1

Cost Management Initiatives

Peter Turner, Vice President MRO Services & Business Development

September 2013

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• Historical Merger / Integration

• 2012 Achievements

• Strategy for the Future

• Fuel Cost

• Fleet Strategy driving Cost

• Cost Management Philosophy

• Insource/Outsource

• Strategic Partnerships

• Inventory Management Strategies

• Leverage Latest Technologies

• Operational Excellence

Delta Air Lines

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• Completed successful merger with NWA in 2009

− Primary focus was “pick-and-go”, select the best from each

world

− Speed wins

− Seamless transition for our customers

• Continued to achieve cost savings by leveraging synergies

of the combined airline

• Focused on optimization of integrated operations

• Pursued technology enhancements and solutions

Merger - Final Integration

Delta Air Lines

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The integrated airline is extremely complex, requiring continual efficiency improvements within Delta

1200+ planes

300+ destinations

15+ fleet types*

Millions of parts!

Thousands of checks!

Millions of transactions!

Delta Air Lines

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• Full year profit of $1.6B, excluding special items

• Operating margin – 7.1%

• Unrestricted liquidity - $5.2B

• Unit revenue gains have outperformed the industry for 21 consecutive

months

• 2012 On-time arrival rate of 86.5%

• 25% YoY reduction in lost bags & 40% reduction in customer complaints

compared to 2011

• Continuous investment in IT capital to further generate revenue

enhancements, cost effectiveness, operational performance, and

improving customer service

Delta continues to gain momentum in achieving core objectives of revenue growth, reduced CASM,

product preference, and a safe and reliable operation

2012 Achievements

Delta Air Lines

Delta Air Lines – Confidential and Proprietary

Delta Is Taking a Different Approach

Employees

• Best employee relations in the

industry

Customers

• Continued benefits from

investments in product, service,

technology and operations

Shareholders

• 4th consecutive year of profitability,

with nearly 10 points of margin

expansion over that time

• Solid free cash flow generation and

achievement of $10 billion debt

target

What to expect in 2013

Make Delta a great place to work for

EMPLOYEES - Job stability with solid wages and benefits - Engaged employees motivated to generate results

Make Delta an airline

CUSTOMERS want to fly

- Reliable, customer-focused operation - High quality products and service

Make Delta a great investment for

SHAREHOLDERS - Solid returns on invested capital - Balanced capital deployment

Delta Air Lines

Strategy for the Future

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• Invest in Network, Product and Facilities

• Onboard

• Terminals/Skyclubs

• Network – AMX, GOL, VAA, SkyTeam

• Cost Control is key to margin expansion

• Managing Fuel Cost

• Fleet Strategy

• Maintenance Cost Strategies

• Continuous improvement in Operational Reliability

Strategy for the Future

Delta Air Lines

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• Trainer Refinery Facility purchased in 2012

as an opportunity to manage fuel cost creep

associated with the refinement costs

associated with processing crude oil.

• Delta acquired refinery $150M with

anticipated savings in excess of $300M

annually

• At steady state (4Q13) able to produce 80%

of Delta’s fuel requirements for east coast

operations

• Off products create additional value

streams which enhance our ability to further

reduce total fuel costs

BOLD AND INNOVATIVE

CONCEPTS

Managing Fuel Costs

Delta Air Lines

Domestic Fleet Restructuring

Fleet Strategy

Domestic Fleet Count

• Reducing 50-seat fleet by more than 200 aircraft

by 2015

• Two-class RJs have both higher RASM and

lower CASM compared to 50-seat jets

• Average gauge increases by 20%

• Similar capacity levels can be produced with

fewer departures, improving unit cost

efficiency

• Maintenance savings begin in advance of aircraft

retirements

• Delivery of 12 737-900ER, 16 717, and 12

CRJ-900 in 2H13 allows for retirement of 80

mainline and regional aircraft

• Fleet retirements will save $200M in

maintenance expense in 2013

• Deploying capital wisely with a mix of new and

used aircraft

594 675

219

295

474 125

2009 2015

1,287

Mainline

50-seat

RJ

Two-class RJ

9

1,095

Average gauge 102 122

Delta Air Lines

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• Balance between in-source and out-source

