Filed by
Delta Air Lines, Inc.
Pursuant
to Rule 425 under the Securities Act of 1933
and
deemed filed pursuant to Rule 14a-12
of the
Securities Exchange Act of 1934, as amended
Subject
Company: Northwest Airlines Corporation
Commission
File No.: 1-15285
The following is a transcript of a
presentation by Edward H. Bastian, President and Chief Financial
Officer of Delta at the 2008 Calyon Securities U.S. Airline Conference on
September 18, 2008.
Statements
in the following 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 cost of aircraft fuel; the
impact that our indebtedness will have on our financial and operating activities
and our ability to incur additional debt; the restrictions that financial
covenants in our financing agreements will have on our financial and business
operations; labor issues; interruptions or disruptions in service at one of our
hub airports; our increasing dependence on technology in our operations; our
ability to retain management and key employees; the ability of our credit card
processors to take significant holdbacks in certain circumstances; the effects
of terrorist attacks; and competitive conditions in the airline
industry.
Forward-looking
statements in the presentation that relate to our proposed merger transaction
with Northwest Airlines Corporation include, without limitation, our
expectations with respect to the synergies, costs and charges, capitalization
and anticipated financial impacts of the merger transaction and related
transactions; approval of the merger transaction and related transactions by
shareholders; the satisfaction of the closing conditions to the merger
transaction and related transactions; and the timing of the completion of the
merger transaction and related transactions. Factors that may cause
the actual results to differ materially from the expected results include, but
are not limited to, the possibility that the expected synergies will not be
realized, or will not be realized within the expected time period, due to, among
other things, (1) the airline pricing environment; (2) competitive actions taken
by other airlines; (3) general economic conditions; (4) changes in jet fuel
prices; (5) actions taken or conditions imposed by the United States and foreign
governments; (6) the willingness of customers to travel; (7) difficulties in
integrating the operations of the two airlines; (8) the impact of labor
relations; and (9) fluctuations in foreign currency exchange
rates. Other factors include the possibility that the merger does not
close, including due to the failure to receive required stockholder or
regulatory approvals, or the failure of other closing conditions.
Additional
information concerning risks and uncertainties that could cause differences
between actual results and forward-looking statements is contained in Delta’s
Securities and Exchange Commission filings, including its Annual Report on Form
10-K for the fiscal year ended December 31, 2007 and Form 10-Q for the quarterly
period ended June 30, 2008. Caution should be taken not to place undue reliance
on Delta’s forward-looking statements, which represent Delta’s views only as of
September 18, 2008, and which Delta has no current intention to
update.
Additional
Information About the Merger and Where to Find It
In
connection with the proposed merger, Delta has filed with the Securities and
Exchange Commission (“SEC”) a Registration Statement on Form S-4 (No.
333-151060), as amended, that includes a joint proxy statement of Delta and
Northwest, dated August 8, 2008, and that also constitutes a prospectus of
Delta. Delta and Northwest urge investors and security holders to
read the joint proxy statement/prospectus regarding the proposed merger because
it contains important information. You may obtain copies of all
documents filed with the SEC regarding this transaction, free of charge, at the
SEC’s website (www.sec.gov). You may also obtain these documents,
free of charge, from Delta’s website (www.delta.com) under the tab “About Delta”
and then under the heading “Investor Relations” and then under the item “SEC
Filings.” You may also obtain these documents, free of charge, from Northwest’s
website (www.nwa.com) under the tab “About Northwest” and then under the heading
“Investor Relations” and then under the item “SEC Filings and Section 16
Filings.”
Delta,
Northwest and their respective directors, executive officers and certain other
members of management and employees may be soliciting proxies from Delta and
Northwest stockholders in favor of the merger. Information regarding the persons
who may, under the rules of the SEC, be deemed participants in the solicitation
of Delta and Northwest stockholders in connection with the proposed merger are
set forth in the joint proxy statement/prospectus. You can find
additional information about Delta’s executive officers and directors in its
definitive proxy statement filed with the SEC on April 25, 2008 related to
Delta’s 2008 Annual Meeting of Stockholders. You can find additional information
about Northwest’s executive officers and directors in its Amendment to its
Annual Report on Form 10-K filed with the SEC on April 29, 2008. You can obtain
free copies of these documents from Delta and Northwest using the contact
information above.
