loyal 44 25 53 Percent Who Will Engage in Each Behavior on Behalf of a Brand 29 62 24 51 22 43 Buy First Stay Loyal Advocate Defend Do not trust Trust Do not trust Trust Do not trust Trust Do not trust Trust +28 points +33 points +27 points +21
Slide 45: Better Business Results Driven by Best-in-Class Customer Experience
Better Business Results Driven by Best - in - Class Customer Experience Note: NPS sourced from Domestic ISM Surveys; 2019 PRASM data is TTM 3Q19; 2019 NPS Data is YTD - Oct 2019 45 Strong relationship observed between NPS and Revenue Premium 106% 117% 119% 15% 38% 51% 2010 2015 2019 YTD 3Q19 Domesti
Slide 46: Delta's Brand is Built on Trust and Delivering What Customers Value
Delta’s Brand is Built on Trust and Delivering What Customers Value 46 Always have our customers, employees, communities and shareholders in mind Thoughtful Reliable Values - Led Innovative Understanding expectations is the standard – exceeding them is where we make the difference Never satisfied wi
Slide 47: Industry-Leading Revenue Generation
Industry - Leading Revenue Generation Eric Phillips Sr. Vice President Revenue Management
Slide 48: Delta is the Airline of Choice
Delta is the Airline of Choice 48 Growing customer preference and sustainable revenue premium Leading Global Network Best - in - class Experience + More customers than ever are choosing to fly Delta, recommending the airline and becoming loyal to our brand…
Slide 49: Evolution to Customer-Focused Revenue Generation
Evolution to Customer - Focused Revenue Generation 49 Transactional Seats Lowest fares Brand loyalty Products Purchase driver Relationship - based Experiences Reliability, service and products Then Now 15% Domestic NPS 50%+ Deep knowledge of customer preferences Personalized offers Best - in - class
Slide 50: Positioned to Continue Revenue Momentum in 2020
+4 - 6% 2016 2017 2018 2019E 2020E Positioned to Continue Revenue Momentum in 2020 $39B • More choice in experience • Fuel recapture • Premium revenue growth • Reliable operation • Branded Fares • Globalization ~$49B 4% 8% ~7% • More choice in payment • 110%+ revenue premium • Amex renewal 4 - 6% Re
Slide 51: Executing on 2020 Revenue Drivers Will Further Brand Affinity
Executing on 2020 Revenue Drivers Will Further Brand Affinity 51 Building Customer Trust Better Selling and Servicing Loyalty Revenue Preferred Corporate Carrier 1 2 3 4 Maintaining our lead by investing in the things Corporate travelers value Driving acquisitions and enhancing card spend Delivering
Slide 52: Building Customer Trust Throughout the Travel Ribbon
INITIATIVE #1: BUILDING CUSTOMER TRUST Building Customer Trust Throughout the Travel Ribbon 52 In - Flight Shopping Booking Post - Purchase Airport Safe, reliable, on - time with bags Transparency in all customer touchpoints Fairness in policy for customers and employees Clarity of choices and assoc
Slide 53: Brand Affinity + Product Affinity is a Powerful Combination
2010 2017 2019E INITIATIVE #2: BETTER SELLING AND SERVICE Brand Affinity + Product Affinity is a Powerful Combination 53 Growing Premium Revenue ~$15B $5.5B $12B +25% 2017 - 2019E Premium revenue has grown ~2x faster than total revenue Customers Want Choice 70% repeat Once a customer purchases a pre
Slide 54: Better Selling and Servicing Fortify Delta's Leading Position
INITIATIVE #2: BETTER SELLING AND SERVICE Better Selling and Servicing Fortify Delta’s Leading Position Strong Direct Channels Opportunity to Expand in Corporate Direct Booking Tools Third Party Opportunity (e.g. Expedia, Concur) 52% direct distribution 42% of direct revenue is premium 10% accounts
Slide 55: Delta is the Preferred Carrier for Business Travel
INITIATIVE #3: PREFERRED CORPORATE CARRIER Delta is the Preferred Carrier for Business Travel Global Focus Domestic: Growing Corporate Markets International: Leveraging Strengths Abroad 2019 Yo2Y Industry Corporate Revenue in Delta Markets 2019 Yo2Y Industry Corporate Revenue 9% 10% 14% Core Hubs Co
