Delta Air Lines : June 19th, 2020(opens in new window)

Delta Air Lines

June 19, 2020

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 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections and strategies reflected in or suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the material adverse effect that the COVID-19 pandemic is having on our business; the impact of incurring significant debt in response to the pandemic; the possible effects of accidents involving our aircraft; breaches or security lapses in our information technology systems; disruptions in our information technology infrastructure; our dependence on technology in our operations; the performance of our significant investments in airlines in other parts of the world; the restrictions that financial and other covenants in our financing agreements could have on our financial and business operations; labor issues; the effects of weather, natural disasters and seasonality on our business; the effects of an extended disruption in services provided by third parties; the cost of aircraft fuel; the availability of aircraft fuel; failure or inability of insurance to cover a significant liability at Monroe's Trainer refinery; the impact of environmental regulation on the Trainer refinery, including costs related to renewable fuel standard regulations; our ability to retain senior management and key employees; damage to our reputation and brand if we are exposed to significant adverse publicity; the effects of terrorist attacks or geopolitical conflict; competitive conditions in the airline industry; interruptions or disruptions in service at major airports at which we operate; the effects of extensive government regulation on our business; the impact of environmental regulation on our business; the sensitivity of the airline industry to prolonged periods of stagnant or weak economic conditions; and uncertainty in economic conditions and regulatory environment in the United Kingdom related to the exit of the United Kingdom from the European Union.

Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in our Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2019, our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 and our Current Report on Form 8-K/A as filed on June 10, 2020. Caution should be taken not to place undue reliance on our forward-looking statements, which represent our views only as of June 19, 2020, and which we have no current intention to update except to the extent required by law.

Current Environment

• • COVID-19 has had an unprecedented impact on our business

• • Delta's response to this crisis has been focused on three key priorities:

  • 1. Protecting the health and safety of our employees and our customers

  • 2. Preserving financial liquidity to work through this crisis

  • 3. Defining our recovery path through and beyond the crisis

• • Demand trends have improved modestly off the mid-April low point driving modest capacity rebuild in June and July to provide more schedule utility

  - Domestic leisure traffic returning as states lift shelter-in-place orders

  - International improvement expected to lag Domestic by 1 to 2 quarters

• • Our principal financial goal is to reduce average daily cash burn to zero by year end

  - Expect daily average cash burn of approximately $30 million in June, a significant improvement from peak burn rate in late March and initial expectations

• • Capital markets remain receptive allowing us to reduce risk by raising cash

  - Liquidity actions to date, combined with CARES Act relief, position Delta to end June quarter with over $15 billion of cash on hand

Note: Cash burn is defined as free cash flow per day, which includes the impact of net sales (cash sales less refunds). Cash burn excludes proceeds from financing arrangements that are reported within investing activities in GAAP results and the CARES Act Payroll Support Program grant proceeds that are reported within operating activities in GAAP results. The company is unable to provide a reconciliation to the most directly comparable GAAP measure for these periods without unreasonable efforts.

Reducing Cash Burn and Boosting Liquidity

• • Minimizing cash burn is the most valuable action to preserve liquidity

  - Daily cash burn in June quarter to date better than original expectations in April

  - Driven by strong cost performance and an improvement in net sales

• • With improved cash burn, $5 billion slots/gates/routes secured financing, $1.25 billion unsecured financing and other liquidity actions, we expect to have over $15 billion of liquidity by the end of June

  • - Includes $4.9 billion from CARES Act Payroll Support Program through end of June, with additional $0.5 billion to come in July

  • - Maintain access to additional capital through our own efforts or the CARES Act secured loan program under which Delta is eligible for up to $4.6 billion

  • - Additional unencumbered collateral - primarily aircraft with some engines and spare parts

  • - Flexibility to de-lever by paying cash for 2021 maturities

Targeting $10 Billion Of Liquidity And Breakeven Cash Burn By Year End

Average Daily Cash Burn

$100M

Last two weeks of March

June

Liquidity

> $15B

YE19

1Q20

2Q20E

Aggressive Self-Help Measures to Preserve Cash

• − Planned capacity reduced by more than 85% year-over-year in the June quarter

• − Parking and retiring aircraft to save costs with more than 650 aircraft parked currently and the accelerated retirement of MD88/90 and 777 fleets

• − Considering additional fleet retirements to advance simplification strategy

• − Reducing non-essential maintenance while adhering to the highest level of flight safety

• − Paused new aircraft deliveries

• − Expect June quarter total expenses to decline by ~55% over prior year

• − Labor savings of $700 million in the June quarter driven by reduced work schedules and more than 40% of workforce taking voluntary leaves

• − Consolidated airport facilities, including the temporary closure of concourses and SkyClubs

• − Reduced contractor and discretionary spend

• − Offering voluntary retirement/separation packages