**************************************
CORPORATE
PARTICIPANTS
Ed
Bastian
Delta
Air Lines, Inc. - President, CFO
CONFERENCE
CALL PARTICIPANTS
Ray
Neidl
Calyon
Securities - Analyst
PRESENTATION
Ray
Neidl
- Calyon Securities -
Analyst
Good
morning everybody, my name's Ray Neidl. For those of you who don't know me I'm
the airline analyst here at Calyon. This is our fourth annual U.S. Airline
Conference. We had our Latin and Regional Airline Conference here in June. And
in November we'll be doing an Aircraft Leasing Conference. It will be November
18th for those of you that are interested.
We've got
a fantastic line up today. And we've got what's my number one choice right now
for airlines, Delta Air Lines, Ed Bastian, the President and CFO. I think he's
going to give up one of those titles eventually, but, he's running all sides of
the department. And they've got a very tight relationship, as you know, with Air
France where they're building a great Atlantic, North Atlantic operation and
they're in the process now of merging with Northwest who will speak
later.
So with
that, we're on a tight schedule today. Each company will be presenting only for
a half hour, then will be doing some one-on-one meetings but, with that let me
kick it off, Ed.
Ed
Bastian
- Delta Air Lines,
Inc. - President, CFO
Thanks
Ray and good morning everybody. Appreciate your coming to hear an airline story
especially during this week of tumultuous change within the industry. Certainly
something that the airline industry knows well, in terms of how to manage
change.
Who would
have thought that you'd actually be coming to an airline and hearing actually a
good news story as compared to some of what's going on out in the street these
days. But we feel very good about where we're going certainly with respect to
Delta Air Lines. And we'll talk a lot about that over the course of this
meeting.
Before I
get started I want to introduce our team, who we have with me this morning. Mr.
Glen Hauenstein, Glen is Executive Vice President of our Network and Revenue
Management, doing a fabulous job leading the revenue resurgence of Delta Air
Lines. We have Mr. Hank Halter, who's our Senior Vice President and Controller,
we have Miss Cathy Cloud our General Manager in our Investor Relations Group. We
have Miss Shannon Mutschler also a General Manager in our Investor Relations
Group.
As you
know this is a public call and I need to provide the Safe Harbor disclosure. We
will be making forward-looking statements as well as including certain non-GAAP
information. And if you need any help with respect to reconciling that to the
GAAP statements you can find that reconciliation on our website at
www.delta.com.
There are
three key messages I want to leave with you this morning as we talk about Delta
Air Lines. And hopefully you'll see at the end of the presentation why we are as
excited about the future and our potential as a result of these
statements.
First of
all we are running a very good airline at Delta. We've had very strong operating
performance. In fact, industry leading with respect to the second quarter on the
financial side as well as on the operation side of the business. We're driving a
revenue premium within the industry, 10% top line growth on a year-over-year
basis and it is performance that is continuing to separate us from the
pack.
If you've
been following us over the last couple of years you know we've been making up a
huge amount of ground within the airline industry context and this performance
that we've had this year is finally pulling us away from the pack. And I'll show
you why we're doing that and how we're doing that and where we project it going
in the future.
Secondly,
we have taken quick and decisive action to preserve and solidify our cash
position and our liquidity position. We were the first carrier, in fact Ray I
think it was at your conference last year, where we announced that we we're
seeing some softness in the domestic economy and as a result of that we we're
going to be implementing a fairly significant domestic capacity pull
down.
Leading
the industry with that, in fact we've been leading the industry with those pull
downs and getting the cost out, getting the capacity out. And it shows in our
performance. But in addition to that we've also made various moves to solidify
our liquidity position and we have opportunities going forward to further
enhance our liquidity posture.
And
finally, not only are we delivering on current performance but very importantly
we are building for our future with our game changing merger with Northwest Air
Lines. It will create the world's most powerful airline. There's no doubt in our
minds about that.
We're
going to have close to $2 billion of expected synergies by 2012, and we are
taking full advantage of the regulatory window that we're in with respect to the
review process to put in place very detailed plans, implementation plans, to
de-risk the merger. And I'll talk a little bit about that over the course of the
presentation.
