Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — Cowen and Company Global Transportation Conference 2015
24 slides from Delta Air Lines's conference presentation, Sep 9, 2015
Slide 1: Delta: Setting A New Standard
Delta: Setting A New Standard Cowen and Company Global Transportation Conference September 9, 2015
Slide 2: Safe Harbor
Safe Harbor This presentation contains various projections and other forward-looking statements which represent Delta’s estimates or expectations regarding future events. All forward-looking statements involve a number of assumptions, risks and uncertainties, many of which are beyond Delta’s control
Slide 3: Delta: Evolution Over The Past Decade
Delta: Evolution Over The Past Decade • Through consolidation, innovation, and capital discipline, Delta is uniquely positioned among high performing S&P industrial companies • Leveraging network scale to produce better revenue efficiency Consolidation • Revenues have increased ~20% on 20% fewer dep
Slide 4: Across The Board Improvement In The Business
Across The Board Improvement In The Business • Delta continues to deliver industry leading operational reliability and customer satisfaction • LTM 2Q15 pretax margin expanded 270bps year over year and 690bps excluding hedges • Lowered adjusted net debt by nearly $5 billion, while returning over $3 b
Slide 5: Managing Capacity To Best Economic Opportunities
Managing Capacity To Best Economic Opportunities • Leveraging network opportunities in certain markets while maintaining system capacity discipline to improve unit revenues and margins Capacity Levels – 4Q 2015 vs. 2014 • Domestic capacity growth takes advantage of previous investments in NY, LAX, a
Slide 6: Fuel Tailwind Accelerates In Second Half 2015
Fuel Tailwind Accelerates In Second Half 2015 • 2H15 all-in price per gallon will be 30-35% lower than 1H15, while market prices will be ~15% lower • Fuel is expected to be a $9 billion expense for Delta in 2015 – $1 move in crude impacts expense by $100 million annually Delta Jet Fuel Prices – At c
Slide 7: Producing A Record September Quarter
Producing A Record September Quarter Business continues to generate strong margins, returns, and free cash flow September Quarter 2015 Forecast Current Operating margin 19% - 21% Fuel Price $1.83 - $1.88 Passenger unit revenue change year over year Down 4.5% - 6.5% CASM – ex fuel change year over ye
Slide 8: Continuing To Drive Margin Expansion
Continuing To Drive Margin Expansion Capacity growth, a sustainable revenue premium and cost productivity combine to generate long- term revenue growth, margin expansion and greater cash generation Efficient Capacity Revenue Premium Cost Productivity Growth • Drive capacity growth • Investments in n
Slide 9: Giving Customers What They Value Drives Revenue Growth
Giving Customers What They Value Drives Revenue Growth Investments in network, product, service, and operations have already produced solid, sustainable revenue gains with more room for growth Network Product Service • Optimizing capacity to • Refleeting and product • Operational reliability shows l
Slide 10: Maintaining Our Strong Cost Performance
Maintaining Our Strong Cost Performance Solid pipeline of initiatives is the foundation that will allow Delta to absorb future cost increases • Benefits from upgauging, maintenance savings and commercial productivity initiatives continue – Upgauging: Improved operating leverage to be Non-Fuel Unit C
Slide 11: Balanced Capital Deployment Drives Long-Term Value
Balanced Capital Deployment Drives Long-Term Value Balanced approach to capital deployment has driven significant value for shareholders Reinvest In The Strengthen The Return Cash To Business Balance Sheet Shareholders • ~50% of operating cash • Nearly $10 billion in debt • Announced new $5 billion
Slide 12: Strong Cash Generation Funds Investment in The Future, Reductions in Leverage, and Capital Returns
Strong Cash Generation Funds Investment in The Future, Reductions in Leverage, and Capital Returns to Owners • Strong operating cash flow, combined with disciplined capital spending, produces sustainable free cash flow of $4-5 billion annually $8.0 Capital Spending and Operating Cash Flow ($B) $6.0
Slide 13: Increasing Shareholder Returns While Strengthening The Balance Sheet
Increasing Shareholder Returns While Strengthening The Balance Sheet • Strong cash generation funds significant increase in shareholder returns, while also allowing for continued debt reduction De-Risking the Balance Sheet Driving the Business for Cash Flow • Target is to achieve and maintain $4 bil
Slide 14: Delta's Stock Has Outperformed the Industrial Peers…
Delta’s Stock Has Outperformed the Industrial Peers… • Delta’s strong financial performance and balanced capital deployment strategy has driven share price appreciation well in excess of the peer group over the last several years Stock Price Performance 2013 - August 31, 2015 350% Delta 269% 300% Ai
Slide 15: …But Valuation Remains at a Significant Discount
…But Valuation Remains at a Significant Discount • Plan targets compare favorably with other industrials and should help drive better valuations ROIC EPS Growth Forward Price to Earnings 20-25% 23.2% 15%+ 14.7 15.6 13.1% 11.5% 10.2 20.1% Delta High Qual. S&P Delta High Qual. Ind. S&P Delta High Qual
Slide 16: The On-Time Machine.
THE ON-TIME MACHINE. #1 U.S. GLOBAL AIRLINE KEEP CLIMBING ADELTA #
Slide 17: Non-GAAP Reconciliations
Non-GAAP Reconciliations 17
Slide 18: 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 19: Non-GAAP Reconciliations
Non-GAAP Reconciliations Total Operating Revenue, Combined Delta presents total operating revenue, combined as if the company's merger with Northwest Airlines had occurred at the beginning of the period presented because management believes this metric is helpful to investors to evaluate the company
Slide 20: Non-GAAP Reconciliations
Non-GAAP Reconciliations Pre-Tax Income and Margin, Adjusted for Special Items Delta adjusts for the following items to determine pre-tax income and pre-tax margin, adjusted for special items, for the reasons described below: Mark -to-mark et ("MTM") adjustments and settlements. MTM adjustments are
Slide 21: Non-GAAP Reconciliations
Non-GAAP Reconciliations Adjusted Net Debt Delta uses adjusted total debt, including aircraft rent, in addition to long-term adjusted debt and capital leases, to present estimated financial obligations. Delta reduces adjusted debt by cash, cash equivalents and short-term investments, and hedge margi
Slide 22: Non-GAAP Reconciliations
Non-GAAP Reconciliations Operating Cash Flow, Adjusted Delta presents adjusted operating cash flow because management believes adjusting for these amounts provides a more meaningful financial measure for investors. Adjustments include: Hedge margin. Delta adjusts for hedge margin as we believe this
Slide 23: Non-GAAP Reconciliations
Non-GAAP Reconciliations Fuel Expense, Adjusted and Average Fuel Price per Gallon, Adjusted The tables below show the components of fuel expense, including the impact of the refinery segment and hedging on fuel expense and average price per gallon. We then adjust for MTM adjustments and settlements
Slide 24: Non-GAAP Reconciliations
Non-GAAP Reconciliations Non-Fuel Unit Cost or Cost per Available Seat Mile (“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-year non-fuel fin
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