Delta Airlines 3Q15 Earnings Call Notes

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Our performance puts us along side companies like 3M and Lockheed

“These types of results investors expect from a high quality industrial company like Delta, our metrics rank among the top 10% of S&P Industrials. Our free cash flow performance puts Delta in the company of companies like 3M and Lockheed Martin.'”

Opportunity from low fuel prices

“We have a significant opportunity ahead, as fuel prices remained low, and we continue to push forward to achieve positive RASM. RASM growth remains a key component of how we drive margin improvement over time and we remain committed to improving our unit revenue trajectory. ”

Corporate demand remains solid

“Corporate demand remains solid with volume growth of 5%. In the domestic entity, corporate growth was notably strong in the Transcons and West Coast markets as we successfully leverage our investments in New York, LA, and Seattle. We saw meaningful improvements in our healthcare, financial services, and media sectors, offsetting declines in energy and manufacturing.”

Cargo/passenger businesses have domestic performing well but international headwinds

“Our cargo business is facing a similar dynamic to our passenger business with domestic performing well, while the international business is facing significant currency and related demand headwinds.”

The stock price does reflect our performance vs our peers, but not relative to industrials broadly

“our market cap does reflect it and our stock price does reflect it against the industry. I think our next closest domestic peer has a market cap it’s $10 billion lower. And when you look at where the P — the forward P is where our opportunity is, is to continue to derisk the balance sheet, derisk our business model, have the best employee relations in the industry, investment grade balance sheet, and continue to move our P/E up to match our performance versus the S&P Industrials and we’re going to quietly continue to do that.”

We can move rapidly to adjust capacity

“I think the thing that people don’t have a full appreciation for just how rapidly we adjust to markets. And if you even just think out about 2015 and what we said we were going to do in December of ’14, in fourth quarter 2015, situations change, currencies got weak in Brazil, currency got weak in Japan, fuel surcharges ran off, sanctions in Russia, and we’ve responded very quickly. And that’s the wonderful thing about what these assets are. If you own a hotel in Manhattan and something doesn’t go well in Manhattan and you can’t move the hotel? Right. But we can take our frequencies in Venezuela down to one a week and we could take Russia down to one a week and you don’t see all those moves, but the reason why we have ever expanding margins is at some point the Street just needs to understand that we’re going to continue to manage the business to drive margin and free cash flow and we have a lot of leverage to do that.”

There is a huge wide body bubble in the world

“we’re seeing a huge bubble in excess wide-body airplanes around the world and we’ve been approached by more than one party. I mean the market appears to be the 777-200s about 9 to 10 years old the price is about $10 million. And on A330-200 the lease rate is about a fifth of what it would be new.

So we do think that the aircraft market is going to be right for Delta and over the course of the next 12 to 36 months and we think that that weakness in that aircraft bubble in wide-bodies is going to spread to narrow-bodies and that there will be some huge buying opportunities because low interest rates really have created a huge wide-body bubble in the world.”

This is a small market with a handful of buyers. There is no deal at these prices, prices are going to go lower

“There’s no deal on the works we just — it’s a relatively small market in the world right there is not many people in the world that can take a dozen 777s, right, there’s a handful of customers. It’s a very small market, it’s a very transparent market, and we get calls all the time. There is no deal. Prices are going to get lower; you wouldn’t strike a deal now.”