Turning
to our second quarter results, despite a $1 billion increase in higher fuel
input costs, Delta was the only profitable network carrier in the second quarter
owing to two core reasons. First of all, strong top line growth. We've had
operating revenue growth of 10% in the second quarter. Not just on the passenger
revenue front where we are outperforming the industry now for the first time
this year. We've been consistently delivering a unit revenue premium to the
industry at 102% of unit revenues.
But also
importantly, in the ancillary businesses, our technical operations MRO, our
SkyMiles program, our cargo performance, our fee-based revenues. Those revenue
streams for Delta are a $3 billion annualized run rate that we're running at
today. It's growing at a 25% clip on a year-over-year basis. And those ancillary
businesses drive a tremendous amount of value directly to the bottom
line.
But we're
coupling that revenue growth with a cost capacity discipline that you've known
from us. We've led the industry with respect to an aggressive stance on domestic
capacity rationalization. We have maintained best in class unit cost within the
network footprint. And we have a very strong fuel hedge program. In fact, for
the second quarter we generated over $300 million of fuel hedge gains helping to
drive that result.
However
one of the things that makes the comps a little difficult to follow is that the
volatility of fuel prices within the second quarter caused a fairly significant
disarray with respect to carrier performance. So what we've done here is
normalize, put everybody at the same fuel price.
As you
know certain carriers did -- made more aggressive steps than others in respect
to fuel hedging, Delta, in fact, was one of the more aggressive carriers with
respect to hedging fuel. But this chart here gives all carriers the benefit of
Delta's fuel hedge and puts all carriers at the same fuel price. And what you'll
see, Delta, of the ten carriers, all ten carriers in the industry, Delta is the
leading position with respect to profits in the second quarter. And
interestingly, who is number two is Northwest Air Lines.
So when
you look at combining those two airlines, combining the synergies that are yet
to come from the combination of these two airlines is why we believe we stand
alone within the industry in terms of our performance for the future. It really
tells you who's running a good operation when you cut out the fuel price
volatility and look at who's performing on revenue, who's performing on cost.
Very important slide that you should be mindful of.
It can't
be overstated the impact that fuel price volatility has had within our business
as well as within our industry. But it also can't be overstated the potential
relief that the recent moderation of fuel prices is also going to have on a go
forward basis within our industry. On a Delta standalone basis, every dollar of
oil movement equates to $80 million. And in the new world, the new Delta with
Northwest combined, every dollar will be a $135 million a year.
So when
you think about oil prices going from near $150 a barrel down to a $100 a barrel
where they are this morning and you think about the billions of dollars of
opportunity that provides the new Delta Air Lines, as well as the industry, but
certainly the new Delta Air Lines there's tremendous amount of leverage. And
certainly when we look at our profit picture going forward into 2009 certainly
changes our view with respect to profitability.
However,
despite this year's fuel price hit, we have done a good job with managing
liquidity and holding onto our cash position. Based on current fuel prices we
expect to take a net $2.6 billion hit with respect to year-over-year increase
with respect to fuel price. A $2.6 billion hit. Yet you can see operating cash
flow, absent just the change from '07 to '08 in fuel price, of being $3 billion.
So we are generating net positive operating cash flow even in this unprecedented
time of fuel price increase, very, very important for you to take note of
that.
The other
thing on the slide I think is also important to note is that we are not
re-leveraging our balance sheet to deal with the fuel crisis. Yes we have issued
some incremental debt, but, our net debt is only up $200 million on a
year-on-year basis. So we haven't taken the $2.6 billion hit and transferred it
to the balance sheet to be a problem in the future. We have managed through that
in the current liquidity position. And we expect to end the end of this year in
a very strong cash position of $3.1 billion.
Liquidity
has been a top priority for us over the course of the last year and we've made
considerable progress in a number of fronts just in the last couple of months.
We've entered into a new credit card processing agreement with our
Visa/MasterCard provider which is extended through 2011 and provides for no hold
back.
And there
is no hold back on our Visa/MasterCard. And the only triggers in there are very,
very manageable cash triggers that we feel very comfortable on a Delta
standalone as well as in the new Delta. That agreement was written in mind of
the new Delta. So we feel good about our cash hold back position, our liquidity
position with respect to our credit card processors.
