Why Invest in

Delta Air Lines, Inc.?

Tina Schreib Eng-361E-06 Advanced Business Report Writing Individual Research Project Delta Air Lines, Inc. Samantha Purpora 14 April 2014

TABLE OF CONTENTS
Abstract 3 Body o Company History 4 o Company Profile o Financial Analysis and Stock History o Management Structure o Employee Relations Policies o State of the Industry and Competition Analysis 5 5-7 7 7 8

o References 9

ABSTRACT
Delta Air Lines Inc. has a long, successful history in the airline industry dating back to the 1930s. Currently they are the third largest carrier in the United States and the largest carrier serving Europe. They have 317 destinations in 55 countries and operate around a hub system. Delta, after filing Chapter 11 bankruptcy in 2007, successfully reoragnized after only 19 months. Delta acquired Northwest Airlines in 2008 for $2.8 billion and became one of the worlds largest airlines. They are also a founding member of the SkyTeam Alliance.

Delta is average or above the average of the industry standard in most financial standings. Deltas sales growth rate is 5.51 while the industry is at -2.99.
Deltas employees have rejected union representation many times in favor of direct negotiation with Deltas management. Delta Air Lines Inc. has 1 subsidiary and 26 executives and offers programs such as; profit sharing, stock awards and monthly payouts (for non-management employees) for sharing company success. Delta was also named one of the 100 Best Places to Work by Fortune Magazine. Stable fuel prices and growing travel demand will help make 2014 the most profitable year on record for the airline industry, proving that the worlds airline industry has rebounded from the recession. Delta also bought its own refinery, therefore bringing down jet fuel prices and helped them lead financially over the Big Three airlines.

COMPANY HISTORY
The third largest air carrier in the United States and the largest U.S. carrier serving Europe is Delta Air Lines, Inc. Their route network serves 317 destinations in 55 countries. Operating around a hub system, its domestic network has airports in Atlanta, Cincinnati, New York, and Salt Lake City. Delta reorganized after only 19 months since recovering from Chapter 11 bankruptcy protection in May of 2007. The U.S. government awarded Delta an airmail contract in 1930 and they remained in business after a temporary suspension of the contract in 1934, even though they took a big hit financially. Delta (then Delta Air Corporation) was awarded three additional airmail contracts by 1941. Under contract to the War Department, Delta transported troops (and supplies) during World War II. In 1945 Delta returned to civilian service and the airline industry experienced growth and competition like never before. Delta merged with Chicago and Southern Airlines in 1951, where they continued to grow as a dominant regional trunk carrier throughout the 1950s and 1960s. In 1967 Delta merged with Delaware Airlines and changed their name officially to Delta Air Lines. Delta assumed a more assertive corporate behavior in the 1980s, the trend in the industry towards external growth was threatening their guarantee to internal growth. Delta purchased Western Air Lines for $680 million in 1986, which was based in Los Angeles.

1930

GRANTED 3 MORE AIR MAIL CONTRACTS

1943

RE-ENTERED CIVILAN SERVICE

1951

MERGED W/ DELAWARE AIRLINES

1980S

PURCHASED WESTERN AIRLINES

OBTAINED AIR MAIL CONTRACT

1941

TRANSPORTED SUPPLIES IN WORLD WAR II

1945

MERGED 1967 W/CHICAGO & SOUTHERN AIRLINES

MORE 1986 AGRESSIVE CORPORATE BEHAVIOR

COMPANY PROFILE
Delta acquired Northwest Airlines in 2008 for $2.8 billion and became one of the worlds largest airlines. In addition to operating its fleet of 700+ aircraft, Delta also handles maintenance, repair, overhaul and cargo operations. They are a founding member of the SkyTeam marketing and code-sharing alliance (where airlines sell one anothers flight in order to extend their networks) and includes carriers such as; Air France, KLM, and Alitalia.

DAL (DELTA) ENJOYS GREAT RANKING BY ANALYSTS

The company is well ranked by analysts. It has even found its way back into the S&P 500 index, another clear indication that the market is responding acome only the second airline to achieve this after the Southwest Airlines. This is quite the story for a company which as recently as 2005 declared bankruptcy. I see a period of extended profitability for this stock, which is good news for investors and everyone associated with DAL in general. (Sharma, 2013)

FINANCIAL ANALYSIS

Delta Air Lines Year-to-Date Return 132.30%

Southwest Airlines 61.28%

United Continental 56.38%

JetBlue 47.29%

Sector 62.65%

Delta is average or above the average of the industry standard in most financial standings. Their dividend yield is .47 higher than the industry standard as well as the 5 year average. Deltas sales growth rate is 5.51 while the industry is at -2.99.

