2014 Investor Day presentation

[topDawg]

the benefit of keeping the 744s in a falling yen environment is that fuel is falling faster than the yen which means that DL COULD discount more aggressively to fill aircraft - allowing the 744s to be kept in service longer.

Exactly what they do NOT want to do. That was covered in the investor day call. Ed said that the idea, of course, pops into your head but to become the investment grade company Delta wants to be they management team it is better to chance margins
 

But DL's revenue numbers have long shown that DL will not throw capacity into a market and then discount aggressively in order to fill planes. That is precisely why DL pulls markets fairly quickly if they don't generate acceptable financial returns. Other carriers do not operate their networks the same way.

exactly. 
 

I will defer to your judgment who is best to lead TechOps... I am 100% behind you to get as much work done inhouse and to get as much MRO capabilities inhouse.

Don is the guy if that is what you want. John and Tony I honestly believe were setting TechOps up to slowly but surely go away. 
 
But Tony also had a big wet dream of building a huge base in Mexico. From what I hear Don/Jack aren't into that like Tony/John were. 
 

Low debt is great as long as there are appropriate protections in place to ensure that a leveraged buyout isn't possible.... NW changed immensely after they were subjected to a LBO which only happened because NW was a very profitable airline. I don't know what DL execs have in place to prevent an LBO but that is the risk of having low debt and generating lots of cash.

This is always a risk when you start dropping debt like that. I believe Anderson and Co would have things in place to prevent such a thing though. 

 

[WorldTraveler]

the only question regarding the 744 is whether you potentially use one or two aircraft that were just sent to the desert for next summer and next summer alone.... not whether DL will keep the 744s for many more years.

the answer to that is clearly NO and the pilot staffing adjustments are in process to ensure the 744s will not stay around.

in case you haven't seen it, here are some considerations which you and I may or may not completely agree with.
http://seekingalpha.com/article/2754375-delta-air-lines-how-new-efficient-aircraft-will-boost-results-in-the-future?uide=7197781&uprof=45

 

[700UW]

http://finance.yahoo.com/news/allied-pilots-association-vote-basic-164300287.html
 

 
Allied Pilots Association President Capt. Keith Wilson applauded Congress for approving legislation that provides American Airlines employees the same tax treatment as other airline workers who experienced economic losses in recent Chapter 11 bankruptcy restructurings. The House version of the bill is H.R. 2591, and the Senate version is S. 2614.
 

 

[WorldTraveler]

now let's see what AA does with it.

Since DL was adding to its pensions in order to reduce its debt load - something AA is far behind DL in doing - the question is whether AA will continue with accelerated pension payments since it is running up the rest of its debt like a drunken sailor after 180 days at sea.

 

[topDawg]

the only question regarding the 744 is whether you potentially use one or two aircraft that were just sent to the desert for next summer and next summer alone.... not whether DL will keep the 744s for many more years.

the answer to that is clearly NO and the pilot staffing adjustments are in process to ensure the 744s will not stay around.

in case you haven't seen it, here are some considerations which you and I may or may not completely agree with.
http://seekingalpha.com/article/2754375-delta-air-lines-how-new-efficient-aircraft-will-boost-results-in-the-future?uide=7197781&uprof=45

I don't disagree with anything in that link. 359 will cost a lot less than the whale. I will miss the 747 because it is the 747 but its time to go. 

 

[topDawg]

Alright going to get the rest of this done. Again, these are not direct quotes unless noted. Generally words inside the () are mine. 
 
 
Gill
First domestic airline to win ATW in 10 years
 
Top of the food chain for on time and completion factor. 2nd in mishandled bags
 
He explained what the flight plan is. (ask for those that don’t know)
 
Working hard on the mishandled bags. Leaps and bounds better than they use to be, working on number one. Hub operations, especially Atlanta, the challenge just do to size and scope.
 
Investing in things such as IT and infrastructure. Bag system in Atlanta still getting investments.
 
