Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Investor Day (December 2015)
51 slides from Delta Air Lines's investor day presentation, Dec 17, 2015
Slide 1: Keep Climbing
KEEP CLIMBING ADELTA 4%
Slide 2: Safe Harbor
2 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
Slide 3: Delta: A High-Quality Company
Delta: A High - Quality Company Richard Anderson Chief Executive Officer
Slide 4: A High-Quality Company
A High - Quality Company America’s Best Run Airline Consistently Producing High - Quality Returns and Cash Flows Sustainably and Durably Growing Our Business Raising the Bar on Our Performance A high - quality company uniquely positioned among the S&P Industrials 4
Slide 5: Delta: Evolution Over The Past Decade
Delta: Evolution Over The Past Decade Consolidation High - Quality Product Sustainable Earnings & Cash Flow • Investments in network, products and services in addition to highly motivated employees drive Delta’s industry leading operational reliability, customer satisfaction and 14% domestic unit re
Slide 6: Managing Business To Long-Term Goals
Managing Business To Long - Term Goals • Balanced, metric - driven approach producing strong results for shareholders that are consistent with high - quality industrial companies • Since introducing goals in 2013, Delta has consistently outperformed and then raised long - term targets at our May ana
Slide 7: Changing Investor Perception
Changing Investor Perception 7 Can the airline industry overcome its history? Are Delta’s earnings and cash flows sustainable throughout the business cycle? How successful has Delta been at retaining the fuel benefit and where have those savings been invested? Despite record results and an improving
Slide 8: Opportunity Ahead For Investors
Opportunity Ahead For Investors Delta’s stock represents an opportunity for investors to purchase a high - quality industrial at an attractive valuation Consistently producing high - quality returns and cash flows… …While valuations remain at a discount 21.3% 22.4% 18.9% Delta High-Quality Ind. Tran
Slide 9: Leveraging Delta's Solid Foundation
Leveraging Delta’s Solid Foundation Ed Bastian President
Slide 10: Leveraging Delta's Solid Foundation
Leveraging Delta’s Solid Foundation Consistently Producing Solid Results Positioned to Grow Earnings and Cash Flow in 2016 International is Key to Long - Term Growth Using Delta’s solid foundation to produce consistent, sustainable results for shareholders while developing longer - term growth oppor
Slide 11: Meeting Our 2015 Commitments
Meeting Our 2015 Commitments Solid execution across the business leads to a record year for Delta • Run a reliable, customer focused operation • Industry’s best operational performance, including 173 100% mainline completion factor days (6x more than entire industry combined) and 86%+ on - time rate
Slide 12: Completing Another Record Year in 2015
Completing Another Record Year in 2015 December quarter caps a successful year of top line growth, margin expansion and free cash flow generation Operating margin 16.5 – 17.5% PRASM change year over year Down ~2% Fuel price $1.82 - $1.87 CASM – Ex Fuel change year over year Up ~2% Non - operating ex
Slide 13: Consistently Producing Solid Results
Consistently Producing Solid Results Running a reliable, customer - focused airline is producing stronger returns, allowing for improved balance sheet strength and increased return of capital to shareholders All results exclude special items Foundation in place to produce high - quality, sustainable
Slide 14: Looking Ahead To 2016
Looking Ahead To 2016 Delta is well - positioned to maintain its industry leadership position in 2016 • Global GDP growth estimated at 2 - 3% with domestic 3% and international 2% – Domestic demand expected to remain solid; international markets mixed • Increasing headwinds from rapid growth of ULCC
Slide 15: Positioned To Grow Earnings And Cash Flow In 2016
Positioned To Grow Earnings And Cash Flow In 2016 • System capacity growth of 0 - 2% - appropriate level to balance capital investment and supply and demand, while also ensuring progress toward our long - term financial targets – 2016 growth focused on markets with strong demand ( US, UK, Mexico, Ca
Slide 16: Strong Momentum With Corporate Travelers
4% 2% 2% 3% 3% 4% 4% 5% 9% Total Other Automotive Technology Media Business Services Health Care Transportation Financial Services 5 4 1 1 1 1 1 2009 2010 2011 2012 2013 2014 2015 Strong Momentum With Corporate Travelers Corporate travelers are recognizing Delta’s high quality product and service… …
Slide 17: Delta Has A Proven International Model
Delta Has A Proven International Model Equity investments, immunized joint ventures and strong commercial cooperation mimic benefits of cross - border consolidation Delta has a proven model with two principles at the core of our international strategy : • Immunized joint ventures allow closest coope
Slide 18: Transatlantic Providing Industry Leading Returns
Transatlantic Providing Industry Leading Returns Improved joint venture performance key to further gains in the Transatlantic Air France/KLM Joint Venture is the Model Maturation of Virgin Atlantic Joint Venture Globalize Delta’s Business Operations • Long - standing AirFrance /KLM joint venture is
