An analyst equity research report on the Apple company

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Analyst's Risk Assessment

LOW MEDIUM HIGH

Airline earnings can be highly volatile, as the business combines large fixed costs for airplanes, gates, and crews with highly cyclical demand. Fixed size and long lead times for planes make capacity unresponsive in the short-term to abrupt demand shifts that can arise from recessions or disease outbreaks. This can intensify the industry's already extreme price competition, as price is often how customers choose amongst numerous airlines offering similar flight options on a given date. We see some risk mitigation from lower fuel prices since the U.S. fracking boom -- typically the 2nd largest cost after employee compensation.

Revenue/Earnings Data

Revenue (Million USD) 1Q 2Q 3Q 4Q Year

2019 10,472 12,536 12,560 11,439 47,007 2018 9,968 11,775 11,953 10,742 44,438 2017 9,101 10,747 11,061 10,228 41,138 2016 9,251 10,447 10,483 9,458 39,450 2015 9,388 10,707 11,107 9,502 40,704 2014 8,916 10,621 11,178 9,647 40,362

Earnings Per Share (USD) 1Q 2Q 3Q 4Q Year

2020 E 0.79 E 1.73 E 2.28 E 1.66 E 6.46 2019 1.09 2.21 2.31 1.71 7.30 2018 0.79 1.49 1.92 1.50 5.67 2017 0.77 1.62 1.61 0.41 4.43 2016 1.21 2.03 1.69 0.84 5.55 2015 0.90 1.83 1.65 1.25 5.63 Fiscal year ended Dec 31. Next earnings report expected: Early Apr. EPS Estimates based on CFRA's Operating Earnings; historical GAAP earnings are as reported in Company reports.

Dividend Data

Amount (USD)

Date Decl.

Ex-Div. Date

Stk. of Record

Payment Date

0.403 Feb 06 Feb 19 Feb 20 Mar 12 '20 0.403 Oct 10 Oct 23 Oct 24 Nov 14 '19 0.403 Jul 11 Jul 24 Jul 25 Aug 15 '19 0.35 Apr 18 May 01 May 02 May 23 '19

Dividends have been paid since 2013. Source: Company reports.

Past performance is not an indication of future performance and should not be relied upon as such. Forecasts are not reliable indicator of future performance.

Price Performance

30-Week Mov. Avg. 10-Week Mov. Avg. GAAP Earnings vs. Previous Year Volume Above Avg. STARS

12-Mo. Target Price Up Down No Change Below Avg.

Source: CFRA, S&P Global Market Intelligence Past performance is not an indication of future performance and should not be relied upon as such. Analysis prepared by Equity Analyst on Mar 11, 2020 02:18 PM, when the stock traded at Colin Scarola USD 42.78.

Highlights

DAL showed impressive growth in 2019, with revenue up 6% vs. industry growth of 4%. DAL’s outperformance came as it added significantly more capacity than the industry (5% vs. 3%), while still managing to improve unit pricing by 1% and operate at a better load factor than the industry (86.3% vs. 84.6%). DAL also showed excellent cost management, lowering unit costs 1%, which combined with strong revenue to produce 28% growth in adjusted pretax earnings in 2019, well above industry at 16%. DAL started 2020 on pace for strong growth, in our view, with load factor at all time highs, and it plans to add 72 new jets this year to its fleet of 898. The outlook quickly reversed in February, however, as the global spread of coronavirus began reducing air travel demand, particularly international (29% of DAL revenue). On March 10th DAL announced plans to reduce capacity by 10-15% for domestic flights and 20-25% for international until demand stabilizes. We view DAL as among the best positioned airlines to handle an industry downturn, with operating income covering net interest expense by 22x in 2019, well above the industry median of 9x, and roughly $3B of cash on hand at year-end 2019.

Investment Rationale/Risk

Our Hold rating balances a strong long-term outlook for airlines with a highly uncertain near-term picture driven by the global spread of coronavirus. Two factors driving our long-term outlook are low oil prices, with DAL's fuel expense ratio falling from 29% in 2014 to 16% in 2019; and long-term growth in air travel demand as the global economy integrates. U.S. air traffic grew 4% annually during 2015-2019, twice as fast as real GDP. Near-term, however, the coronavirus has introduced tremendous uncertainty, and we expect major airlines like DAL, with 29% of revenue generated on international flights, to be hit harder than smaller North American carriers. On the plus side, a nearly 50% drop in oil prices since the start of 2019 will produce large fuel cost savings for DAL. Further, we think it is among the best positioned to handle the downturn due to low leverage (2019 EBIT-to-interest of 22x) and $3B of cash on hand, enough to absorb essentially the full cash burn the firm suffered in 2008-09, before which its EBIT-to-interest was much worse at just 2x. Our target price is 9.1x the $6.50 we estimate DAL would earn in a normal year of operations, absent the demand impact of the coronavirus.

