Delta Air Lines, Inc. (NYSE:DAL) Q2 2019 Earnings Conference Call Transcript

Jul 11, 2019 • 10:00 am ET

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Delta Air Lines, Inc. (NYSE:DAL) Q2 2019 Earnings Conference Call Transcript

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Presentation
Executive
Paul Jacobson

remains strong, adjusted debt-to-EBITDAR of 1.7 times is at the low end of our target leverage ratio of 1.5 to 2.5 times. Consistent with our capital allocation strategy, we continue to proactively address our pension obligation with a voluntary $500 million contribution in the June quarter.

We generated $3.3 billion of operating cash flow and reinvested $1.4 billion into the business during the June quarter. This produced free cash flow of $1.8 billion, bringing our first half free cash flow to $2.5 billion. This represented conversion of more than 100% of net income, nicely ahead of last year benefited by both top-line growth and margin expansion.

Our strong first half performance sets us up to achieve $4 billion in free cash flow for the full year and we expect net income conversion of nearly 90%. This includes our expectation for full-year CapEx of $4.5 billion, which is unchanged from initial guidance provided in Investor Day.

Our healthy balance sheet and cash generation enable us to consistently return cash back to our owners, while also investing in the future growth of the company. During the quarter, we returned $497 million to shareholders, including the accelerated buyback earlier this year, total shareholder returns are just over $2 billion through the first six months of the year. We funded our accelerated buyback in the first quarter with $1 billion short-term loan, with cash flow running ahead of plan, we completed repayment of the short-term facility earlier than anticipated.

Since first announcing our capital allocation strategy in 2013, we have returned more than $14 billion to owners. We have reduced our fully diluted share count by approximately 25% and increased our dividend for six consecutive years. But importantly, we have done that while also investing in our business and our people. Additionally, we are maintaining low debt levels and improving the funded status of our pension plans, as part of our commitment to maintain our investment grade credit ratings.

Our consistent repurchase activity in 15% dividend increase in the third quarter demonstrate our continued strong conviction on the durability and sustainability of our business model. These results are a validation of our unrivaled network, our dedicated people and our powerful brand. Our competitive advantages continue to deliver industry-leading results and drive long-term value for all of our stakeholders.

And with that, I'll turn the call back over to Jill to begin the Q&A.

Executive
Jill Greer

Great. Thanks, Paul. Jake, we're ready for questions from the analyst. If you could give the instructions.