Delta Air Lines, Inc. · NYSE:DAL
Delta Air Lines — J.P. Morgan Aviation, Transportation & Defense Conference 2011
17 slides from Delta Air Lines's conference presentation, Mar 22, 2011
Slide 1: Delta: Building a Better Airline
Delta: Building a Better Airline J.P. Morgan Aviation, Transportation & Defense Conference March 22, 2011
Slide 2: Safe Harbor
1 1 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 con
Slide 3: Delta: Building a Better Airline
2 2 Delta: Building a Better Airline Higher revenues plus solid cost performance drove $2.5 billion year-over-year improvement in profitability for 2010 Strong free cash flow generation Solid financial foundation and low cost structure, coupled with improved risk profile, positions Delta to effectiv
Slide 4: 2010 Results Show Delta's Solid Foundation
3 3 2010 Results Show Delta’s Solid Foundation…. 2010 Operating Income ($M) Note: All results exclude special items. Delta’s industry-leading results are among the best in its history In 2010, Delta: • Improved pre-tax income by more than $2.5 billion over 2009 • Generated a 10% return on invested c
Slide 5: But Industry Faces Dramatic Rise in Fuel Prices
4 …But Industry Faces Dramatic Rise in Fuel Prices Today’s market prices reflect 2011 fuel price range of $3.05 - $3.10 per gallon May - September $2.02 - $2.11 May 2010 Dec 2011 Prices to drive Delta’s fuel expense up by $3 billion, or 35%, over 2010 June - December $3.13 - $3.18
Slide 6: Higher Fuel Prices Driving Reduced Earnings
5 5 5 Higher Fuel Prices Driving Reduced Earnings $325M Capital Expenditures Up 10 - 11% Consolidated unit cost March quarter 2011 Operating margin (2 - 3%) Fuel price $2.90 Total unrestricted liquidity $5.4 billion March quarter 2011 vs. March quarter 2010 Passenger unit revenue Up 7 - 8% Consolida
Slide 7: Adapting Quickly To The New Fuel Environment
6 • Strong revenue environment, combined with industry fare actions, driving higher yields Higher Revenues Reduce Capacity Fleet Efficiency Hedge Portfolio • Retire 120 of our least efficient aircraft over next 18 months, including DC9-50 and Saab turbo-prop fleets, and 60 50-seat regional jets • Re
Slide 8: Successfully Passing Fuel Cost through Revenue
7 Revenues in all entities except transatlantic keeping pace with fuel increase March Quarter 2011 YOY Change Entity Unit Revenue Unit Cost Domestic Up 9 - 10% Up 9 - 10% Latin Up 15 - 16% Up 13 - 14% Pacific Up 11 - 12% * Up 11 - 12% Atlantic Down 2 - 3% Up 11 - 12% System Up 7 - 8% Up 10 - 11% * P
Slide 9: Reducing 2H11 Schedule by Four Points
8 Targeted reductions where revenue not keeping pace with costs 2H11 YOY Capacity Change Original Plan Revised Plan Change Domestic 2% (3%) (5 pts) Atlantic (1%) (4%) (3 pts) Latin 7% 6% (1 pt) Pacific 13% 5% (8 pts) System 2% (2%) (4 pts) Capacity Actions • Pulldown of 15-20% Japan capacity through
Slide 10: The situation in Japan continues to evolve
9 Preliminary estimates range 2011 net impact at $250 - $400 million The situation in Japan continues to evolve…. Other Actions • $1 million donation of cash and in-kind support for disaster relief • Dedicated Delta-Red Cross website to receive donations from employees and customers • Standing offer
Slide 11: Targeting Incremental Revenue of $1 Billion by 2013
10 10 Targeting Incremental Revenue of $1 Billion by 2013 Technology, product investments underway to unlock untapped revenue streams Deliver a Consistent, Quality Experience for Customers • Improved seat experience with flat-beds, Economy Comfort and more domestic first class seats • State of the a
Slide 12: Repositioning Fuel Hedge Portfolio
11 % of Fuel Consumption Hedged Responding to dislocation of WTI to jet fuel Avg Jet Equivalent Cap $2.91 $2.89 $2.95 $2.84 Avg Jet Equivalent Floor $2.74 $2.62 $2.54 $2.62 Repositioning Fuel Hedge Portfolio • Converted nearly all WTI hedge positions to Brent crude or heating oil • Current mark to m
Slide 13: Commitment to Debt Reduction Remains Intact
12 Commitment to Debt Reduction Remains Intact Adjusted Net Debt 12/31/09 Mid-2013 High fuel will shift timing of achieving $10 billion adjusted net debt target 3/31/11 $14.6 billion $17 billion $10 billion
Slide 14: Proactively Managing Near-Term Debt Maturities
13 Scheduled Debt Maturities ($B) Proactively Managing Near-Term Debt Maturities $1.6 $2.1 $2.5 * EETC Other debt / capital leases Exit facility Amex • Strong liquidity position will be maintained by a combination of financing and refinancing activities in addition to solid free cash flow generation
Slide 15: Commitment To $1.3 Billion Annual CapEx
14 Commitment To $1.3 Billion Annual CapEx Annual Capital Spending Levels (billions) Prudent capital management enables sustainable annual free cash flows 14 2008 2009 2010 2011 2012 2013 2014+ $2.2 $1.3 $1.3 $1.25 $1.2 $1.4 $1.3 Merger Integration International Product & Facilities Domestic Narrowb
Slide 16: Path To Improving Shareholder Returns
15 15 Path To Improving Shareholder Returns Generate sustainable 10%+ return on invested capital 10 - 12% operating margin $5 billion EBITDAR Minimize capital reinvestment requirements Use cash to delever the balance sheet
Slide 17: Non-GAAP Financial Measures
16 Non-GAAP Financial Measures We sometimes use information that is derived from our Condensed Consolidated Financial Statements, but that is not presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”). Certain of this information is considered “non-GAAP financial
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