Slide 56: Amex Partnership Creates Value for Delta and Our Customers
INITIATIVE #4: LOYALTY REVENUE Amex Partnership Creates Value for Delta and Our Customers 56 Delta - Amex Contribution 2018 2019E 2020E New and improved co - brand card benefits and refreshed marketing will accelerate acquisitions and drive portfolio spend ~$4B $3.4B ~$4.4B ~15% CAGR 12%+ Portfolio
Slide 57: Strong Foundation with Durable Platform for Growth
Strong Foundation with Durable Platform for Growth 57 Scale Local Share Corporate Strong global presence, geographically balanced network Local share is growing, ~20% yield premium over connecting traffic ~60% domestic local mix Preferred airline of the business traveler #1 carrier in revenue genera
Slide 58: Best-in-Class Customer Experience = Sustained Revenue Growth
IN SUMMARY Best - in - Class Customer Experience = Sustained Revenue Growth 58 x Culture x Employees x Network & Fleet x Operational reliability We have the right… …for future success 2020 Top - line Growth 4 % to 6 % Trusted Brand x Technology x Loyalty program x Global partners x Products & Servic
Slide 59: People Fuel our Success
People Fuel our Success Joanne Smith Chief People Officer
Slide 60: Empowered Employees: Our Culture in Action
Empowered Employees Our Culture in Action Caring for our people, sustaining their passion Our People: Strengthening brand, customer loyalty, higher NPS Our Brand: Caring for our customers, who become passionate about Delta Our Customers: 60
Slide 61: Creating Moments That Matter Every Day
Creating Moments That Matter Every Day 61
Slide 62: Care When It's Needed Most
Care When It’s Needed Most “The decision to help was, without a doubt, who we are as a company that cares about connecting the world. In this case, we were able to connect hundreds of people to safety and humanity. Our team’s commitment to helping others continues to inspire me every day.” Dave Holt
Slide 63: A Culture of Giving Back
A Culture of Giving Back 63 273 Habitat Homes Delta employees build homes annually – spanning 13 countries since 1995 – with Habitat for Humanity 1,000 Bikes Delta contributes to Toys for Tots annually and Delta employees build 1,000 bikes for kids every holiday season 13,064 Pints of Blood Delta em
Slide 64: A Thriving Culture Strengthens Customer Loyalty
More likely to have higher Net Promoter Scores More likely to have highly engaged employees More likely to have employees innovating IN SUMMARY A Thriving Culture Strengthens Customer Loyalty 6X 13X 7X 64 Source: O.C. Tanner Global Culture Report 2020
Slide 65: Delivering Consistent Value for Shareholders
Delivering Consistent Value for Shareholders Paul Jacobson Chief Financial Officer
Slide 66: Agenda
Agenda 66 Financial highlights and outlook Capital allocation
Slide 67: Strong 2019 Financial Performance Caps Decade of Transformation
Strong 2019 Financial Performance Caps Decade of Transformation Note: Adjusted for special items; non - GAAP financial measures reconciled in Appendix 67 Fifth consecutive year >$5 billion $1.5B $5.3B ~$6B 2010 2017 2019E Targeting ~70% of FCF to owners with steady dividend growth $2.4B ~$3B 2010 20
Slide 68: Robust Free Cash Flow Generation in 2019
Operating Cash Flow ~$8.5B Core Capital Spending ~$4.5B Free Cash Flow ~$4B $2B Buybacks • Expect free cash flow to net income conversion of 80% to 90% • Additional $500 million elective pension contribution in the December quarter Robust Free Cash Flow Generation in 2019 Note: Adjusted for special
Slide 69: Continued Momentum in 2020
Continued Momentum in 2020 69 Earnings Per Share Free Cash Flow Revenue ~ $47B ~ $49B 2019 Guidance 2020 Outlook 2019 Guidance 2020 Outlook 2019 Guidance 2020 Outlook 4% - 6% $6.75 - $7.25 $6.75 - $7.75 ~$4B ~$4B ~7% Note: Adjusted for special items; non - GAAP financial measures reconciled in Appen
Slide 70: Total Expense Growth in 2020 Expected to be Slightly Lower than 2019