All
financing commitments, both the Delta and Northwest are firmed up. And so any
aircraft that we have on firm order through 2010 has guaranteed financing
sitting behind it. We've recently, working with Northwest, have amended their
credit facility which addressed an incompatibility you've heard me talk about in
the past, the need to align our two credit agreements before we're able to close
the merger.
It's
done, we accomplished that last week. And both agreements are in place now such
that they will survive the merger and that's not going to be an issue with
respect to our ability to close in terms of bringing two credit agreements in
place.
In
addition to that, we've also re-run and continue to monitor very closely the
Delta covenants with respect to the Delta credit facility. And we are very
comfortable with our two key covenant triggers, one being cash and the second
being our fixed charge ratio. Very comfortable with both as Delta as well as the
new Delta going forward on a merge Co. basis.
And we're
looking for additional cash raising opportunities in the future. We continue to
seek that. As you may be aware, we have two different affinity cards for
example. Delta has American Express as its affinity card provider. Northwest has
U.S. Bank. Those agreements expire shortly within the two years following the
merger consummation. That will be an opportunity for us, not just to raise
incremental liquidity post-merger, but also get the benefit of having the
world's most powerful frequent flyer currency in the hands of the right affinity
card provider, substantial liquidity opportunity for us going
forward.
And in
addition to that, Northwest has also received a term sheet with respect to
incremental liquidity. They've been able to raise a $500 million revolving
credit facility against their unencumbered assets that will survive and go into
place -- continue with the new carrier on a going forward basis. So if you look
at the combined Delta/Northwest liquidity position of roughly $6 billion that we
anticipate at the end of the year, we've just added another $500 million to it
over the course of the last few weeks.
With
respect to fuel, our fuel hedging portfolio is shown as -- on this slide. You
can see for the very short term we're not going to be able to take advantage of
this recent drop in prices over the next couple of months. But, certainly, going
forward particularly into 2009, we have tremendous amount of upside opportunity
with respect to the recent decline in fuel.
Wish to
update our September quarter guidance at this point. This is new. This is the
first time and this is something we're going to continue to give -- and guidance
going forward in respect of revenue guidance. We're looking at our unit revenue
guidance, our passenger RASM to be up between 9% and 10% in the third quarter. I
think that compares quite favorably with any of the carriers that have announced
forward-looking revenue guidance for the third quarter.
We
realize the sensitivity in the marketplace with respect to airline demand and
some softness in the economy on a general basis. And this is something that
we're going to continue to give guidance on with respect to how demand looks,
how revenue trends look.
I can
also tell you with respect to that 9% to 10% for the quarter it was accelerating
over the course of the quarter. So, September will clearly be in the double
digit territory for Delta on this, on a consolidated basis.
Looking
into the fourth quarter we anticipate unit revenues to be up on a double digit
-- low double digit basis for the quarter as well. Non passenger revenue that
includes our ancillary revenue businesses, our maintenance and repair operation,
our cargo operation, et cetera is going to be roughly $750 million in the third
quarter. Up 25% on a year-over-year run rate.
Fuel
prices, we're expecting $3.51 a gallon to be our third quarter fuel price. We
will have roughly -- and embedded in there is roughly a $200 million gain, a
benefit with respect to fuel hedging. We will -- do not anticipate any large
mark-to-market write-downs with respect to our fuel hedge portfolio in the
quarter. I know United announced a large mark-to-market hit in their third
quarter. We will not have that at Delta Air Lines.
With
respect to non-fuel CASM it's up slightly 1% to 3% in the third quarter. That's
about two points higher than we would like it to be. A couple of things driving
that. One, as we've taken capacity and moved it around, it's taken us a little
longer time to get all the cost out. Our commitment to you is to get our
non-fuel unit cost flat by the end of the year relative to capacity. We'll do
that in the fourth quarter. We're having a slight delay in the third
quarter.
And
secondly we have some onetime good guys in the third quarter a year ago and the
cost went roughly $50 million that we're lapping. So, once you get that behind
us we think we'll be flat going forward with respect to non-fuel unit cost. And
our system capacity, overall system capacity is down 1%. But domestic capacity
for the third quarter is down a full 12%, international is up 15%.
That
international capacity, though, is unique. And it's going to different
destinations. It's going to Africa. It's going to the Middle East. It's going to
Latin America. All areas that are absolutely on fire and moving at dramatically
higher growth rates than anything we've been seeing, say, in some of the classic
international destinations that we fly into Europe.