Slide 19: Pacific Restructuring Improving Margins
Pacific Restructuring Improving Margins Early efforts have restored profitability of Narita hub, improved Pacific margins by 6 points • First phase of Pacific restructuring has been successful – Entity margins have increased by 6 points over last year, with Narita hub restored to profitability despi
Slide 20: A Growing Force In Latin America
A Growing Force In Latin America Leveraging Delta’s Latin Investments Strengthening GOL as an Airline and a Partner Building a Deeper Relationship with Aeromexico Focused on maximizing value of partnerships while driving value from Delta’s network, product and service investments • Recognized as US
Slide 21: Expanding Partnership With Aeromexico
Expanding Partnership With Aeromexico New investment demonstrates Delta’s confidence in Mexico’s future • Mexico is the largest US market in Latin America and its economy is well positioned for the future – Open Skies is expected to be approved in 2016 and Delta has already applied for ATI with Aero
Slide 22: Leveraging Delta's Solid Foundation
Leveraging Delta’s Solid Foundation Consistently Producing Solid Results Positioned to Grow Earnings and Cash Flow in 2016 International is Key to Long - Term Growth Using Delta’s solid foundation to produce consistent, sustainable results for shareholders while developing longer - term growth oppor
Slide 23: Running A Reliable, Customer-Focused Operation
Running A Reliable, Customer - Focused Operation Gil West Chief Operating Officer
Slide 24: Delivering Top Tier Operational Results
Delivering Top Tier Operational Results 24 Top of Industry Operational Performance – YTD November 76.6% 78.1% 80.0% 80.0% 86.1% 86.3% 70% 75% 80% 85% 90% jetBlue United American Southwest Delta Alaska DOT On - Time (A14) 3.92 3.39 3.28 3.18 2.09 1.79 1.5 2.0 2.5 3.0 3.5 4.0 4.5 American Alaska South
Slide 25: Driving Core Reliability Performance
Driving Core Reliability Performance • Superior execution skills • Expanded maintenance footprint • Growing internal maintenance capabilities • Serviceable levels • Reliability projects • Leverage Cargo’s improved Dash performance • Big data/predictive maintenance TechOps Leverage TechOps YTD Perfor
Slide 26: Keeping Cost Down Maintenance Expense
Keeping Cost Down Maintenance Expense Delta preserves its relative strength in maintenance, leading network carriers in CASM, despite the highest average fleet age and complexity in the industry Maintenance Cost Per Seat Block Hour ($) – Last 12 Months Ending June Qtr ‘15 4.48 4.68 4.88 5.16 5.78 WN
Slide 27: Improving the Customer Experience
4.14 4.28 4.34 4.38 2012 2013 2014 2015 Improving the Customer Experience 27.2% 31.1% 33.5% 37.8% 2012 2013 2014 2015 Domestic Net Promoter Score - YTD Flight Attendant Interaction - YTD (5 = Excellent) Cabin Maintenance Audit - YTD (3 rd Party Audit Score: 100 = Excellent) 77.7 88.1 92.2 94.4 2012
Slide 28: Our Culture Fuels Our Success
Our Culture Fuels Our Success Joanne Smith Chief Human Resources Officer
Slide 29: Our Culture Fuels Our Success
NET PROMOTER EMPLOYEE SATISFACTION FINANCIAL PERFORMANCE + = OPERATIONAL PERFORMANCE Our Culture Fuels Our Success Our Rules of the Road is the foundation of what makes Delta unique and drives our culture of open and honest communication – it is our strategic competitive advantage. OUR FOUNDATION KE
Slide 30: Balanced Investment Mindset For All Stakeholders
Balanced approach to capital deployment has driven significant value for all stakeholders Balanced Investment Mindset Employees • Receive competitive pay and benefits, in addition to profit sharing and retirement contributions Customers • Benefit from investment in our fleet, products, technology an
Slide 31: Engaged Employees
Engaged Employees Purposeful about Maintaining Culture 31 Empower & Engage Planned and organic engagement drives commitment with Delta’s: • Culture of Celebration - Profit Sharing & Chairman’s Club • Focus on developing business acumen – Speaker Series & Network Groups • Follow through on commitment
Slide 32: Driving Our Revenue Momentum
Driving Our Revenue Momentum Glen Hauenstein Chief Revenue Officer
Slide 33: Driving Our Revenue Momentum
Driving Our Revenue Momentum Leveraging our strengths to produce further revenue gains Making Targeted Network Investments Expanding Ancillary Revenue Through a Tailored Customer Experience Upgauging Fleet for Efficient Domestic Growth • Enhance segmentation through further product differentiation,
Slide 34: Flying To The Right Destinations With The Right Product
Flying To The Right Destinations With The Right Product Optimize capacity by focusing on hub strengths to serve high - revenue markets over short, intermediate and long time horizons • Over the short to intermediate term, capitalize on leading unit revenue position • Focus on serving major populatio
Slide 35: Unique Fleet Strategy Is Cornerstone To Domestic Growth
Unique Fleet Strategy Is Cornerstone To Successful Domestic Growth 35 Domestic fleet initiatives producing a more cost effective fleet with higher customer satisfaction and lower capital cost • Increasing average seats per departure by an additional 5 - 7% between 2015 and 2020 – more efficient capa
