DELTA AIR LINES, INC. - FORM 8-K - EX-99.1 - PRESENTATION

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8-K - CURRENT REPORT ON FORM 8-K - DELTA AIR LINES, INC.	delta_8k-051911.htm

Exhibit 99.1

Delta: Building a Better Airline

2011 Global Transportation Conference

May 19, 2011

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, that could cause the actual results to differ materially from the
projected results. Factors which could cause such differences include, without limitation,
business, economic, competitive, industry, regulatory, market and financial uncertainties
and contingencies, as well as the “Risk Factors” discussed in Delta’s Form 10-K for the year
ended December 31, 2010. Caution should be taken not to place undue reliance on Delta’s
forward-looking statements, which represent Delta’s views only as of the date of this
presentation, and which Delta has no current intention to update.

In this presentation, we will discuss certain non-GAAP financial measures. You can find the
reconciliations of those measures to comparable GAAP measures on our website at
delta.com.

Delta: Building a Better Airline

Significant pressure on the business from rising
fuel prices, impact of events in Japan, and
Transatlantic weakness

Adjusting to the New Fuel
Environment

Strong operating cash flows with limited capital
requirements allow for considerable free cash
flow generation and continued delevering of the
balance sheet

Aligning revenue, capacity and cost structure
to build a sustainable business model at $3+
per gallon jet fuel

Position Delta for long-term
success

Challenging March Quarter

Results Show Delta’s Solid Foundation

LTM March 2011 Operating Income ($M)

March Quarter Highlights:

• Increased revenues by 13%

• Generated $450 million in free
cash flow

• Refinanced Delta’s exit facility
with a new $2.6 billion credit
facility in April

• Reduced adjusted net debt to
$14.5 billion

• Ended the quarter with $5.5
billion in unrestricted liquidity

• Generated 9.5% return on
invested capital for prior 12
months

Operating
Margin

7.4%

8.6%

1.9%

6.3%

9.3%

7.4%

Current Trends Are Positive

• Strong yields drove April RASM up
7%, with May up 12%

• Corporate revenue up 25% in 2011,
from new accounts and increased
share

• Domestic showing strong yields and
load factors

• Double digit yields for Latin,
Transatlantic and Pacific

• Japan continues to rebound

• June quarter all-in fuel price now
forecasted at $3.20

– Quarter only partially benefits due to
timing of fuel price decline

• September quarter reflects current
impact of price decline, which results in
an expected all-in price of $3.10

Continued revenue strength…

…and moderating fuel prices

High Fuel Prices are the Norm for the Industry

• 17 successful pricing actions in 2011, coupled with
international fuel surcharges, resulting in double
digit yield improvements across all entities

Higher Revenues

Reduce Capacity

Flat Non-Fuel Cost

Fuel Management

• Resizing the airline to achieve flat ex-fuel unit costs
by the end of the year, including reduction of 140
aircraft over next 18 months

• Reducing post-Labor Day capacity 4%, with a focus
on markets where revenue has not kept pace with
higher fuel costs

• Reshaping hedge portfolio into Brent and
heating oil cashless collars, while also retiring
least fuel-efficient aircraft

Actively managing through revenue, capacity and cost adjustments

Need to Size Airline to Ensure It Can Cover Higher
Fuel Costs

Revenue increases must keep pace with rising cost of operating flights

March Quarter 2011 YOY Change

Entity	Unit Revenue	Unit Cost
Domestic	Up 9%	Up 12%
Latin	Up 16%	Up 11%
Pacific	Up 11%	Up 7%
Atlantic	Down 1%	Up 11%
System	Up 7%	Up 11%

Reducing Delta’s Post-Labor Day Capacity by 4%

Targeted reductions where revenue not keeping pace with costs

Domestic	(1-3%)	• Reducing Memphis hub departures by 25% • Right-size domestic network for high fuel environment, continued progress on 140 aircraft reduction
Atlantic	(10-12%)	• Market cancellations and frequency reductions, in conjunction with JV partners
Latin	2-4%	• Thinning of Caribbean markets for off -season, offset by build-up of Mexico and profitable deep South America flying
Pacific	(1-3%)	• Frequency reductions and downgauging of Haneda service
System	(4%)