HOLD

Stock Report | | NYSE Symbol: March 20, 2020 DAL | is in the S&P 500DAL

Delta Air Lines, Inc.

Recommendation Price

USD 21.35 (as of Mar 19, 2020 4:00 PM ET) 12-Mo. Target Price USD 59.00

Report Currency USD

Investment Style Mid-Cap Value

Equity Analyst Colin Scarola

UPDATE: PLEASE SEE THE ANALYST'S LATEST RESEARCH NOTE IN THE RESEARCH NOTES SECTION

GICS Sector Industrials Sub-Industry Airlines

Summary Delta is the 3rd largest U.S. airline in terms of seat-mile capacity flown annually, operating at least 5,000 daily flights in over 50 countries.

Key Stock Statistics (Source: CFRA, S&P Global Market Intelligence (SPGMI), Company Reports)

52-Wk Range USD 63.44 - 19.10 Oper. EPS 2020E USD 6.46 Market Capitalization(B) USD 13.61 Beta 1.27 Trailing 12-Month EPS USD 7.30 Oper. EPS 2021E NA Yield (%) 7.54 3-Yr Proj. EPS CAGR(%) 6 Trailing 12-Month P/E 2.95 P/E on Oper. EPS 2020E 3.33 Dividend Rate/Share USD 1.61 SPGMI's Quality Ranking B $10K Invested 5 Yrs Ago $4,991 Common Shares Outstg.(M) 637.50 Institutional Ownership (%) 78

Redistribution or reproduction is prohibited without written permission. Copyright © 2020 CFRA. This document is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek independent financial advice regarding the suitability and/or appropriateness of making an investment or implementing the investment strategies discussed in this document and should understand that statements regarding future prospects may not be realized. Investors should note that income from such investments, if any, may fluctuate and that the value of such investments may rise or fall. Accordingly, investors may receive back less than they originally invested. Investors should seek advice concerning any impact this investment may have on their personal tax position from their own tax advisor. Please note the publication date of this document. It may contain specific information that is no longer current and should not be used to make an investment decision. Unless otherwise indicated, there is no intention to update this document.

Corporate Information

Investor Contact J. S. Greer (404 715 2600)

Office PO Box 20706, Atlanta, Georgia 30320-6001

Telephone 404 715 2600

Website www.delta.com

Officers

CEO & Director E. H. Bastian

Senior EVP & COO W. G. West

Principal Accounting Officer, Senior VP & International CFO W. C. Carroll

Executive VP, Chief Legal Officer & Corporate Secretary P. W. Carter

Non-Executive Chairman F. S. Blake

President G. W. Hauenstein

Senior Vice President of Technical Operations D. Mitacek

Executive VP & CFO P. A. Jacobson

Board Members

A. B. Carter C. A. Hazleton D. A. Carp D. G. DeWalt D. S. Taylor E. H. Bastian F. S. Blake

G. N. Mattson J. P. Jackson K. N. Waller M. P. Huerta S. A. Rial W. H. Easter

Domicile Delaware

Founded 1924

Employees 91,000

Stockholders 2,450

Auditor Ernst & Young LLP

Business Summary March 10, 2020

COMPANY OVERVIEW. Delta Air Lines (DAL) operates over 5,00 flights a day to at least 300 destinations in 50 countries. The company operates a hub and spoke model, where nearly all flights orginate or terminate at one of its hub airports where it has a large presence. Delta has core hubs in Atlanta, Minneapolis-St. Paul, Detroit, and Salt Lake City, as well as smaller presence coastal hubs in Boston, Los Angeles, New York-LaGuardia, New York-JFK, and Seattle.

Operating through hubs allows Delta to transport passengers between a large number of destinations with substantially greater volume than if spoke cities were served directly. For example, a direct flight between two minor cities would likely see limited and irregular demand. But connecting two small destination cities through a hub in a large metro area leads to greater traffic and allows Delta to operate those flights more frequently. This is because a first-leg spoke flight to a hub can serve a much larger number of customers traveling to a broad range of ultimate destinations, rather than just the few passengers who might be traveling between the two small cities.

Delta is a founding member of the SkyTeam alliance, which allows it and its partner airlines to collectively reach over 900 destinations and 140 countries. Operating within the alliance can boost international demand for Delta, as it allows customers to book flights to destinations it does not directly service, with certain legs of the trip being operated by a partner.

INDUSTRY LANDSCAPE. The U.S. airline industry produced roughly $240 billion in annual revenue in 2018, according to the Bureau of Transportation Statistics, giving Delta’s 2018 revenues of $44 billion about 19% of the total U.S. market that year. Delta is third in terms of U.S. seat-mile capacity, having flown 263 billion seat-miles in 2018, behind only American (AAL) and United (UAL).

Delta’s 2019 international flights comprised 29% of total revenue, compared to 38% and 26% for rivals United and American, respectively. In 2019, Delta’s geographic revenue breakdown was 71% on domestic flights, 16% on trans-Atlantic, 6% on trans-Pacific, and 7% on Latin America. In addition to United and American, the company competes with myriad non-U.S. airlines on certain of its international routes.

