We are maintaining our $63 fair value estimate for no-moat  Delta Air Lines (DAL) after its Dec. 13 investor day. The carrier released new guidance for 2019, reinforced long-term projections for EPS, called for ROICs of around 15% going forward, and reiterated its re-fleeting plans through 2023. Amid Brent’s fall from $85 at the start of the fourth quarter, to $60 today, Delta looks poised to re-ignite margin expansion heading into 2019. Management pulled down Brent oil price assumptions but maintained its 2019 capacity growth near 3%. Moreover, the carrier guided for oil prices between $65 and $70 for 2019, allowing the carrier to guide to fuel cost savings of roughly $300 million. While we also envision low fuel prices in 2019, we're a bit more aggressive than management and forecast Delta erasing close to $400 million in fuel costs. Our fuel cost assumptions rest on Brent oil prices gradually receding to our $60 midcycle price through our 2022 normalized year.

For the coming year, Delta expects to achieve pretax margin expansion of more than 100 basis points and adjusted EPS between $6 and $7, which lines up with the 200-basis-point margin expansion and adjusted EPS of $6.40 in our valuation model. We were encouraged by the carrier’s ability to stymie non-fuel costs per available seat mile, or CASM. Management set out to limit non-fuel CASM to less than 2% in 2018, which it accomplished. And now it expects to replicate its success, keeping non-fuel CASM growth to a range of flat to up 2%. Our model incorporates non-fuel CASM growth around 2% over 2018. Combined with growing loyalty program contributions and increased exposure to high revenue cabin configurations, we project that Delta's 2022 pretax margins land 200 basis points above the 12% pretax margins we forecast for 2019. Our midcycle adjusted 14% pretax margins translate to a 15% operating margin, short of management’s long-term guidance calling for margins of around 17%.