14 Jan 2020 Delta Air Lines Inc

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Delta Air Lines Inc DAL Corrected Transcript,Q4 2019 Earnings Call 14 Jan 2020. CORPORATE PARTICIPANTS,Jill Sullivan Greer Paul A Jacobson. Vice President Investor Relations Delta Air Lines Inc Chief Financial Officer Executive Vice President Delta Air Lines Inc. Edward H Bastian Tim Mapes, Chief Executive Officer Director Delta Air Lines Inc Senior Vice President and Chief Marketing Communications Officer. Delta Air Lines Inc,Glen W Hauenstein,President Delta Air Lines Inc Rahul Samant. Chief Information Officer Executive Vice President Delta Air Lines. OTHER PARTICIPANTS,J David Scott Vernon Savanthi Syth.
Analyst Sanford C Bernstein Co LLC Analyst Raymond James Associates Inc. Helane Becker Myles Walton, Analyst Cowen and Company Analyst UBS Securities LLC. Hunter Keay Stephen Trent, Analyst Wolfe Research LLC Analyst Citigroup Global Markets Inc. Andrew G Didora Leslie Josephs, Analyst Bank of America Merrill Lynch Reporter CNBC LLC. Michael Linenberg Mary Schlangenstein, Analyst Deutsche Bank Securities Inc Reporter Bloomberg LP. Jamie N Baker Ted Reed, Analyst JPMorgan Securities LLC Analyst Forbes Media LLC.
Duane Pfennigwerth David Slotnick, Analyst Evercore Group LLC Senior Reporter Business Insider. Joe Caiado Robert Silk, Analyst Credit Suisse Securities USA LLC Senior Editor Travel Weekly. Brandon R Oglenski Dan Reed, Analyst Barclays Capital Inc Senior Contributor Forbes Media LLC. 1 877 FACTSET www callstreet com Copyright 2001 2020 FactSet CallStreet LLC. Delta Air Lines Inc DAL Corrected Transcript,Q4 2019 Earnings Call 14 Jan 2020. MANAGEMENT DISCUSSION SECTION, Operator Good morning everyone and welcome to the Delta Air Lines December Quarter and Full Year 2019.
Financial Results Conference Call My name is Shannon and I will be your coordinator At this time all. participants are in a listen only mode until we conduct a question and answer session following the presentation. As a reminder today s call is being recorded, I would now like to turn the conference over to Jill Greer Vice President of Investor Relations Please go ahead. Jill Sullivan Greer, Vice President Investor Relations Delta Air Lines Inc. Thanks Shannon Good morning everyone and thanks for joining us on our December quarter and full year call. Joining us from Atlanta today are our CEO Ed Bastian our President Glen Hauenstein and our CFO Paul. Jacobson Our entire leadership team is here in the room with us for the Q A. Ed will open the call and give an overview of Delta s financial performance Glen will then address the revenue. environment and Paul will conclude with a review of our cost performance and cash flow To get in as many. questions as possible during the Q A please limit yourself to one question and a brief follow up. Today s discussion does contain forward looking statements that represent our beliefs or expectations about. future events All forward looking statements involve risks and uncertainties that could cause the actual results to. differ materially from the forward looking statements Some of the factors that may cause such differences are. described in our SEC filings, We ll also discuss non GAAP financial measures All results exclude special items unless otherwise noted and. you can find a reconciliation of our non GAAP measures on the Investor Relations page at ir delta com. And with that Ed,Edward H Bastian, Chief Executive Officer Director Delta Air Lines Inc. Thanks Jill Good morning everyone We appreciate you joining us today Earlier Delta reported our full year. results including a December quarter pre tax profit of 1 4 billion which is up 240 million compared to last year. Our EPS in the quarter increased 31 to 1 70 with pre tax margins expanding 140 basis points to 12 4. The December quarter performance was a great finish to what was truly an outstanding year on all fronts. Strategically with the American Express renewal and the announcement of LATAM and Wheels Up partnerships. operationally with best in class completion factor and on time performance and financially with industry leading. revenue profits and cash flow 2019 was the best year in our history. The top line grew 7 5 to 47 billion positioning Delta as the largest carrier by revenue in the world We. delivered 6 2 billion in pre tax income an improvement of more than 1 billion over 2018 setting a new record. for Delta and the U S airline industry Full year earnings per share improved 30 over the prior year and we. generated 4 2 billion of free cash flow with 3 billion returned to owners. 1 877 FACTSET www callstreet com Copyright 2001 2020 FactSet CallStreet LLC. Delta Air Lines Inc DAL Corrected Transcript,Q4 2019 Earnings Call 14 Jan 2020.