On domestic flights Delta competes with a broader set of U.S. airlines. As of December 2019, there were at least 8 other domestic airlines offering long-distance U.S. flights, and at least eight smaller carriers offering regional service. Delta also contracts with 3rd-party regional airlines under the Delta Connection brand to connect smaller destinations with its hubs, thereby allowing it to provide service that otherwise could not be provided economically with its mainline aircraft (120 seats or more).

Barriers to entry in the airline industry are high, in our view. Large capital requirements are driven by the costly nature of aircraft and maintenance. Also, gates in major cities are limited in number and in high demand, driving up the cost of gate rents and landing fees over time, particularly for airlines seeking to operate hubs at high demand airports. Business travel is particularly high barrier, in our view, as many employers have long-term relationships in place with certain of the major airlines, including Delta. This produces high switching costs for business accounts, as transitioning customers risk losing meaningful reward points and perks accumulated over many years of exclusive travel with one airline.

Pricing in the industry is extremely competitive, too, as customers can typically choose between numerous airlines for the specific route and dates they wish to fly. The incremental cost of adding one more passenger to a flight is also virtually zero, which makes the industry prone to intense price competition, particularly on routes seeing capacity increases. Price competition is especially strong for leisure travel, in our view, as these flights are personal purchases, making them more price sensitive than business travel covered by an employer.

The largest expense for airlines is typically employee compensation, which ran to 24% of Delta’s 2019 revenue. The next largest is usually fuel, which consumed 18%. Fuel prices have come down substantially over the past decade as the U.S. fracking boom increased global oil supply, with Delta’s fuel expense ratio now well below the 29% it saw in 2014 when oil prices were still over $90 per barrel vs. an average of $57 in 2019.

Despite the benefits from a secular decline in oil prices, the airline industry is still subject to highly volatile earnings due to frequent bouts of over/under capacity and a high degree of fixed costs, in our view. Multi-year lead times for aircraft orders and high fixed costs make industry capacity relatively unresponsive to short-term demand fluctuations, which can occur abruptly when a recession or contagious disease outbreak occurs. Further, unlike a store or factory where costs can be brought down, to an extent, in response to lower demand by cutting plant shifts or operating the store with fewer staff, airplanes and their accompanying gates generally require the same operating costs whether a flight is sold out or flown with just a handful of passengers. Also, most aircraft are financed or leased, meaning loan and lease payments remain even if aircraft are grounded due to low demand.

High fixed costs that generally take much longer to reduce than industry demand, as well as intense price competition, can lead to large losses even when revenue only drops 10% - 20%. For example, U.S. airlines ran up roughly $26 billion in aggregate losses during 2008-09, even though revenues only fell about 11% from 2007 levels.

FINANCIAL TRENDS. Delta’s total revenue grew from $39.6 billion in 2016 to $47.0 billion in 2019, representing a 3-year CAGR of 6%, fastest among major U.S. airlines. Over the same period, adjusted pretax earnings per share, which exclude the impact of tax law changes, grew from $8.67 to $9.70, for a 3-year CAGR of 4%.

Delta has low leverage relative to most peers, as its 2019 operating income covered net interest expense by 22x versus industry median of 9x.

Stock Report | | NYSE Symbol: March 20, 2020 DAL | is in the S&P 500DAL

Delta Air Lines, Inc.

Stock Report | | NYSE Symbol: March 20, 2020 DAL | is in the S&P 500DAL

Delta Air Lines, Inc.

Quantitative Evaluations

Fair Value Rank 5 1 2 3 4 5 LOWEST HIGHEST Based on CFRA's proprietary quantitative model, stocks are ranked from most overvalued (1) to most undervalued (5).

Fair Value Calculation

USD 113.68

Analysis of the stock's current worth, based on CFRA's proprietary quantitative model suggests that DAL is undervalued by USD 92.33 or 432.5%.

Volatility LOW AVERAGE HIGH

Technical Evaluation

NEUTRAL Since February, 2020, the technical indicators for DAL have been NEUTRAL.

Insider Activity UNFAVORABLE NEUTRAL FAVORABLE

Expanded Ratio Analysis

2019 2018 2017 2016 Price/Sales 0.81 0.78 0.98 0.94 Price/EBITDA 4.28 4.57 4.93 4.67 Price/Pretax Income 6.16 6.72 7.36 5.85 P/E Ratio 8.01 8.80 12.64 8.86 Avg. Diluted Shares Outsg.(M) 653 694 723 755

Figures based on fiscal year-end price

Key Growth Rates and Averages

Past Growth Rate (%) 1 Year 3 Years 5 Years Sales 5.78 6.02 3.10 Net Income 21.14 4.35 48.55

Ratio Analysis (Annual Avg.) Net Margin (%) NM NM NM % LT Debt to Capitalization 24.14 NA NA Return on Equity (%) 32.82 NA NA

