0. Equity Research Presentation – Delta Airlines, Inc.
Price as of 10/30/2015:
Target Price: $73.00
Potential Return: 42.8%
Daniel Brenner
Senior Analyst
Anisa Khalouf
Junior Analyst

1. Investment Thesis Business Overview Growth Catalysts Strategy Safety
Table of Contents
Investment Thesis
Business Overview
Growth Catalysts
Strategy
Safety
Appendix

2. Strategic Alliances and Equity Investments
Investment Thesis
DAL is differentiating itself in a commoditized industry through strategic alliances and investments, has a strong balance sheet , and is trading at a steep discount on various multiples.
Trading at Discount
Strategic Alliances and Equity Investments
Trading at a 30% discount based on simplified discounted cash flow
Discounted cash flow model implies a conservative 5% growth in EBITDA
PEG ratio of .45x, industry average PEG is 1.06x
Trading at a 8.97x 2 year Price to Earnings, industry average is 18.93x or a 47% discount
DAL has joint ventures with 6 airlines and equity investments in 4 international airlines
DAL is the only airline to have equity investments and strategic alliances with international airlines
This will allow DAL to be more efficient than its competitors in expanding to international markets
Safety
In-House Refinery
Investment grade balance sheet
Net debt/EBITDAR of 0.7x
Debt/Assets ratio of .15x
Shareholder friendly management gives stock support
Stock repurchase of $5 billion through 2017
Plans to return 50% of cash flows in next 3 years
Increasing dividends
In 2013 DAL acquired wholly owned subsidiary Monroe, LLC
DAL is the only airline that owns its own refinery
Enables DAL to have the lowest fuel price/gallon within the industry
The refinery has generated significant profit for the first time since purchasing it

3. Investment Thesis Business Overview Growth Catalysts Strategy Safety
Table of Contents
Investment Thesis
Business Overview
Growth Catalysts
Strategy
Safety
Appendix

4. Business Overview
Delta Airlines provides air transportation for passengers and cargo worldwide operating on its global route network.
Overview
Revenue by Geography
Founded in 1928 in Monroe, Louisiana and headquartered in Atlanta, GA.
DAL operates in two segments: Airlines and Refinery
Mainline fleet: more than 700 aircraft
Serves more than 170 million customers each year
DAL Global Network:
Offers 334 destinations
Service to 64 countries on 6 continents
Market Share
Financial Snapshot
Domestic Market Share: 17%
Airport Market Share in Top 5 Trafficked Airports:
ATL  74.11%
DTW 48.33%
LAX 14.89%
JFK 26.48%
LGA 21.78%

5. Investment Thesis Business Overview Growth Catalysts Strategy Safety
Table of Contents
Investment Thesis
Business Overview
Growth Catalysts
Strategy
Safety
Appendix

6. China Eastern Airlines
Growth Catalyst
International Equity Investments
AeroMexico
GOL
DAL has 9.5% stake in GOL by owning conditional voting preferred shares
Second largest airline in Brazil with 40% market share
Plans to file antitrust immunity and establish a JV by end of next year
Once JV is secured, DAL will have profit sharing agreements with two leading airlines within Latin America
DAL has 4.24% equity stake in AeroMexico, largest airline in MEX, and an enhanced operating agreement
Potential to own up to 8.27% from derivatives
DAL, has received a seat on the board of AeroMexico
Expected within a few months to receive antitrust immunity and establish a joint venture (“JV”)
After “JV:” DAL will have largest market share in Mexico
China Eastern Airlines
Virgin Atlantic
China Eastern is 2nd largest airline in China
Owns 3.5% of outstanding common stock and has a exclusive partnership
Interest are aligned to expand into international market by feeding passengers to each other
Plans to build Shanghai hub
DAL owns a 49% stake in parent company Virgin Atlantic Limited and JV agreement
Codeshare agreement across 108 routes; 66 destinations
$13M in profit from MTM adjustments in Q315
Enhances DAL’s access to London-Heathrow
Makes DAL a competitor across the Atlantic

7. Plans For Improvements
Growth Catalyst
Operational Efficiency
Peer Analysis
Plans For Improvements
Leading the industry in:
Load Factor
Price per gallon of jet fuel
Far above the industry average in:
ASM
Yield Per RPM
Weak performance in CASM
Expected increase in Yield Per RPM because of “Branded Fares Program”
Expected decrease in CASM due to purchasing new and more efficient aircraft
Price/Gallon expected to decrease to 1.75 for Q4 due to refinery increasing operational efficiency
ASM to increase from 0% to 2%
Relatively flat change in ASM due to international restructuring

8. Growth Catalyst Refinery- Monroe Energy, LCC Production Details
Effect on Fuel Price
Operates in Pennsylvania as wholly-owned subsidiary of Delta
Produces 200,000 barrels a day
Produces 40,000 barrels of jet fuel
Monroe Energy will either exchange other products for jet fuel or sell it to the market
DAL has lowest cost per barrel of jet fuel at 1.8
Projected to be at 1.75 per barrel in Q4
Produces roughly 30% of the daily jet fuel for New York Hubs
DAL used to have highest jet fuel prices per barrel in the industry before refinery
Natural Hedge
Impact on Cash Flows
This refinery differentiates DAL from every other airline in terms of safety
Increase in jet fuel prices would allow refinery to become more profitable
Ensures the lowest in the industry jet fuel prices
Purchased in 2013 for $180 million
By end of 2015 will generate $350 dollars in profit
For year 2014, fuel expense was 42% of revenue
Lower fuel expense will significantly increase margins