Region

YOY Capacity Change

Capacity Actions

SkyTeam JV Partners Working Together to Address
Transatlantic Capacity

Transatlantic Winter
YOY Capacity Change

(10-12%)

(7-9%)

3-4%

7-8%

Original Plan

Revised Plan

• All carriers are significantly
reducing post-Labor Day
capacity from prior plans

• Total JV capacity down ~15
points from plan

• Capacity reductions
accomplished through:

– Market cancellations

– Reduced frequencies

– Market downgauges

JV will reduce planned winter capacity by 15 points

Note: Transatlantic flying defined as US to Europe/Middle East/Africa and Amsterdam to India for Delta; and US and Canada to Europe for JV

Targeting Incremental Revenue of $1 Billion by 2013

New revenue streams expected to deliver $150-200 million this year

Deliver a Consistent, Quality Experience for Customers

• Improved seat experience with flat-beds, Economy
Comfort and more domestic first class seats

• State of the art facilities in JFK and Atlanta

Offer New Products and Services Customers Value

• Seat-related products (e.g. Economy Comfort)

• SkyPriority recognizes our highest-value customers

• Ancillary products to improve the travel experience (e.g.,
hotels, SkyClub passes, Wi-Fi)

Invest in Technology To Sustain Innovation

• Revamped eCommerce platforms enable revenue
innovation

• Improved revenue management from stronger pricing
tools

JFK Terminal 4

Selling and Other
Expenses

Headcount
Reductions

Maintenance
Savings

• Reduced distribution costs

• Technology-driven
productivity (i.e. kiosk
auction for voluntary
“bumping”)

• Full corporate review of
discretionary expenses

• Announced company-wide
voluntary exit program, with
55,000 employees eligible

• Flexible workforce provides
opportunities for improved
efficiency

• Reducing aircraft count by
140 shells over next 18
months

• Remove fleet-associated
costs (maintenance, parts
inventory, insurance)

• Maintenance savings from
reduced average age of
fleet

• Forecast maintenance
costs for 2H11 are $250
million lower than 1H11

Targeting Flat Ex-Fuel Unit Costs by End of Year

Actions underway to reduce cost base as airline is resized

Moderating Fuel Offsets Other Cost Pressures

		June quarter 2011
Operating margin		7 - 9%
Fuel price		$3.20
Total unrestricted liquidity		$5.7 billion

		June quarter 2011 vs. June quarter 2010
Consolidated non-fuel unit cost		Up 3 - 5%

System capacity		Up 1 - 3%
	Domestic	Flat to down 2%
	International	Up 6 - 8%

Note: Unit costs exclude profit sharing

Commitment to Debt Reduction Remains Intact

Adjusted Net Debt

12/31/09

Mid-2013

6/30/11
$13.8 billion

$17 billion

$10 billion

Expect to generate $700 million in free cash flow in June quarter

Near-Term Debt Maturities are Manageable

$1.6

$1.3

$1.9

EETC

Other debt / capital leases

• Maintaining solid liquidity position through
free cash flow generation and proactive
management of near-term debt maturities

• Taking advantage of market opportunities
to proactively address future maturities
and reduce cost of debt

• Closed on a new $2.6 billion credit facility
to refinance Delta’s exit facility

– New $1.2 billion revolver brings
total undrawn credit lines to $1.8
billion

– Effective interest rate of 3.67% for
five years

Plan in place to maintain minimum $5 billion in liquidity

Plan to Maintain Annual CapEx at $1.2 to $1.4 Billion

Annual Capital Spending Levels (billions)

Prudent capital management enables sustainable annual free cash flows

2008 2009 2010 2011 2012 2013 2014+

$2.2 $1.3 $1.3 $1.2 $1.2 $1.4 $1.3

Merger

Integration

International
Product &
Facilities

Domestic
Narrowbody
Replacement

Path To Improving Shareholder Returns

10 - 12% operating margin

$5 billion EBITDAR

Minimize capital reinvestment
requirements

Use cash to delever the balance
sheet

Generate sustainable 10%+ return on invested capital

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 measures” under the U.S. Securities and Exchange Commission rules. The non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results.