Company Financials Fiscal year ending Dec. 31

Per Share Data (USD) 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Tangible Book Value 0.65 -1.36 -3.00 -3.23 -4.90 -6.81 -3.33 -19.62 -18.95 -16.52 Free Cash Flow 5.36 2.67 1.57 5.09 6.25 3.23 2.28 0.60 1.89 1.79 Earnings 7.30 5.67 4.43 5.55 5.63 0.78 12.29 1.19 1.01 0.70 Earnings (Normalized) 5.91 4.47 4.98 4.89 4.55 3.26 1.93 1.15 0.82 1.07 Dividends 1.50 1.31 1.02 0.68 0.45 0.30 0.12 NA NA NA Payout Ratio (%) 21 23 23 12 8 38 1 NA NA NA Prices: High 63.44 61.32 56.84 52.76 52.77 50.16 29.43 12.25 13.21 14.94 Prices: Low 45.08 47.90 43.81 32.60 34.61 27.26 11.97 7.83 6.41 9.60 P/E Ratio: High 8.7 10.8 12.8 9.5 9.4 64.3 2.4 10.3 13.1 21.3 P/E Ratio: Low 6.2 8.4 9.9 5.9 6.1 34.9 1.0 6.6 6.3 13.7

Income Statement Analysis (Million USD) Revenue 47,007 44,438 41,138 39,450 40,704 40,362 37,773 36,670 35,115 31,755 Operating Income 6,650 5,459 6,175 6,224 6,501 5,268 3,526 2,600 2,243 2,667 Depreciation + Amortization 2,263 2,124 2,035 1,728 1,687 1,642 1,548 1,489 1,459 1,440 Interest Expense 301 311 396 388 481 650 852 1,005 1,094 1,185 Pretax Income 6,198 5,151 5,500 6,353 7,157 1,072 2,527 1,025 769 608 Effective Tax Rate 23.1 23.6 41.7 34.0 36.8 38.5 -317.1 1.6 -11.1 2.5 Net Income 4,767 3,935 3,205 4,195 4,526 659 10,540 1,009 854 593 Net Income (Normalized) 3,858 3,106 3,599 3,689 3,660 2,751 1,658 980 691 906

Balance Sheet and Other Financial Data (Million USD) Cash 2,894 1,768 2,639 3,249 3,441 3,310 3,803 3,374 3,615 3,610 Current Assets 8,249 6,340 7,804 7,451 9,056 9,158 9,651 8,272 7,729 7,307 Total Assets 64,532 60,266 53,671 51,261 53,134 54,005 52,252 44,550 43,499 43,188 Current Liabilities 20,204 18,578 18,959 15,239 17,526 16,847 14,152 13,270 12,701 11,385 Long Term Debt 8,052 7,959 6,295 5,999 6,538 8,200 9,444 10,647 11,297 12,592 Total Capital 33,353 31,296 23,125 20,050 19,407 19,047 23,654 11,105 12,804 16,223 Capital Expenditures 4,936 5,168 3,891 3,391 2,945 2,249 2,521 1,968 1,254 1,342 Cash from Operations 8,425 7,014 5,023 7,215 7,927 4,947 4,504 2,476 2,834 2,832 Current Ratio 0.408 0.341 0.412 0.489 0.517 0.544 0.682 0.623 0.609 0.642 % Long Term Debt of Capitalization 24.1 25.4 27.2 29.9 33.7 43.1 39.9 95.9 88.2 77.6 % Net Income of Revenue 10.1 8.9 7.8 10.6 11.1 1.6 27.9 2.8 2.4 1.9 % Return on Assets 6.66 5.99 7.36 7.45 7.58 6.20 4.55 3.69 3.23 3.83 % Return on Equity 32.8 30.0 25.8 36.3 46.0 6.4 NM -57.2 NM NM

Source: S&P Global Market Intelligence. Data may be preliminary or restated; before results of discontinued operations/special items. Per share data adjusted for stock dividends; EPS diluted. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked. UR-Under Review.

Sub-Industry: Airlines Peer Group*: Airlines

Recent 30-Day 1-Year Fair Return Stock Stock Stk. Mkt. Price Price P/E Value Yield on Equity LTD to

Peer Group Symbol Exchange Currency Price Cap. (M) Chg. (%) Chg. (%) Ratio Calc. (%) (%) Cap (%)

Delta Air Lines, Inc. DAL NYSE USD 21.35 13,611 -63.5 -57.2 3 113.68 7.5 32.8 24.1 American Airlines Group Inc. AAL NasdaqGS USD 10.38 4,422 -63.4 -66.5 3 14.52 3.9 NM 62.7

Cathay Pacific Airways Limited CPCA.Y OTCPK USD 5.203 4,093 -22.4 -39.2 17 NA 4.7 5.3 53.9

China Southern Airlines Company Limited ZNH NYSE USD 20.04 45,326 -34.7 -51.8 9 NA 1.8 9.8 15.3