9. Terms of DAL Branded Fares Combatting Competition
Growth Catalyst
Branded Fares Program
Terms of DAL Branded Fares
Revenue Driver
DAL revamped product offerings and classes of service to target customers more effectively
Includes customer upgrades in: Basic Economy, Main Cabin, Delta Comfort+, First Class, and Delta One
Each category permits specialized amenities
Serves as a driver of value for DAL customers, offering more choices
Projected to generate an annual $1.5 billion annually in incremental revenue by 2018
Implemented in 462 markets since launch in Q215
Generated $75 million in high margin revenue in Q315
Sales in Comfort+ class increased 42%
Increased paid first class load factor to 56% on basis of 5% more first class seats
DAL plans to generate $350 million in “cost benefits” in 2015 – CFO Jacobson
Combatting Competition
U.S. Airlines are moving in direction of branded fares
American Airlines and Frontier spearheaded program popularity
DAL offers more options and specialized perks than co competitors
DAL classifies 5 service classes where as others only offer 3
Proven success model for other airlines
Drives revenue and overall passenger traffic

10. Investment Thesis Business Overview Growth Catalysts Strategy Safety
Table of Contents
Investment Thesis
Business Overview
Growth Catalysts
Strategy
Safety
Appendix

11. Strategy Domestic vs. International Domestic Strategy
International Strategy
Invest heavily in various hubs to consume as much market share as possible
Planning a conservative 3% in domestic market
Recent investment in Seattle hub yielded a 24% increase in RASM from that hub
JFK and LAX hubs saw a 3% increase in capacity
Reducing international capacity by 4.5% with cuts of 20% or more in places like Japan, Brazil, Russia, and Middle East
JV Model: most capital efficient method of accessing international market
Possible airline consolidation in China will benefit DAL
Domestic Partnerships
International Partnerships
Domestic alliances with Hawaiian Airlines and Alaska Airlines
Code sharing and frequent flyer participation
Delta Connection, DAL’s regional carrier program
Involves contractual agreements with 7 regional airlines
“Capacity purchase agreements”
18% of passenger revenue was from regional carriers for year end 2014
JV Agreements: transatlantic and transpacific
Air France-KLM and Alitalia, Virgin Atlantic Airways, Virgin Australia Airlines
JVs allow commercial operations in respective geographic regions
Complete sharing of bottom line amongst JVs
GOL Enhanced Commercial Agreements gives elements of control
DAL has seat on the Board of Directors

12. Strategy Fleet Composition Current Fleet Pricing Competition
Own 76% of their aircraft
Both operating and capital leases make up 24% of DAL’s fleet
Above industry average age at 17.1 years
Airbus aircraft make up 42% of Delta’s fleet
Boeing aircraft make up 58% of Delta’s fleet
CEO, Richard Anderson, is intent on competitive pricing for new aircraft
Strategically pits Airbus and Boeing against each other
DAL used to be only Boeings but recently have been buying Airbus
Richard Anderson believes there is an “Aircraft Bubble”
Plans to buy used aircraft at a steep discount
Changes to Fleet
Delta TechOps
Commitment to purchase 178 aircraft within the next 5 years
43% are Boeing while 57% are Airbus
Retiring older aircraft such as Boeing 747
Replacing with Boing 737 and Airbus neo
DAL is not looking for huge growth in their fleet but rather better utilization of their current fleet
DAL TechOps is a division of Delta which does aircraft maintenance, repair, and overhaul (“MRO”)
DAL’s elite MRO division allows older aircraft to operate at higher efficiencies despite being old
DAL TechOps excellent overhaul program will refurbish the used aircraft to like-new conditions
Industry average of Maintenance Expense/Sales is 9.88% and DAL is 4.53%

13. Strategy
Fleet Composition

14. Investment Thesis Business Overview Growth Catalysts Strategy Safety
Table of Contents
Investment Thesis
Business Overview
Growth Catalysts
Strategy
Safety
Appendix

15. Stock Repurchase Program
Safety
Capital Returns to Shareholders
Stock Repurchase Program
Stock Dividend
Plans to return 50% of all cash flows back to the shareholders
Authorized a stock repurchase program through of $5 billion
Estimated repurchase of 14% of shares outstanding
In 2015, it is expected to buy $2.5 billion of share repurchases
8% of current shares outstanding
Last quarter DAL increased their dividend to $.135
50% increase from their previous dividend

16. Safety Debt Composition Manageable Debt
As of Q3, DAL has $8.9 billion of debt outstanding
Plans to reduce net debt to $4 billion by 2017
Cash position of $2.4 billion
Net Debt to EBITDAR is .7x
Debt to Asset .15x
Debt is evenly distributed over the upcoming years
Debt Composition is: 44.48% bonds, 23.38% term loans outstanding, 17.75% revolver outstanding, and 8.70% municipal bonds

17. Investment Thesis Business Overview Growth Catalysts Strategy Safety
Table of Contents
Investment Thesis
Business Overview
Growth Catalysts
Strategy
Safety
Appendix

18. Appendix
Income Statement

19. Appendix
Balance Sheet

20. Appendix
Simplified Discounted Cash Flow