Total Expense Growth in 2020 Expected to be Slightly Lower than 2019 Fuel Price per gallon ~ Flat Non - Operating Profit Sharing • Wage increases • Airport construction • Higher volume • Next - gen aircraft • Lower gauge benefit • Product and service • Technology • Catering transformation • Deprecia
Slide 71: Consistently Delivering Solid Financial Results
Consistently Delivering Solid Financial Results 71 Earnings growth, sustained margins, strong free cash flow and reinvestment in the business drive continued momentum Exceeding initial 2019 financial targets including top - line growth, margin expansion and strong cash generation Transformational de
Slide 72: Agenda
Agenda 72 Financial highlights and outlook Capital allocation
Slide 73: Balanced Cash Deployment Over the Last Decade
Balanced Cash Deployment Over the Last Decade 73 2010 to 2019 Cumulative Operating Cash Flow $64 billion Note: All metrics calculated over 2010 to 2019E period. 2010 to 2019 cumulative operating cash flow excludes cash funding to pen sion; adjusted for special items; non - GAAP financial measures re
Slide 74: Balanced Capital Allocation Priorities
Balanced Capital Allocation Priorities 74 1 Reinvest in the Business Renewing Delta’s fleet with more efficient next - generation aircraft, while investing in facilities and technology for future growth Maintain Investment Grade Balance Sheet 2 Targeting adjusted debt to EBITDAR range of 1.5x - 2.5x
Slide 75: Our Investments are Driving Strong Returns
1. REINVEST IN THE BUSINESS Our Investments are Driving Strong Returns • Approximately 400 basis points of ROIC improvement on a $17 billion increase in invested capital base since 2010 • Compounding benefits of reinvestment support long - term growth ROIC and Invested Capital $17B ~$34B ~11% ~15% 2
Slide 76: Reinvestment Consistent but Flexible
1. REINVEST IN THE BUSINESS Reinvestment Consistent but Flexible $3.2B $3.7B $4.6B ~ $4.5B ~ $4.5B 2016 2017 2018 2019E 2020E Aircraft Technology Ground/Other CapEx / Sales 8% 9% 11% ~10% ~9% Core Capital Spending • Core capex spend in 2020 similar to 2019 ‒ Expecting ~80 aircraft deliveries ‒ Cabin
Slide 77: Investment Grade Balance Sheet Provides Powerful Advantage
2. MAINTAIN INVESTMENT GRADE BALANCE SHEET Investment Grade Balance Sheet Provides Powerful Advantage • Robust cash generation and strong balance sheet position Delta to: − Consistently reinvest in the business − Seize strategic opportunities − Return cash to shareholders − Manage through a business
Slide 78: Sustained Free Cash Flow Enables Consistent Shareholder Returns
3. RETURN CASH TO OWNERS Sustained Free Cash Flow Enables Consistent Shareholder Returns $3.2B $2.4B ~ $4B ~$4B 2017 2018 2019E 2020E Free Cash Flow Free Cash Flow Allocation Targets Share Buybacks 45% - 50% Dividends 20% - 25% Balance Sheet 30% ~$4B of annual FCF Target 70% of FCF to owners 78 Note
Slide 79: Dividend Demonstrates Our Confidence
3. RETURN CASH TO OWNERS Dividend Demonstrates Our Confidence $0.54 $0.81 $1.22 $1.40 $1.61 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 $425M $600M $875M $950M $1B Dividend Run Rate • Dividend targeted at 20% to 25% of Free Cash Flow • Track record of annual increases with current yield of 2.9% Dividend per
Slide 80: Delta is a Compelling Long-Term Investment Opportunity
Delta is a Compelling Long - Term Investment Opportunity 80 Powerful Brand With Industry - Leading Returns Strong Partner Portfolio and Global Scale Unmatched Competitive Advantages Proven Track Record of Execution & Reinvestment
Slide 81: Investment Thesis: Delta is a Compelling Long-Term Investment Opportunity
INVESTMENT THESIS Delta is a Compelling Long - Term Investment Opportunity 81 Powerful Brand With Industry - leading Returns Strong Partner Portfolio and Global Scale Unmatched Competitive Advantages Proven Track Record of Execution & Reinvestment Record customer satisfaction Durable revenue and