Chorus Aviation Inc. CHR TSX CAD 2.370 381 -69.4 -66.9 3 4.700 20.3 25.7 67.9

Hawaiian Holdings, Inc. HA NasdaqGS USD 8.650 397 -67.6 -65.9 2 24.15 5.5 22.1 22.4

LATAM Airlines Group S.A. LTM NYSE USD 2.230 1,463 -74.2 -80.8 7 NA Nil 6.0 34.3

Ryanair Holdings plc RYAA.Y NasdaqGS USD 49.50 10,208 -45.5 -32.3 9 NA Nil 18.3 35.6

Singapore Airlines Limited SING.Y OTCPK USD 8.290 4,909 -32.5 -42.6 6 NA 5.2 10.7 63.3

Southwest Airlines Co. LUV NYSE USD 31.94 16,522 -44.1 -35.7 7 42.40 2.3 23.4 9.4

easyJet plc ESYJ.Y OTCPK USD 7.046 2,783 -63.9 -56.0 3 NA 8.2 22.5 54.4

*For Peer Groups with more than 10 companies or stocks, selection of issues is based on market capitalization. NA-Not Available NM-Not Meaningful. Note: Peers are selected based on Global Industry Classification Standards and market capitalization. The peer group list includes companies with similar characteristics, but may not include all the companies within the same industry and/or that engage in the same line of business.

Industry Performance

GICS Sector: Industrials Sub-Industry: Airlines

Based on S&P 1500 Indexes Five-Year market price performance through Mar 19, 2020

NOTE: All Sector & Sub-Industry information is based on the Global Industry Classification Standard (GICS).

Past performance is not an indication of future performance and should not be relied upon as such. Source: S&P Global Market Intelligence

Sub-Industry Outlook

We have a negative fundamental outlook for Airlines over the next year. In late February the global spread of the coronavirus began driving the most severe demand drop off the sub-industry has faced since the terrorist attacks of 9/11. We expect this global pandemic to reverse the positive free cash flow trends the industry saw in 2019, leading to our negative outlook. Partially mitigating the downturn will be the collapse in oil prices lowering fuel costs and potential Federal assistance.

U.S. Airlines entered 2020 with strong momentum and planned to expand their 10-year run of profitability with significant capacity growth. This seemed a reasonable strategy, as key revenue metrics for the sub-industry hit record highs in 2019, including capacity (seat-miles flown) up about 3% vs. 2018; and load factor (percent of seats filled) up to 85. 4% vs. 83.7% in 2018 (Bureau of Transportation Statistics).

Strategies for Airlines abruptly changed course in February and March, however, as the global spread of coronavirus led to international travel restrictions, corporate bans on air travel, and cancellations of leisure trips due to widespread fear of catching or spreading the virus. Rather than capacity expansions, liquidity became the immediate focus for Airlines, which led to capacity reductions, hiring freezes, and short-term borrowings to raise cash.

To illustrate, on March 13th Delta announced plans to cut its Spring capacity by 40%, the largest reduction in its history, including 2001. For the big 3 carriers (American, Delta, and United), capacity cuts have been weighted toward international routes, which generates 26% - 38% of revenue depending on the airline. But even the more U.S. focused carriers are taking drastic measures, including Southwest (97% of

revenue from domestic flights) reducing Spring capacity by 20%.

These cuts are intended to conserve cash, but earnings are likely to fall precipitously anyway. Parked aircraft will lower cash burn versus flying low load flights, but even parked planes burn cash as loan or lease payments remain. Further, despite large scale cuts, major excess capacity will remain in the market so long as virus fears remain elevated. This will likely lead to sharp drops in load factors and unit pricing, producing severe revenue and earnings decline even on the flights that continue flying.

The Airlines are facing the worst demand shock in their history, in our view, but fortunately the news isnt all bad. From early January to mid-March oil prices fell roughly 56%. This will produce major cost savings for Airlines on the flights they continue operating, as fuel is typically their 2nd largest expense item after employee compensation, running to about 20% of industry revenue in 2019.

Further, while Airlines are already increasing debt on their own to weather the coronavirus crisis, they may soon have assistance from the government. In mid-March the Wall Street Journal reported that &U.S. airlines are seeking over $50 billion in financial assistance from the government .... And on the subject, President Trump remarked that & were going to back the airlines 100%... Its not their fault. Our view is that Airlines will see major assistance in the form of grants and/or government-backed loans, which will materially reduce their borrowing costs and cushion but not eliminate, their cash burn over the next year.

Year to date through March 13, the S&P Airlines Index fell 38.6% versus a 17.0% drop for the S&P Composite 1500 Index.

/Colin Scarola

Stock Report | | NYSE Symbol: March 20, 2020 DAL | is in the S&P 500DAL

Delta Air Lines, Inc.