Delta is unable to reconcile certain forward-looking projections to GAAP, including projected consolidated unit cost, as the nature or amount of special items cannot be estimated at this time.

Delta excludes special items because management believes the exclusion of these items is helpful to investors to evaluate the company’s recurring operational performance.

Delta excludes non-cash mark-to-market (MTM) adjustments related to fuel hedges settling in future periods in order to evaluate the company’s financial results related to operations in the period shown.

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 total debt by cash, cash equivalents and short-term investments, resulting in adjusted net debt, to present the amount of additional assets needed to satisfy the debt.

Delta presents free cash flow because management believes this metric is helpful to investors to evaluate the company’s ability to generate cash.

Delta presents consolidated unit cost excluding ancillary businesses not associated with the generation of a seat mile. These businesses include aircraft maintenance and staffing services Delta provides to third parties and Delta’s vacation wholesale operations.

Delta presents return on invested capital (ROIC) as management believes it is helpful to investors in assessing the company's ability to generate returns using its invested capital. ROIC represents operating income excluding special items divided by the sum of market value of equity and average adjusted net debt.

Operating Income


(in millions)	Last Twelve Months Ended March 31, 2011
Operating income	$	2,057
Items excluded:
MTM adjustments for fuel hedges settling in future periods		(29	)
Restructuring and other items		403

Operating income excluding special items	$	2,431

Operating Margin


	Last Twelve Months Ended March 31, 2011
Operating margin		6.3	%
Items excluded:
MTM adjustments for fuel hedges settling in future periods		-0.1	%
Restructuring and other items		1.2	%

Operating margin excluding special items		7.4	%

Adjusted Net Debt



(in billions)	March 31, 2011					December 31, 2010					September 30, 2010					June 30, 2010					March 31, 2010					December 31, 2009
Debt and capital lease obligations	$	15.2				$	15.3				$	15.4				$	15.8				$	16.9				$	17.2
Plus: unamortized discount, net from purchase accounting and fresh start reporting		0.6					0.6					0.7					1.0					1.1					1.1
Adjusted debt and capital lease obligations			$	15.8				$	15.9				$	16.1				$	16.8				$	18.0				$	18.3
Plus: 7x last twelve months' aircraft rent				2.5					2.7					3.0					3.2					3.3					3.4
Adjusted total debt				18.3					18.6					19.1					20.0					21.3					21.7
Less: cash, cash equivalents and short-term investments				(3.8	)				(3.6	)				(3.9	)				(4.4	)				(4.9	)				(4.7	)
Adjusted net debt			$	14.5				$	15.0				$	15.2				$	15.6				$	16.4				$	17.0

Free Cash Flow



(in millions)	Three Months Ended March 31, 2011
Net cash provided by operating activities (GAAP)				$	788
Net cash used in investing activities (GAAP)	$	(576	)
Adjustment:
Purchase of short-term investments		240
Cash used in investing					(336	)

Total free cash flow				$	452

Unit Cost


	Three Months Ended March 31,
	2011			2010
Unit cost		13.94	¢		12.72	¢
Items excluded:
Ancillary businesses		(0.30	)		(0.26	)
Restructuring and other items		(0.01	)		(0.10	)
MTM adjustments for fuel hedges settling in future periods		0.05			-

Unit cost excluding special items		13.68	¢		12.36	¢

March quarter 2011 YOY change		11%

Capital Expenditures



(in billions)	2009		2008
Delta property and equipment additions (GAAP)	$	1.2	$	1.5
Northwest property and equipment additions (GAAP) for the period from January 1 to October 29, 2008		-		1.1
Other		0.1		(0.4	)

Total capital expenditures	$	1.3	$	2.2

ROIC

(in billions, except % return)	Last Twelve Months Ended March 31, 2011
Operating income excluding special items	$	2.4

Market value of equity (assuming $12.60/ share)	$	10.7

Average adjusted net debt	$	15.0

Total invested capital	$	25.7

Return on invested capital		9.5%

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