These results simply would not be possible without the incredible work of our Delta team I am pleased we ll. recognize our employees performance in 2019 with 1 6 billion in profit sharing This marks the highest profit. sharing in Delta s history and is the sixth consecutive year of 1 billion or more in profit sharing We could not be. happier for our people, For our customers we continue to run the world s most reliable airline We ended the year with 165 cancel free. days across the entire Delta branded system with 281 zero cancel days on our mainline operations representing. an entire month s worth of improvement over the record performance that we set in 2018. Recently Delta was named 2019 s Most On Time North American airline by FlightGlobal for the third year in a. row Exceptional operational performance along with unmatched customer service is why more people than ever. are choosing to fly Delta In 2019 we flew 204 million customers a 6 increase over 2018 And over the last. decade we ve significantly improved the quality and reliability of Delta s operations And as a result our customer. satisfaction scores have more than tripled Domestic Net Promoter Score is now regularly in the 50s with nearly. five point improvements over the course of 2019, Delta s continued investment in our operations products service airports and technology are reshaping. customers perception of our brand and our journey to improve continues daily And we plan to keep climbing by. powering our culture of service through technology Last week I had the honor of delivering the opening keynote. address at the Consumer Electronics Show where we outlined Delta s vision for the future of travel unveiling. innovative technologies to better serve customers and give our employees the best tools to use in the world. Delta is leading the industry in every dimension In five short years Delta will celebrate its 100th anniversary It s. amazing to think how far we ve come but even more exciting to look ahead. 2020 is off to a good start The U S consumer and travel demand remain healthy our brand has strong. momentum and we have a pipeline of commercial initiatives that support another year of revenue growth in. excess of GDP Consistent with our plan that we outlined at Investor Day last month we expect to grow 2020. revenue by 4 to 6 This is on top of the 15 growth that we ve delivered over the last two years. Our full year earnings outlook of 6 75 to 7 75 per share positions Delta for the sixth straight year of pre tax. profits in excess of 5 billion Free cash flow is also expected to remain strong at 4 billion in 2020 This would. bring Delta s three year cumulative free cash flow to over 10 billion by the end of this year. By leveraging a solid financial foundation with increasingly diverse revenue streams and building brand. momentum we are demonstrating an unprecedented level of earnings and free cash flow consistency for this. industry This is enabling us to reinvest in our business at a level that others cannot match This reinvestment is. extending our competitive advantages and when combined with a great brand powered by the very best people in. the business we have the engine to drive meaningful long term value for our customers our employees and our. With that I d like to turn the call over to Glen and to Paul to go through the details of the quarter. Glen W Hauenstein,President Delta Air Lines Inc, Thanks Ed and good morning First I d like to thank the entire Delta team for delivering a record year end 2019. It s their hard work that enabled 47 billion in revenue an increase of more than 3 billion over prior year The. 1 877 FACTSET www callstreet com Copyright 2001 2020 FactSet CallStreet LLC. Delta Air Lines Inc DAL Corrected Transcript,Q4 2019 Earnings Call 14 Jan 2020. 7 5 growth was broad based with strength in both business and leisure improvements in domestic and. international and double digit growth in loyalty and MRO. Total unit revenues improved 2 8 sustaining our revenue premium to the industry of more than 110 and. outpacing non fuel unit cost growth of 2 We continue to diversify the top line with 53 of our revenue. generated by premium products loyalty and other non ticket revenue sources. Premium product revenue grew 9 in the year to 15 billion We ve continued to improve and invest in the. premium experience and we are seeing increasing product affinity On average 70 of customers that fly in. premium products purchase an equal or better product on a future trip. We are providing SkyMiles Members more options to use miles anywhere they can use cash with Delta Since. launching upsell with miles a little over a year ago 1 2 million customers have redeemed miles contributing 135. million of incremental revenue and we continue to expand capabilities most recently with the ability to pay for bag. fees using miles, Brand preference for Delta is stronger than ever We are seeing momentum in customer satisfaction scores and.