Stock Report | | NYSE Symbol: March 20, 2020 DAL | is in the S&P 500DAL

Delta Air Lines, Inc. Analyst Research Notes and other Company News

March 20, 2020 01:54 pm ET... Senate Majority Leader Proposes Federal Assistance for Airlines (21.51***): Senator McConnell unveiled a coronavirus emergency aid bill last night including up to $50B in government loans or loan guarantees available for airlines. While not finalized, a bill with similar provisions for airlines will likely be signed into law, providing a needed shot in the arm to the industry. We estimate several airlines, including the big 3 (DAL, UAL, and AAL), did not have enough cash as of the end of 2019 to weather one quarter of current operating conditions without large capital raises. And given the high uncertainty about how long these conditions will persist, many lenders are apprehensive about continuing to lend to airlines without government guarantees, even against good collateral, in our view. We still think forecasting when the virus situation will stabilize is too uncertain to recommend buying most of the major airlines, however, even with government backing and recent sell-offs -- particularly the big 3 with their large exposure to international flights that have slowed to a trickle. /Colin Scarola

February 27, 2020 12:22 pm ET... CFRA Lowers Opinion on Shares of Delta Air Lines to Hold from Strong Buy (49.59*****): We cut our 12-month target $16 to $59, 9.1x our 2020 EPS estimate (cut from $7.38 to $6.46). We view DAL as a best-in-class U.S. airline with industry leading operating profit per seat mile flown, and also view shares as attractively valued relative to earning power under normal economic conditions. However, predicting industry conditions for 2020-2021 has become highly uncertain with the global spread of coronavirus, as have assessments of DAL’s likelihood of outperforming the S&P 500 over the next year. We previously thought major outbreaks of the virus could be contained to less important markets for DAL, as Pacific flights contribute just 6% of revenue. But with outbreaks in Europe over the last week we now see increasing odds of a broader decline in international revenue (29% of total), and think a new unexplained virus case in California increases risk for domestic flights. Further, even a modest revenue decline could severely crimp profit due to high fixed costs for aircraft, in our view. /Colin Scarola

February 24, 2020 11:50 am ET... CFRA Lowers Opinion on Shares of United Airlines to Hold from Buy (78.01***): We lower our target $27 to $83 on a combination of lower EPS estimates and a lower valuation multiple on heightened risk following the recent major outbreaks of coronavirus in developed markets beyond Asia (including Italy). We lower our 2020 EPS estimate $1.30 to $11.45, a 5% decline from 2019 (vs. +6% previous estimate), as we see UAL, among U.S. airlines, most at risk for lower passenger traffic from virus fears due to its greater international bent. We estimate roughly 40% of UAL revenues are generated on international flights, versus less than 30% for DAL and AAL, and just 3% for LUV. Given the virus is currently stable in the U.S., with no major outbreak or unexplained cases, we see demand for domestic air travel holding up well relative to international, where an increasing number of developed markets are experiencing an acceleration of virus spread. For domestic-focused airlines, we think the roughly 20% YTD drop in oil prices could mitigate most of the virus’s impact on passenger traffic this year. /Colin Scarola

January 14, 2020 12:50 pm ET... CFRA Maintains Strong Buy Opinion on Shares of Delta Air Lines (59.24*****): We keep our 12-month target at $75, 10.2x our ’20 EPS estimate of $7.38 (unchanged), above the peer average of about 9x, but in the middle of DAL’s five-year range. DAL posts Q4 adjusted EPS of $1.70 versus $1.30, beating our $1.50 estimate and consensus of $1.39. Revenues grew 6% and topped our expectations, with unit revenue growth of 2.4% better than we were expecting. Ex-fuel unit costs were also better than we expected. Results benefited from strong holiday travel demand and from the lack of capacity growth by other airlines that have been impacted by the 737-MAX grounding, we think. We expect this issue to continue to benefit Delta in Q1. DAL expects 5%-7% revenue growth in Q1, largely on capacity growth with unit revenues forecast flat to up 2%. DAL also forecasts ’20 EPS of $6.75-$7.75. We see Delta as the best run global airline, with stronger-than-peer EPS growth likely over the next several years as well as an attractive valuation that should expand over time. /Jim Corridore

December 12, 2019 09:49 am ET... CFRA Maintains Strong Buy Opinion on Shares of Delta Air Lines, Inc. (56.61*****): At investor day today, Delta outlined its strategy to improve its already industry leading operational and financial performance. Part of this plan involves revenue diversification, including growth in Maintenance, Repair and Overhaul (MRO), changes to customer loyalty plans and the benefits of joint ventures and partnerships in Europe and Latin America. Delta unveils 2020 targets of revenue growth of 6% and EPS in a range of $6.75-$7.75. The midpoint of this range ($7.25) compares favorably with our $7.13 estimate and the S&P Capital IQ consensus of $7.14. Delta also sees 2020 free cash of about $4 billion, which is about flat with 2019 despite increased investments being made. Our view is that Delta is the best-run airline in our coverage universe, with high-quality management that thinks more strategically and longer-term than peers. We think Delta's ongoing strategic initiatives and commitment to increased financial transparency should unlock a higher valuation over time. /Jim Corridore