With
respect to the overall quarter, we expect it to be roughly a breakeven trending
to a modest loss, for the third quarter. Which when you think about the fact
that we were encountering up to $150 fuel prices for the third quarter, to be
able to cover that and get to a position of breakeven to a modest loss I think
is quite an accomplishment for the Delta team.
Fourth
quarter capacity, we're looking at our domestic airline capacity consolidated
and domestic to be down 14%, and our international in the fourth quarter to be
up 15% with an overall system number of a down about 4% in the fourth
quarter.
Now
turning quickly to the Northwest merger in terms of how we're doing. We are in
an extended regulatory window. And that process is going very well. We expect to
close the Northwest transaction prior to the end of this year. However, we're
using the time to build a very detailed integration plan to make certain that we
de-risk the merger. And de-risk the exposure with respect to the integration of
these two very, very large carriers.
First off
in an unprecedented step, we have entered into a four year agreement with the
pilots of both sides. The Delta pilots and Northwest pilots have ratified a four
year pilot agreement which would not only provide us stability in the pilot
workforce through 2012, but also importantly, we'll deliver an integrated
seniority list prior to the end of this year. So we will enter the merger with
all pilot issues, integrated seniority lists, behind us.
Never
been done, never been done in the history of the airline space. And all you need
to do is look around at a few other carriers and the challenges they're having
with respect to integration. How that's impacting their operations and the
results, you can see the power that that will provide us.
Secondly,
we've already received approval from the EU that the merger can proceed. And
we're continuing to work closely with the DOJ on their analysis. We expect to
hear from them in the not too distant future. We have entered into a timing
agreement with Justice and we expect -- and we have to hit all milestones that
were agreed upon. And we do expect not only to get their analysis back but also
their findings here very shortly.
With
respect to stockholder meetings, those are set for September 25th both at Delta
as well as at Northwest with respect to approving the deal. If any of you
haven't voted yet, I'd encourage you to vote, vote often, vote early. And the
integration planning teams are working very, very diligently across the two
carriers. We have roughly 25 teams that are working in concert.
As I
mentioned, the credit facility is already done with respect to aligning so
there's no issues with respect to credit. There's no issues with respect to any
financial negotiations that need to occur in order to align the close. New
officer leadership team of both carriers have been named. Both carriers today
have in total about 85 officers combined between the two units.
We've
named the new 65 officers, a reduction of about 25%, who will take this new
airline going forward. Those people are named. They're in place. They're
building their detail plans and building their teams as we speak. So we're not
waiting for this merger to occur. We're already moving with great
speed.
We've
announced our core IT systems and our platform in terms of how it's going to be,
integrating the best of some of the applications at Northwest into the Delta
suite of systems. We expect the technology integration to take roughly about 18
months before we can fully integrate the technology. But the key thing is we're
moving now. We're absolutely investing in those systems and building those
systems now. We're not waiting to start this process.
And last
and very importantly, we've already submitted our plan to the FAA to apply for a
single operating certificate between the two carriers. As you know, you can't
run an integrated operation until you get the single operating certificate
affirmed by the FAA. Plan's already been submitted to the FAA.
We expect
to hear back from them in the course of the next couple of days with respect to
their approval of that plan. And that process should also take roughly 15 to 18
months. So that by the end of '09 is our target date to have the single
operating certificate between the two carriers in place. We're moving with great
speed.
This is
an eye chart. I won't try to walk you through all these boxes. But you can see
we're targeting the close before the end of the year. We're looking at the
integration of the two carriers to be roughly an 18 to 24 month
process.
Three key
gating items that will drive a lot of the progress, I've already mentioned first
technology. We think the Res cutover and moving to a single website and a single
technology platform will take place roughly around the first quarter of 2010.
We're expecting, secondly, to get that single operating certificate by the end
of '09.
And
thirdly and very importantly, we need to resolve labor representation. While
we've reached agreement with the pilot unions on both sides, as you also know,
Northwest is heavily unionized, Delta is heavily non-unionized. We need to
resolve the representation questions regarding our labor groups in '09. We
expect that process to take about a year.