– Industry-leading maintenance, repair and overhaul provider

– Barometer for cost effectiveness

• Develop strategic partners

– Provide lateral and vertical integration platforms

– Integrated metrics using scorecards and periodic business reviews

• Implement inventory management strategies

– Consignment of expendable parts

– Supplier-owned inventory and reduced TAT for line allocations

– Surplus material program

• Leverage latest technology

– Apply Aeroxchange tools to improve efficiency, reporting and transparency of

performance

Maintenance Cost Strategies

Delta Air Lines

Delta Air Lines – Confidential and Proprietary

Balance between in-source and out-source

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2012 F

ast

Facts

Engine & Component Overhaul

• 700+ Engine & APU Overhaul Events Per Year

• 125,000+ Component Repairs

• Over 50% of engine repairs are for MRO customers

Line Maintenance & Operational Support

• 44 Maintenance Stations

• 22 Domestic

• 22 International

• Over 140,000 Overnight Checks Per Year

Aircraft Maintenance

• Major Visits (PSV) – 233

• Hangar Overnight Visits & Letter Checks - 260

• Modification & Paint Visits – 206

Delivering World-Class Services 365/24/7

Delta Air Lines

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• All partners and supplier are measured on a scorecard and have

identical metrics to enable fair comparisons

• Scorecards are treated as living documents and are continuously

monitored and reviewed

• Delta Corporate Leadership Team reviews scorecard performance

quarterly

• Ensure visibility of scorecards at appropriate levels in supplier

organization

• Scorecard performance is tied to Delta goals

• Poor scorecard performance impacts awarding of future business

opportunities

• Joint efforts to identify opportunities for improvement and build

action plans

Metrics and scorecards provide a mechanism for clear communication of expectations and results

Develop Strategic Partners / Suppliers

Delta Air Lines

• Delta has aggressive goals for reducing the inventory balance while increasing the

inventory service level

− 2013 goal of 13% reduction in total inventory year over year

− The 2013 target for asset bin compliance (at least one serviceable unit) is 92%

− The 2013 target for expendable bin compliance is 95%

• A key opportunity for expendables is for suppliers to own and manage consignment

inventory in-house or in local warehouses to reduce delivery time and safety stock

• Line allocations can be reduced by reduction of vendor TAT and supplier-owned inventory

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$1,250

$1,300

$1,350

$1,400

$1,450

Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12

Inventory Balance ($M)

Total Active Inventory YE2012 Target

94%

97%96%

97%98% 98%

86%

79%

77% 77%

85%

87%

82%

84%

70%

75%

80%

85%

90%

95%

100%

3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

Expendables and Assets Bin Compliance

Expendables Assets OSR Bin Status Expendable Target Asset Target

Efficiencies can be gained by eliminating Delta as the “middle man” for inventory management

Implement Inventory Strategies

Delta Air Lines

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• Delta utilizes surplus component and engine parts supplied by over a dozen

suppliers

• Thousands of aircraft are now economically obsolete due to a unique blend

of high fuel prices, low interest rates, high production rates, and new

technology aircraft

• The parting-out of many of these aircraft has fueled an increase in surplus

parts supply

• Surplus spend has doubled since 2010 with a combined spend of over $120M

forecasted for 2013

Surplus components and engine parts will continue to be a significant part of Delta’s material strategy

Implement Inventory Strategies

Delta Air Lines

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• Delta is using Aeroxchange (AEX) tools thus implementing the industry’s leading

supply chain platform with:

− State of the art technology infrastructure

− Complete suite of productivity enhancing tools

− 100% Supplier adoption

− Secure and confidential transactions

AeroBuy Technical and AeroRepair

AeroBuy Commercial

USER

PORT A L

Orders

Checks

Reporting

Suppliers

Suppliers

Contract Lifecycle Mgmt.

Spend Analytics

VMS/TMS

Warranty

Supplier Performance

TOOLS

Delta Air Lines

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98.5

99.0

99.5

100.0

Jan Feb Mar Apr May Jun Jul Aug Sep

Delta Air Lines B737-700/800

Industry Average B737-700/800

1.131.20 1.20

1.31

1.431.51

Delta B737NG Operational Performance

• Delta’s maintenance expertise helps drive operational excellence and key performance metrics such

as D0, Average AOS, Mx Cancellations, etc.

Industry Avg. 1.34

2 Last 12 months ended September Quarter 2012 – Source: Form 41 data, including both internal and outsourced costs

3 Average fleet age as of 12/31/11 – Source: 2011 10-K SEC filings

6.

1

15.

6 10.

9

12.

4

12.

4

15.

0

Avg. Aircraft Age3

• In addition to industry-leading operational performance, Delta also leads its peers on a Maintenance

Cost per ASM (Mx CASM) basis, trailing only JetBlue which benefits from a younger fleet

Delta Maintenance CASM (¢)2

Mechanical Scheduled Performance

1 Operational Difficulty Index (ODI) are a count of

FAA reportable events

YTD YTD

Actual Goal

Mtc D0 97.72 97.29

Mtc CF 99.92 99.87

ODI1 0.49 0.62

AOS 0.96 1.18

Delta B737NG Metrics

Operational Excellence at World-Class Cost