October 10, 2019 08:44 am ET... CFRA Maintains Strong Buy Opinion On Shares Of Delta Air Lines, Inc. (53.92*****): We maintain our 12-month target price of $75, 10. 2x our '20 EPS estimate of $7.38, in line with DAL's three-year average but below its 5-year average of 13.7x as airline multiples have contracted. We raise our '19 EPS estimate to $7.13 from $7.04. Delta Q4 adjusted EPS of $2. 32 versus $1.80 beat our $2.28 estimate and the consensus of $2.27. Adjusted revenues grew 6.5% and were in line with our expectations, while operating margins were better than we expected on lower fuel costs and the leverage of unit costs over increased capacity. Delta saw record passengers and revenues. We are positive on its decision to invest in LATAM, which will help expand market share in Latin America. Q4 revenue guidance is for unit revenues up 0%-2%, versus growth of 2.5% in Q3. However, with capacity likely up 4.5% and fuel costs down, we think DAL is likely to see strong EPS growth in Q4. Trading at a 7.3x forward EPS, well below its 3- and 5-year averages, we find the shares undervalued. /Jim Corridore

Note: Research notes reflect CFRA's published opinions and analysis on the stock at the time the note was published. The note reflects the views of the equity analyst as of the date and time indicated in the note, and may not reflect CFRA's current view on the company.

Forecasts are not reliable indicator of future performance. Note: A company's earnings outlook plays a major part in any investment decision. S&P Global Market Intelligence organizes the earnings estimates of over 2,300 Wall Street analysts, and provides their consensus of earnings over the next two years, as well as how those earnings estimates have changed over time. Note that the information provided in relation to consensus estimates is not intended to predict actual results and should not be taken as a reliable indicator of future performance.

Note: For all tables, graphs and charts in this report that do not cite any reference or source, the source is S&P Global Market Intelligence.

Wall Street Consensus Opinion

BUY/HOLD

Wall Street Consensus vs. Performance

For fiscal year 2020, analysts estimate that DAL will earn USD $3.63. For fiscal year 2021, analysts estimate that DAL's earnings per share will grow by 85% to USD $6.70.

Analysts' Recommendations

Monthly Average Trend Buy Buy/Hold Hold Weak Hold Sell DAL Ticker B BH H WH S

No. of Recommendations

% of Total 1 Mo.Prior 3 Mos.Prior

Buy 8 40 9 9 Buy/Hold 4 20 5 4 Hold 7 35 6 8 Weak Hold 0 0 0 0 Sell 0 0 0 0 No Opinion 1 5 1 1 Total 20 100 21 22

Wall Street Consensus Estimates

Estimates 2019 2020 2021 2019 Actual (Normalized Diluted) $5.91

Fiscal Years Avg Est. High Est Low Est. # of Est. Est. P/E 2021 6.70 8.66 4.75 18 3.2 2020 3.63 8.11 -7.42 18 5.9 2021 vs. 2020 85% 7% 164% 0% -46%

Q1'21 0.99 1.37 0.35 3 21.5 Q1'20 0.44 1.20 -0.95 16 48.8 Q1'21 vs. Q1'20 125% 14% 137% -81% -56%

Stock Report | | NYSE Symbol: March 20, 2020 DAL | is in the S&P 500DAL

Delta Air Lines, Inc.

Abbreviations Used in Equity Research Reports CAGR - Compound Annual Growth Rate CAPEX - Capital Expenditures CY - Calendar Year DCF - Discounted Cash Flow DDM - Dividend Discount Model EBIT - Earnings Before Interest and Taxes EBITDA - Earnings Before Interest, Taxes, Depreciation & Amortization EPS - Earnings Per Share EV - Enterprise Value FCF - Free Cash Flow FFO - Funds From Operations FY - Fiscal Year P/E - Price/Earnings P/NAV - Price to Net Asset Value PEG Ratio - P/E-to-Growth Ratio PV - Present Value R&D - Research & Development ROCE - Return on Capital Employed ROE - Return on Equity ROI - Return on Investment ROIC - Return on Invested Capital ROA - Return on Assets SG&A - Selling, General & Administrative Expenses SOTP - Sum-of-The-Parts WACC - Weighted Average Cost of Capital

Dividends on American Depository Receipts (ADRs) and American Depository Shares (ADSs) are net of taxes (paid in the country of origin).

Qualitative Risk Assessment Reflects an equity analyst's view of a given company's operational risk, or the risk of a firm's ability to continue as an ongoing concern. The Qualitative Risk Assessment is a relative ranking to the U.S. STARS universe, and should be reflective of risk factors related to a company's operations, as opposed to risk and volatility measures associated with share prices. For an ETF this reflects on a capitalization-weighted basis, the average qualitative risk assessment assigned to holdings of the fund.