TechOps YTD improvements, 11% reduction in delays, 40% reduction in cancelation. Industry leading CASM. 151 100% Mechanical
 
competition days (taking names and kicking ass! Way to go to the team system wide at TechOps! (from me, not Gill)
 
Focus on IROPS and TechOps biggest keys to driving operations results.
 
Good balance between TechOps network and cost. (don’t be shocked to see more line stations come on line however)
 
Again stressing how important the part out program is. It is helping lower material costs by a pretty large margin.
 
Best TBOs and TATs in the industry for overhauls in-house.
 
Working with Georgia Tech for research. (BOOOO!!!!! Need that money up to Athens man…. Much better school. Just saying…. )
 
PAXs surveys by PNR allows company to see everything about a person’s flight. Big push in sharing this data with frontline employees and build on that. Improve everything from a GO level to a individual level.
 
Investing in Airports, Wifi, cabins, IFE etc. etc.  
 
75E lie flats, 753, 738s, 752s, 319s fleet wide AVOD. 320s upgrades but no AVOD.
 
15-25 seats (depending on config) on 757, 10 on the 320
 
Going to ATG4 wifi on domestic fleet. (faster speed) 1/3 international aircraft have wifi by the end of 2014. Should be close if not at 100% at 2015 YE

 

[topDawg]

Glen
Not too worried about a short/medium term capacity dump. You have to hire in advance and he doesn’t seem to believe any of the carriers are really set up dump capacity.
 
Network right where were it is wanted. Hubs are all in great place. Should see any drastic changes in the network for a while.
 
Pricing dept is doing a great job. Instead of just matching fares to match them they look at the costs at Delta and at the other carriers to see if it is even worth dropping the price. Not chasing market share anyone. Loyal fallowing in the high yielding market place.
 
SkyMiles program gearing to spend not miles is better for the business traveler. Thinking in the industry is finally getting away from regulation and into more logical thoughts of deregulation.
 
Hard to close MEM but the city of Memphis produces the same revenue as JFK-LAX market. Makes choice pretty easy. (being almost all 50 seat jets didn’t help)
 
Parking 50 jets and closing 50 jet centric hubs better for everyone.
 
Winning in New York means being stable. Delta felt they had to grow or leave and Gerry made the call to grow. They are now larger than United in NYC (iculd. EWR)
 
JFK horseshoe finally closing. JAN 13 is the target date. Two gates will replace. Expanded bus network between T2/T4. Investing money into T2
 
120 flights in SEA in summer. 95% flows on the west will be able to flow over SEA at that point. NRT hub still profitable. Domestic operations in SEA profitable with margin expansion. 70% “done” to make SEA sustainable.  LAX is also where it needs to be sustainable.
 
West coast network is really where Delta wants is. SLC/LAX/SEA give a person a way to get anywhere they want to go. GEG was given as an example. Delta use to just have SLC-GEG flights, now you can fly SLC-GEG to the east coast, LAX-GEG to Hawaii, Asia, Oz and SEA-GEG to Asia.
 
35% connection rate to GOL now. Expected to get even higher. ATL-GRU#2 profitable.
 
More soft product improvements coming to DeltaOne. (ex BizE) Name change because they felt it was limiting. Not a business class product but not a First class product. But Delta’s best product thus DeltaOne.  (so okay….I think its still kinda terrible but I’m not a marketing major)
 
First Class has been turned into a loss leading upgrade class to a profit center.
 
New economy system makes things the best for business PAX but also the best Y for the lowest cost PAX. Who would you rather fly DL or NK?
 
Made a running point of saying that the way the industry is set up now, you spend the most on a fare you might be sitting in the center seat on a 757 next to two people who paid 100 bucks 6mons out. The plan with the new system is the change it so that last minute, higher yielding, PAX get a better product, better seat, over head space, etc. compared to those 6 month out 100 buck fare family of four heading to see the mouse. SkyMiles changes also goes along with this. 

 

[topDawg]

Paul.
Not so focused on cost discipline that they won’t reinvest into product and needs for the airline. Balance is the focus. Balance lets the company invest in the company, people, product, investors etc.
 
Delta employee production and efficiency yearly.
 