So when
you put it all together, and believe me there are tremendous detailed plans that
sit underneath each of these boxes, that teams are doing a great job on, but
when you put it all together, you should expect to see the new Delta fully
integrated, full-up fashion, sometime mid-part of 2010.
And that
is consistent with this next chart which shows how the synergy's phase in. The
green chart at the bottom of the slide represents how the revenue synergies
phase in and the red chart is how the cost synergies phase in. And you can see
on the front end of this is this heavily weighted towards revenue synergies on
the front end for several reasons.
First of
all we have the ability, now that we've done the agreement with our pilots, to
implement full code share on both carriers from day one of the merger. Today,
Delta only -- the Delta code is only carried on roughly 25% or so of the
Northwest flights. We'll go to 100% on day one, tremendous revenue benefit,
being able to sell in the market place a single code and a single
system.
Secondly,
we'll be able to move the fleet around literally from day one in terms of
optimizing the wide bodies, optimizing our international locations, making sure
we get the right size capacity in the right size market. So those revenue
streams will kick off on day one. And you can see the revenue growth kicking
in.
The cost
synergies are largely tied to integrating the two carriers. So getting that
single operating certificate, getting on the same technology platform, getting
the representation issues resolved with our labor groups are more in the back
end of the process. You can see those cost synergies start to ramp in into 2011.
But full expectation, we'll have the full-up $2 billion in place by
2012.
On to
cash integration cost, we continue to believe the integration cost on a cash
basis of the two carriers will be $600 million or less. And you can't see in the
box on the bottom maybe, but importantly, this transaction and these estimates
will be accretive to the shareholders in year one including the one time cost of
integration, so all in accretive for our Delta shareholders in the first
year.
So
wrapping up, hopefully you can see the excitement that we have around the new
Delta. Very, very strong operating performance, we're running a great airline,
separating ourselves from the pack that we continue to see going forward, driven
by strong top line growth and domestic capacity discipline and the best in class
cost structure within the network carriers.
We're
doing, I think, a very good job on our liquidity position. Expect at the end of
the year, north of $3 billion in cash, on a combined basis with Northwest, $6
billion in cash. And we have opportunities post-merger to continue to grow the
cash position of these two carriers.
And
third, the Northwest merger is an absolute game changer. There's no question in
our mind that not only are we creating the world's largest airline, we're also
going to be creating the world's best airline, the best assets, the best
employees and clearly the best opportunities to move forward. So with that, Ray,
I'll conclude my remarks. Thank you for your attention and your interest in
Delta. I'll be open to any questions that you might have.
QUESTION
AND ANSWER
Ray
Neidl
- Calyon Securities -
Analyst
We have
time for a couple of questions (inaudible - microphone
inaccessible)
Unidentified
Audience Member
On your
hedging program, can you discuss any counterparty risks you might
have?
Ed
Bastian
- Delta Air Lines,
Inc. - President, CFO
Obviously
this has taken on a whole new meaning this week with respect to counterparty
risk. The good news is, no, we have no significant issues with respect to
counterparty risk. We did have certain of our hedges with Lehman that we've been
in the market this week that we have issued the default notice on, because of
the bankruptcy filing with Lehman, and we've already
replaced.
We don't
anticipate any exposure. We've been able to go into the market and replace them
largely because of the sizeable rundown in fuel at current levels. So no,
there's no considerable risk on the fuel hedge program. We've also obviously
catalogued any exposure we have to AIG -- AIG is, through IOCs and other
avenues, insurance and life, obviously a big provider to the airlines. We're
very comfortable with our exposure at AIG as well.
Unidentified
Audience Member
(inaudible
- microphone inaccessible)
Ed
Bastian
- Delta Air Lines,
Inc. - President, CFO
Excuse
me.
Unidentified
Audience Member
(inaudible
- microphone inaccessible)
Ed
Bastian
- Delta Air Lines,
Inc. - President, CFO
There
will be no net impact with respect -- I showed you on the slide here what we
anticipate our average cap on fuel hedges going forward. That includes our --
the fact that Lehman has already filed for bankruptcy. We do not anticipate
there to be a degradation with respect to our position as a result of the Lehman
filing.
Unidentified
Audience Member
How does
your wholly-owned feeders, like Comair and Compass in Northwest, how do they fit
into your plans in the merger?
