Deutsche Bank Markets Research Hating Buy North America United States Industrials Airlines Delta Air Lines, Inc. DAL N Ev‘hengo Mcka, DAL US NYS DAL Dare 9 June 2014 Forecast Change Price at 6 Jun 2014 (USD] Price Target 52-week range EPS momentum carrying into 2H DAIRY 2014/2015; Raising estimates/PT michom linenbero Research Analyst EPS momentum iv eight( e 1+11 212 250-9254 en by belie, revenue led to couttnu Since the start of the quarter, revenue trends have been stronger-than- michaellinenbergedb.com expected. In May, Delta unit revenues increased 7%, at the high end of the company's +6% to 7% range (tightened higher from +5% to 7% in the Perna TO.-.& beginning of May). That PRASM came in at the high end of the tightened Research Associate range could reflect better close in (i.e. business) bookings, in our view. Given 0112122SO-9469 that we are seeing similar trends across our US airline coverage universe, we richttalwarCeiThcom believe that we are not only seeing the benefits of consolidation, but that the macroeconomic backdrop is also improving. As such we are raising our June Catti.,ro,O ,].'Brkii Q and Pi 2014/2015 estimates and raising our PT: Buy. Research Associate Jet fuel should also proxrde a tailwind ix ti 212 250-8949 In addition to the aforementioned strength in revenue trends, we have also catherine-m.o-brienedb.com seen jet fuel crack spreads narrow markedly over the past month and a half, providing a further boost to June Q earnings. Jet fuel spreads to Brent and Fixed Income WTI have decreased 34% and 2055 since mid-April, so while Brent and WTI are I;ouri intf:, CFA trading at similar levels the price of jet fuel per gallon has fallen 4%. Raising June Ca, 2014, and 2015 oarninott We are raising our June O 2014 EPS estimate to $1.05 (vs. consensus of $ I.02) from $1.00 as strong revenue and lower fuel prices are better-than-expected. We expect the revenue strength seen in the June Q to continue in the second half of 2014 and into 2015 as the benefits of the last round of consolidation provide better pricing power and the macro backdrop improves. As such, we are raising our 2014 and 2015 EPS estimate to $3.05 (vs. consensus of $3.04) from $2.85 and $3.55 (vs. consensus of $3.51) from $3.10, respectively. Valuation and f Given our improved earnings outlook and our belief that Delta merits a multiple Sane Dartach• &ant slightly above the group's historical range given its continued efforts to de-risk the business and reward shareholders (plans to pay down an additional $2 billion in net debt, increased dividend by 50%, and announced new $2 billion so share repurchase program during the June O), we are raising our price target 40 to $48 from S40. Our price target is derived by the application of a 13.5 PIE 30 multiple to our 2015 forecast, slightly above the group's historical 10x - 12x 20 range. Turning to risks, fuel price volatility is a key risk for Delta—we estimate to every 100/0 move in jet fuel (ceteris paribus) impacts our 2014 EPS forecast of $3.05 by $0.70. Other risks include economic weakness, government 6113 regulation, labor issues, the threat of terrorism and war, and the revaluation of the stock market resulting in higher equity risk premiums for airline stocks. Porlormance I%) 1m 3m 12m Absolute 12.0 19.4 141.6 !tolecirsil And Rum S&P 500 INDEX 4.4 3.9 20.1 Yeas End Dec 31 2013A 2014E 2015E Snit* du saMI Se FY EPS (USD) 3.14 3.05 3.55 P/E Ix/ 6.4 13.9 11.9 Revenue IUSDrn) 37,773.0 40,368.3 43.003.5 Source Darwin &ink atones camping deb Research Analyst 1+11212 250-9319 douglas.runteedb.com 42.23 48.00 02.23 - 17.36 ihev <ha:1/k,', Price Target 40.0010 48.00 1 20.0% EPS ILISO) 2.86 to 3.05 1 7.0% Revenue 40.026 to 40.368 I 0.9% lUSOm/ se-e."77 12112 6113 DAM Int Linn. Inc SSP soeiti0Ex(R•bined) 12.,13 Deutsche Bank Securities Inc. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 148/04/2014. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0124112 CONFIDENTIAL SDNY_GM_00270296 EFTA01461845