Operations, TechOps allows the capital cost in fleet to be lowest in the US. Also gives Delta better flexibility in the bad times and good times.
 
Keep Capex in 2-3B is important.
 
Supply chain is going to keep getting cheaper. Learning a balance (don’t want to run vendors out of business) and learning how to use the scale of such a large company is going to keep driving costs down.
 
IT is the future. Must keep investing in it because it is the largest driver of efficiency.
 
Sorry not sorry for gaining a check on the crack spread via refinery. Speaking off, 70M profit this quarter for refinery.
 
Not going to stop hedging.
 
Working on the Tax issue. Not expecting to pay taxes till 2017, and that is not going to be a full year. (I mean if you are looking to make less profit you could outsource a little less. I’m just saying….can’t tax it if you don’t got it….)
 
Wants to do a phased retirement plan. Fliping back and forth between NBs and WBs. Doing them at different times allows the company to keep CapEx down.
 
Again, always looking for used airplane deals.
 
He went over the operating cash flow v CapEx. Jesus Leo Mullen is a friggin idiot. Complete and total idiot.
 
CapEx in 2015 is 2.8B Mostly on aircraft. (mods/orders.
 
Driving to investment grade. 3 upgrades in the last 18 months. 2 away from investment grade
 
1.35 billion back to investors in 2014
 
Pension should be 80% funded in 2020.
 
21M shares repurchased. (at ~40$ a share) 

 

[topDawg]

Q&A
NRT slots not something Delta can make money off of.
 
Asked about LAX gates, very, very vague. Said pretty much out of spaced, but when asked if Delta would do something to grow Glen basically said we will see.
 
Delta about 50/50 Business to leisure travel. When it comes to revenue however Business is about 60/40. Expecting that people are going to start spend more on vacations as economies bounce back should bring up revenue
 
Always trying to raise fares. Most of the time it works. Its not always something that hits the papers though

 

[WorldTraveler]

yes, DL will consider strategic options at LAX.

To think that DL can't do what other carriers do is simply silly. If the market is there, DL will participate and no carrier can gain assets from LAX to the exclusion of everyone else.

and a general theme of much of what you have written and they said is that DL has moved well past the merger to restructuring the way the industry operates.

DL is a change leader.

other carriers are nowhere near the place where they can restructure to the benefit of their company. That is what DL is doing with their Pacific network, equity in Gol, AeroMexico, and Virgin. The refinery.

DL is long past the point of merging and is now reworking the business to succeed where the industry has not succeeded in the past.

the NW merger provided an enormous first mover advantage and an opportunity to rethink the business which no one else is even close to thinking about matching, let alone actually executing to it.

 

[commavia]

Well I sure hope those "strategic options" include a large fleet of buses - because that's what's going to be required to get to the closest terminal that would even have a chance at open gate space.

 

[Kev3188]

Why not? After all, DL wants to be seen as a  "transportation company."

 

[WorldTraveler]

we knew you wouldn't understand.

DL intends to be rated along with high quality transportation companies.

And again, commavia, you have this jealously induced belief that AA will have some corner on gates that no one else can match.

LAWA cannot make deals with AA that exclude other carriers or give AA the only right to gates that are constructed.

You are simply delusional if you think that LAWA is going to construct a bunch of gates and no one else but AA will be able to use them.

and you still can't get that DL does have strategic options to obtain space.

And you also can't grasp that DL and UA both have triple hub west coast strategies with multiple int'l gateways.

AA has ONE TPAC viable gateway and even then it has to be subsidized heavily.

AA's west coast strategy is nowhere near capable of competing with DL, UA, or WN.

 

[Kev3188]

Good balance between TechOps network and cost. (don’t be shocked to see more line stations come on line however)

Nice. Any idea (or even WAGS) where?
 

 

we knew you wouldn't understand.

Whatever. 🙄

 

[WorldTraveler]

then don't make comments that show a major disconnect between what DL has clearly spelled out - at least to the investment community in their language.

You haven't seen them writing articles about DL ordering busses, have you?