Slide 36: Driving Higher Revenue With Improved Customer Segmentation
Driving Higher Revenue With Improved Customer Segmentation Branded Fares revenue expected to approach $2.5 billion by 2018 36 Branded Fares Revenue: 2014 - 2018 Branded Fares on track to reach 2018 revenue goal of $2.4 billion, $1.5 billion increase over 2014, with 2015 revenue up nearly 30% year ov
Slide 37: Maximizing The Value Of Our Premium Cabins
Maximizing The Value Of Our Premium Cabins Since 2013, we have demonstrated significant progress increasing paid load factors and upsell revenue for First Class and Delta Comfort+ with more upside to come First Class Delta Comfort+ 45% 57% ~70% 2013 2015E 2018 Goal First Class Paid Load Factor 34% 3
Slide 38: Creating Distinct Products That Are Easy To Understand And Buy
• Develop distinct value propositions for each product so customers have a clear understanding of which product is best for their travel experience • Invest in core products to create high - value, differentiated experiences • Make products easier to buy across Delta channels and Delta preferred 3 r
Slide 39: Opportunity To Capture A Greater Portion Of Travel Spend
Opportunity To Capture A Greater Portion Of Travel Spend Delta will keep investing to further segment customers and continue to offer best in class products that are easy to purchase for our ~180 million customers 39 Growth in Optional Service Revenue per Passenger Through Segmentation. . . . . . En
Slide 40: Delivering Sustainable Financial Results
Delivering Sustainable Financial Results Paul Jacobson Chief Financial Officer
Slide 41: Delivering Sustainable Financial Results
• Capital expenditures at ~50% of operating cash flow annually support our fleet , product, facility and technology initiatives • Investments are high return opportunities to drive significant long - term value for shareholders • Non - fuel unit cost growth is expected to remain below 2% over the lo
Slide 42: Managing Business To Long-Term Goals
Managing Business To Long - Term Goals • Balanced, metric - driven approach producing strong results for shareholders that are consistent with high - quality industrial companies • Since introducing goals in 2013, have consistently outperformed and then raised long - term targets at our May analyst
Slide 43: Solid Cost Opportunity Pipeline
Solid Cost Opportunity Pipeline The productivity pipeline remains robust and will allow Delta to maintain non - fuel unit cost growth below 2% annually Excludes special items • Delta expects non - fuel unit cost growth to remain below 2% including profit sharing at its base earnings per share growth
Slide 44: Fuel Tailwind To Continue In 2016
Fuel Tailwind To Continue In 2016 Delta expects financial momentum to continue, even assuming fuel prices above the forward curve • Second year of lower market fuel prices contributing to nearly $3 billion incremental fuel savings in 2016 • Hedge strategy focused on cost efficient opportunities to m
Slide 45: Business Opportunities Will Reduce Cash Taxes
Business Opportunities Will Reduce Cash Taxes • Business initiatives will result in lower book and cash taxes – Excess pension funding reduces taxable income – Accelerated depreciation on long - lived assets will result in taxable income being below book income for several more years – Transatlantic
Slide 46: Balanced Capital Deployment Drives Value
Balanced Capital Deployment Drives Value Balanced approach to capital deployment is driving significant value for shareholders 46 Expect to produce over $20 billion in operating cash flow from 2015 - 2017 Reinvest In The Business • ~50% of operating cash flow to be reinvested in the business • Allow
Slide 47: Capital Efficient Investment Strategy
Capital Efficient Investment Strategy Disciplined reinvestment in the business drives long - term growth opportunities and superior returns on invested capital • Delta will spend $3 billion on core growth initiatives in 2016 including the capital investment it is making in Delta Material Services (D
Slide 48: Proactively Managing Our Pension Obligations
Proactively Managing Our Pension Obligations • Delta plans to continue contributing ~$1 billion annually to the pension plan through 2020 • Rising interest rates will allow Delta to achieve its pension targets sooner – A 50 basis point increase in the discount rate reduces the pension liability by $
Slide 49: Delta Committed To Consistent Shareholder Returns
Delta Committed To Consistent Shareholder Returns Using strong cash generation in a balanced, deliberate and sustainable manner to reinvest in the business, further strengthen the balance sheet and return increasing levels of cash to shareholders 49 9.1% 7.0% 6.9% 6.6% 5.8% 5.5% 4.8% 3.4% 3.3% 2.2%
Slide 50: Opportunity Ahead For Investors
Opportunity Ahead For Investors Delta’s stock represents an opportunity for investors to purchase a high - quality industrial at an attractive valuation Consistently producing high - quality returns and cash flows… …While valuations remain at a discount 21.3% 22.4% 18.9% Delta High-Quality Ind. Tran
Slide 51: Non-GAAP Reconciliations
Non - GAAP Reconciliations 51