Ed
Bastian
- Delta Air Lines,
Inc. - President, CFO
That's
going to be a very interesting opportunity for us. Going forward we're going to
have roughly 40% of the regional depth in the industry flying under the Delta
code. And when you talk about a lot of the future opportunities of the new
airline that truly we haven't really even scratched the surface on when you
start to put them together in a basket whether it's to build
scale.
To build
some opportunity, whether to go to market with them or to look at the
opportunity to create the world's not only largest airline but potentially the
world's largest regional airline. Although a lot of synergies that are true at
the big airline are also true at the regional.
So we've
not embedded a tremendous amount of value in that because there's a lot of work
to be done. I think the first question that we're asking ourselves and resolving
is just what is the right size for the regional space. We have moved fairly
dramatically with respect to reduction of small shell aircraft.
I think
on a year-over-year basis we're going to be down roughly a 100 regional jets in
Delta from where we started the year to where we're anticipating ending the
year. And as we now bring Northwest into the fold and building an integrated
schedule looking at what the right size capacity is.
So my
sense is you'll hear a lot from us over the course of the next six months as we
get a good calibration on what the right size of that regional airline is. That
said separately, with respect to scale, synergies, cost benefits, revenue
values, to me there's tremendous value in building the largest regional
operation not just the world's largest airline.
Unidentified
Participant
I guess
given the success in the international markets that both Delta and the other
carriers have seen I think there's been some concern about whether that's going
to remain quite as strong going forward. And obviously your capacity growth has
been a little bit different than the other carriers. But I was wondering if you
could give us a sense for the RASM growth? How that breaks down domestically
versus internationally?
Ed
Bastian
- Delta Air Lines,
Inc. - President, CFO
Sure.
Unidentified
Participant
And how
you would anticipate that performance to be going
forward?
Ed
Bastian
- Delta Air Lines,
Inc. - President, CFO
We are
looking at a solid double digit growth rate unit revenue for international this
quarter, third quarter, year-over-year. So we are not seeing a tremendous amount
of softening or weakness with respect to the international.
I think
the key part of that is there are two things. One, we're going to unique
destinations. We're going into Africa, we're going into the Middle East. We are
the leading carrier now to the Middle East amongst the U.S. carriers. We're the
leading carrier, in fact, the only major carrier flying into Africa. We're going
to economies that are growing at a much higher clip. We're moving our Mumbai
flight from New York down to Atlanta. And then we'll do fabulously with respect
to that move. That's starting in November.
Heathrow,
I know Heathrow is a bit of bloodbath currently. It's a bloodbath if you were an
incumbent. But if you've just entered into the market and you had been flying in
Gatwick it's a huge benefit.
I'll tell
you our Atlanta to Gatwick -- excuse me, our Atlanta/Heathrow flight is doing
very, very well. So, on the international side we've made the right capacity
that's putting the lift into the new and different destinations that's
distinguishing us and differentiating us with respect to the
competition.
And,
secondly don't forget we're still building on investments we've made over the
last couple of years. So we're realizing the fruits of that investment this year
and in the future. So, when you think about how long it takes to spool up an
international market, it generally takes two to three years to get it at full
run rate. So we're getting the benefit of all the investment we've made over the
last two years coming in this year alone. So, we're looking at a double digit
year to revenue performance this quarter.
We expect
that next quarter and the fourth quarter to see our domestic unit revenues
growing at a solid double digit growth rate, largely driven obviously by our
capacity rationalization. And on the international front I'd say we're going to
be close to a double digit unit revenue growth rate for the international as
well, despite the fact that we're at 15% growth.
The other
thing about our unit revenue performance which Glen reminds me continuously is
that's also with a 5% increase in stage length which obviously pulled down some
of that -- some of the benefit you're getting. So, despite a 5% increase in
stage length we're seeing double digit unit revenue growth. And we expect to see
that in the foreseeable future.
Ray
Neidl
- Calyon Securities -
Analyst
Thank you
very much Ed.
Ed
Bastian
- Delta Air Lines,
Inc. - President, CFO
Thank you
everybody, I appreciate it.
Northwest Airline (NYSE:NWA)
과거 데이터 주식 차트
부터 11월(11) 2024 으로 12월(12) 2024
Northwest Airline (NYSE:NWA)
과거 데이터 주식 차트
부터 12월(12) 2023 으로 12월(12) 2024