STARS Ranking system and definition: 5-STARS (Strong Buy):

Total return is expected to outperform the total return of a relevant benchmark, by a notable margin over the coming 12 months, with shares rising in price on an absolute basis.

4-STARS (Buy): Total return is expected to outperform the total return of a relevant benchmark over the coming 12 months, with shares rising in price on an absolute basis.

3-STARS (Hold): Total return is expected to closely approximate the total return of a relevant benchmark over the coming 12 months, with shares generally rising in price on an absolute basis.

2-STARS (Sell): Total return is expected to underperform the total return of a relevant benchmark over the coming 12 months, and the share price is not anticipated to show a gain.

1-STAR (Strong Sell): Total return is expected to underperform the total return of a relevant benchmark by a notable margin over the coming 12 months, with shares falling in price on an absolute basis.

Relevant benchmarks: In North America, the relevant benchmark is the S&P 500 Index, in Europe and in Asia, the relevant benchmarks are the S&P Europe 350 Index and the S&P Asia 50 Index, respectively.

Glossary

STARS Since January 1, 1987, CFRA Equity and Fund Research Services, and its predecessor S&P Capital IQ Equity Research has ranked a universe of U.S. common stocks, ADRs (American Depositary Receipts), and ADSs (American Depositary Shares) based on a given equity's potential for future performance. Similarly, we have ranked Asian and European equities since June 30, 2002. Under proprietary STARS (Stock Appreciation Ranking System), equity analysts rank equities according to their individual forecast of an equity's future total return potential versus the expected total return of a relevant benchmark (e.g., a regional index (S&P Asia 50 Index, S&P Europe 350® Index or S&P 500® Index)), based on a 12-month time horizon. STARS was designed to meet the needs of investors looking to put their investment decisions in perspective. Data used to assist in determining the STARS ranking may be the result of the analyst's own models as well as internal proprietary models resulting from dynamic data inputs.

S&P Global Market Intelligence's Quality Ranking (also known as ) - Growth andS&P Capital IQ Earnings & Dividend Rankings stability of earnings and dividends are deemed key elements in establishing S&P Global Market Intelligence's earnings and dividend rankings for common stocks, which are designed to capsulize the nature of this record in a single symbol. It should be noted, however, that the process also takes into consideration certain adjustments and modifications deemed desirable in establishing such rankings. The final score for each stock is measured against a scoring matrix determined by analysis of the scores of a large and representative sample of stocks. The range of scores in the array of this sample has been aligned with the following ladder of rankings:

A+ Highest B Below Average A High B- Lower A- Above Average C Lowest B+ Average D In Reorganization NR Not Ranked

EPS Estimates CFRA's earnings per share (EPS) estimates reflect analyst projections of future EPS from continuing operations, and generally exclude various items that are viewed as special, non-recurring, or extraordinary. Also, EPS estimates reflect either forecasts of equity analysts; or, the consensus (average) EPS estimate, which are independently compiled by S&P Global Market Intelligence, a data provider to CFRA. Among the items typically excluded from EPS estimates are asset sale gains; impairment, restructuring or merger-related charges; legal and insurance settlements; in process research and development expenses; gains or losses on the extinguishment of debt; the cumulative effect of accounting changes; and earnings related to operations that have been classified by the company as discontinued. The inclusion of some items, such as stock option expense and recurring types of other charges, may vary, and depend on such factors as industry practice, analyst judgment, and the extent to which some types of data is disclosed by companies.

12-Month Target Price The equity analyst's projection of the market price a given security will command 12 months hence, based on a combination of intrinsic, relative, and private market valuation metrics, including Fair Value.

CFRA Equity Research CFRA Equity Research is produced and distributed by Accounting Research & Analytics, LLC d/b/a CFRA ("CFRA US"; together with its affiliates and subsidiaries, "CFRA"). Certain research is produced and distributed by CFRA MY Sdn Bhd (Company No. 683377-A) (formerly known as Standard & Poor's Malaysia Sdn Bhd) ("CFRA Malaysia"). Certain research is distributed by CFRA UK Limited ("CFRA UK"). CFRA UK and CFRA Malaysia are wholly-owned subsidiaries of CFRA US.

Stock Report | | NYSE Symbol: March 20, 2020 DAL | is in the S&P 500DAL

Delta Air Lines, Inc.

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STARS Stock Reports: Global STARS Distribution as of December 30, 2019

Ranking North America Europe Asia Global Buy 33.4% 29.0% 41.1% 33.5% Hold 56.1% 54.8% 46.4% 54.6% Sell 10.5% 16.2% 12.5% 11.9% Total 100.0% 100.0% 100.0% 100.0%

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Stock Report | | NYSE Symbol: March 20, 2020 DAL | is in the S&P 500DAL

Delta Air Lines, Inc.

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Stock Report | | NYSE Symbol: March 20, 2020 DAL | is in the S&P 500DAL

Delta Air Lines, Inc.