DAL - Embedded Expectations Analysis - 2018 11 16
Delta Air Lines, Inc. (DAL:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 14.6x Uniform P/E, implying bearish expectations for the firm. Moreover, management has concerns about their ability to expand margins and improve their loyalty programs revenue and passenger experienceSpecifically, management may have concerns about their ability to maintain disciplined unit costs in order to achieve margin expansion, and about the earnings of their airline partners, Aeromexico and Virgin Atlantic. Furthermore, they may have concerns about the impact of their decision to purchase aircrafts rather than lease them on their short-term free cash flow generation, and may be exaggerating the financial strength of the company. Additionally, they may lack confidence in their ability to sustain strong loyalty program revenue growth, and to continue expanding their products and services for passengers. Finally, they may be exaggerating their commitment to expanding the frequent flyer miles program, and may lack confidence in their ability to incorporate their premium products into sales agreements
Delta Air Lines provides scheduled air transportation for passengers and cargo. The company serves the Transatlantic, Transpacific and Latin America markets directly on the company and through joint ventures with airline partners. Internationally, the company has hubs and market presence in Amsterdam, London-Heathrow, Mexico City, Paris-Charles de Gaulle and Seoul-Incheon. These arrangements are commercial joint ventures that include joint sales and marketing coordination, co-location of airport facilities and other commercial cooperation arrangements. The company has other businesses arising from its airline operations, including providing maintenance and engineering support for its regional aircraft.
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