Dividends
Dividend Yield Dividend Yield - 5 Year Avg. Dividend 5 Year Growth Rate Company 0.74 0.17 -Industry 0.27 0.06 -0.28

Growth Rates
Sales (MRQ) vs Qtr. 1 Yr. Ago Sales (TTM) vs TTM 1 Yr. Ago Sales - 5 Yr. Growth Rate EPS (MRQ) vs Qtr. 1 Yr. Ago EPS (TTM) vs TTM 1 Yr. Ago EPS - 5 Yr. Growth Rate Capital Spending - 5 Yr. Growth Rate Company 5.51 3.01 10.72 140,473.00 934.91 -11.03 Industry -2.99 6.88 11.46 100.97 --26.39 23.86

Financial Strength
Quick Ratio (MRQ) Current Ratio (MRQ) LT Debt to Equity (MRQ) Total Debt to Equity (MRQ) Interest Coverage (TTM) Company 0.61 0.68 84.13 97.41 32.19 Industry 0.79 0.88 60.80 94.11 10.70

Profitability Ratios
Gross Margin (TTM) Gross Margin - 5 Yr. Avg. EBITD Margin (TTM) EBITD - 5 Yr. Avg Operating Margin (TTM) Operating Margin - 5 Yr. Avg. Pre-Tax Margin (TTM) Pre-Tax Margin - 5 Yr. Avg. Effective Tax Rate (TTM) Effective Tax Rate - 5 Yr. Avg. Company 33.57 34.36 13.27 11.34 9.00 5.19 6.69 1.98 -317.10 -251.22 Industry 49.49 45.56 -7.53 2.09 2.48 0.83 2.52 -21.76 16.12

Efficiency
Revenue/Employee (TTM) Net Income/Employee Receivable Turnover Inventory Turnover Asset Turnover Company 484,269 135,128 22.88 24.06 0.78 Industry 4,252,452 198,779 26.11 23.37 1.29

Management Effectiveness
Return on Assets (TTM) Return on Assets - 5 Yr. Avg. Return on Investment (TTM) Return on Investment - 5 Yr. Avg. Return on Equity (TTM) Return on Equity - 5 Yr. Avg. Company 21.78 5.26 30.38 7.17 221.61 303.58 Industry 0.89 2.97 1.21 4.54 2.36 8.67

MANAGEMENT STRUCTURE
Deltas employees have rejected union representation many times in favor of direct negotiation with Deltas management. Delta Air Lines Inc. has 1 subsidiary and 26 executives. Board of Directors Delta has ten voting members that include reputable company leaders. CEO Richard Anderson Chairman of the Board Daniel Carp (formerly Chairman and CEO of Eastman Kodak Company) Non-Voting Member (represents pilots) Kenneth Rogers (former pilot) Key Committees Four key committees assist the Board of Directors (run by outside directors of reputable companies). The committees formulate recommendations (throughout the year) regarding; auditing, corporate governance, personnel, and compensation and finance policies.

EMPLOYEE RELATIONS POLICIES

Delta has a unique culture of positive employee relations, and under the CEOs leadership, it has prospered. Employees and management are treated respectfully and participate in advantages that are rewarding for the company and the employees. Delta offers programs such as; profit sharing, stock awards and monthly payouts (for non-management employees) for sharing company success. The CEO also founded employee-led nonprofit funds. The Employee & Retiree Care Fund provides financial assistance for those who face an unexpected crisis. The Delta Scholarship Fund provides academic scholarships to qualified employees and family members. Delta was also named one of the 100 Best Places to Work by Fortune Magazine.

STATE OF THE INDUSTRY & COMPETITION ANALYSIS

Stable fuel prices and growing travel demand will help make 2014 the most profitable year on record, proving that the worlds airline industry has rebounded from the recession. Delta bought its own refinery, therefore bringing down jet fuel prices and has been in the lead financially over the Big Three airlines. They have also made improvements, focusing on customers, such as; including snacks in coach and a commitment to completing all flights. Delta also recycles some of its waste and donates the money to Habitat for Humanity. Other airlines have made improvements as well. Southwest Airlines has converted diesel-burning ramps, beltloaders and other equipment to electric power and recently installed plane seats and interiors made with recyclable material. (?, 2014). American Airlines replaced heavy flight manuals and maps with electronic tablets to reduce the weight of its planes and United is replacing its foam cups with recyclable plastic cups.

REFERENCES
Delta Airlines: An Analytical View, Recommendations to ... (n.d.). Retrieved from http://www.academicmind.com/unpublishedpapers/business/management/2008-06-000aao-delta-an-anyalytical-view.html Delta Air Lines Inc (DAL.N) Company Profile | Reuters.com. (n.d.). Retrieved from http://www.reuters.com/finance/stocks/companyProfile?symbol=DAL.N Delta Air Lines: Information from Answers.com. (n.d.). Retrieved from http://www.answers.com/topic/delta-air-linesinc Delta Air Lines, Inc. Names of Competitors. (n.d.). Retrieved from http://www.hoovers.com/company-information/cs/competition.Delta_Air_Lines_Inc.74 a6998796b3e945.html Delta, Leader Of The U.S. Airline Industry, Challenges Boeing ... (n.d.). Retrieved from http://www.forbes.com/sites/tedreed/2014/04/13/delta-leader-of-the-u-s-airline-industry-challenges-boeing-and-the-exportimport-bank/ Michael H. Campbell - Delta Air Lines Newsroom - Leadership. (n.d.). Retrieved from http://news.delta.com/index.php?s=18&item=88 Top Reasons Why You Should Invest in Delta Air Lines, Inc ... (n.d.). Retrieved from http://basicsmedia.com/top-reasons-why-you-should-invest-in-delta-air-lines-inc-nysedal-stock-6061 YHOO Historical Prices | Yahoo! Inc. Stock - Yahoo! Finance. (n.d.). Retrieved from http://finance.yahoo.com/q/hp?s=YHOO