in 2019 Business Travel News named Delta the world s best airline for business travel for the ninth year in a row. More customers are choosing to interact directly with us with 52 of trips purchased directly from Delta during. the year Digital is our fastest growing distribution channel Mobile revenues grew by 35 driven by an active. user base of over 24 million customers, Total loyalty revenues grew 18 We added the highest number of SkyMiles Members in our history with over 6. million new enrollments We also acquired 1 1 million new co brand cards setting a new record and marking the. third consecutive year of more than 1 million co brand acquisitions. We deepened our customer engagement to drive 12 growth in mileage redemptions and co brand spend This. is the fifth year of double digit growth for portfolio of spend In 2019 our renewed contract with American Express. benefited revenue by approximately 500 million, Delta s close relationship with American Express is a strategic advantage that is truly unique In 2019 the total. contributions grew by 20 to 4 1 billion We expect this to reach 4 4 billion in 2020 and grow to nearly 7 billion. by 2023 on a combination of improved rates continued acquisition momentum and spend growth. Enhancing customer loyalty and building trust is at the heart of our business And together with American Express. we are finding new and innovative ways to reward customers for their loyalty Later this month we will be. launching our new portfolio of card offerings The redesigned cards deliver new and richer rewards that will. continue to increase customer benefits and drive future card acquisitions. Turning to the December quarter we delivered a strong close to the year with top line revenue growth of 7 2. Total unit revenue growth of 2 4 beat guidance and marked our 11th consecutive quarter of improvement over. prior year Passenger unit revenue was up 1 4 over prior year led by strength in domestic and Latin. Holiday travel came in ahead of expectations driven by strong consumer sentiment and a condensed booking. period between Thanksgiving and Christmas Domestically we saw strength in business and leisure demand with. solid yield gains on peak travel days, 1 877 FACTSET www callstreet com Copyright 2001 2020 FactSet CallStreet LLC. Delta Air Lines Inc DAL Corrected Transcript,Q4 2019 Earnings Call 14 Jan 2020. Premium product revenue outpaced our expectations growing 9 in the December quarter on top of last year s. 10 growth Domestically revenue was up 7 7 on a 1 6 improvement in unit revenues Corporate demand. was strong at up 6 and premium products remain a key contributor up 11 year over year. Similar to the September quarter we saw revenue and margin improvement in every domestic hub with revenue. up 10 in coastal hubs and 6 in core hubs Internationally revenue grew 2 on flat PRASM Latin was the. best performing entity with 6 3 PRASM improvement a 3 point improvement sequentially Brazil and Mexico. both delivered double digit PRASM gains In the Atlantic PRASM declined 1 6 almost entirely driven by FX. Pacific revenue stabilized on a 3 point sequential PRASM improvement While China remained soft trends. improved in Japan and Delta Premium Select performed well as we continue our fleet and product transformation. With new and reconfigured aircraft now on 80 of our Pacific routes we have the Delta One suite and Premium. Select products in place, In the March quarter we expect total unit revenues to increase by 5 to 7 on unit revenues up flat to up 2.
The sequential change in unit revenues from the December quarter is due to lapping last year s American. Express contract benefits and MRO engine volume timing. Importantly PRASM growth remains consistent at approximately 1 5 in both 4Q 2019 and 1Q 2020 March

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