ATLANTA, July 18, 2007 (PRIME NEWSWIRE) -- Delta Air Lines (NYSE:DAL) reported combined(1) results for the quarter ended June 30, 2007. Key points include:
-- Delta's second quarter pre-tax income was $1.9 billion. Excluding
reorganization and related items, pre-tax income was $373
million, a nearly $200 million improvement compared to the prior
year period.(2)(3)
-- Delta's operating income for the June 2007 quarter was $490
million, the company's fifth consecutive quarterly operating
profit, reflecting an operating margin of 9.8 percent. Excluding
reorganization and related items, operating income was $499
million, and operating margin was 10.0 percent.
-- In the June 2007 quarter Delta generated $1.1 billion in free
cash flow. As of June 30, 2007, Delta had $3.7 billion in cash,
cash equivalents and short-term investments, of which $3.4
billion was unrestricted. The company's undrawn revolving credit
facility provides an additional $1 billion in unrestricted
liquidity.
-- Delta accrued $79 million in profit sharing for the June 2007
quarter, in recognition of the achievements of all Delta
employees toward meeting the company's financial targets.
Delta reported pre-tax income of $1.9 billion in the second quarter of 2007, compared to a pre-tax loss of $2.2 billion in the second quarter of 2006. Given its significant net operating loss carry forwards (NOLs), which will be used to offset substantially all cash income tax obligations in the foreseeable future, Delta believes pre-tax earnings is a more meaningful measure of financial performance.
Net income for the June 2007 quarter was $1.8 billion, or $4.49 per share based on 393.8 million diluted shares outstanding. Excluding the reorganization and related items described below, net income was $274 million or $0.70 per share.
"Delta's emergence from bankruptcy was a significant milestone in the history of the company and the airline industry," said Gerald Grinstein, Delta's chief executive officer. "In delivering the kind of outstanding financial, operational and customer service results we saw this quarter, it is clear Delta people at every level are producing a strong airline with a bright future."
Fresh Start Reporting
Upon emergence from bankruptcy on April 30, 2007, the company adopted fresh start reporting(4). Under fresh start reporting, Delta revalued its assets and liabilities to preliminarily estimated current market values and changed the accounting for its SkyMiles frequent flyer program. These non-cash adjustments significantly impacted Delta's balance sheet, statement of operations and statement of cash flows. As a result, Delta's financial statements on and after May 1, 2007 are not comparable to its previously issued financial statements.
Financial Performance
Strong passenger demand, together with Delta's network restructuring and revenue management initiatives, drove operating revenue of $5.0 billion for the June 2007 quarter, representing an increase of $262 million or 5.5 percent compared to the prior year period. The increase includes a $42 million benefit, primarily impacting passenger revenue, from fresh start adjustments related to a change in accounting for Delta's frequent flyer program.
Delta's consolidated passenger unit revenue (PRASM) was 11.78 cents, an increase of 5.6 percent in the June 2007 quarter compared to the same period in 2006. Excluding the impact of the fresh start adjustments related to a change in accounting for the frequent flyer program, consolidated PRASM increased 4.6 percent.
Delta's international PRASM grew 9.7 percent year over year, with trans-Atlantic markets producing an 11.1 percent PRASM improvement on an 11.8 percent increase in capacity, and Latin American markets producing a 6.7 percent increase in PRASM on a 23.8 percent increase in capacity. Domestic markets also showed solid PRASM performance, with domestic PRASM up 5.7 percent on 4.8 percent lower capacity. Delta's mix of domestic versus international capacity was 65 percent and 35 percent, respectively in June 2007, as compared to 77 percent and 23 percent, respectively in June 2005.
Based on the most recent available ATA data for the year-to-date period ended May 31, 2007, Delta's consolidated length of haul adjusted PRASM was 96% of the industry average PRASM (excluding Delta), up from 86% in 2005 and on track with Delta's target of closing the gap to the industry by the end of 2008.
For the June 2007 quarter, Delta's operating expenses increased 3 percent, or $141 million, versus the prior year period. The increase was due to $79 million in profit sharing expense, $36 million in non-cash expense from fresh start adjustments, $26 million in non-cash compensation expense related to emergence awards, and higher expenses related to a 1% increase in capacity. These increases were partially offset by lower fuel price and benefits from restructuring initiatives. For the same period, non-operating expenses declined 27 percent, or $52 million, due primarily to improved cash flows and lower effective interest rates.
Delta's reported mainline unit cost (CASM) in the second quarter of 2007 was 10.41 cents, an increase of 1.8 percent compared to the second quarter of 2006(5). Excluding expenses from profit sharing and bankruptcy-related professional fees, mainline non-fuel CASM was 6.93 cents, a decline of 0.6 percent.
Liquidity
At June 30, 2007, Delta had $3.7 billion in cash, cash equivalents and short-term investments, of which $3.4 billion was unrestricted. Delta also has an additional $1 billion in unrestricted liquidity available under its undrawn revolving credit facility. During the June 2007 quarter, Delta generated $1.1 billion in free cash flow, which included more than $170 million in capital expenditures reinvested in its business.
June 2007 Quarter Highlights
The June 2007 quarter included several significant events for Delta. In addition to emerging from bankruptcy on April 30, Delta continued the positive momentum from its restructuring, demonstrating its continued commitment to providing the best products and services to its customers while creating value for investors by:
-- Completing its $2.5 billion exit financing facility, which
includes an industry leading $1 billion revolving credit
facility, and repaying its $2.1 billion debtor-in-possession
financing loans;
-- Beginning trading of its common stock on May 3rd on the New York
Stock Exchange under the ticker symbol DAL;
-- Increasing its unrestricted cash reserves by approximately $800
million by amending its Visa/Mastercard credit card processing
agreement to provide for return of the previously required
holdback;
-- Earning, for the second consecutive year, a ranking in the top
two among network carriers in the JD Power Customer Satisfaction
Survey;
-- Completing the conversion of eight B767-400 aircraft from
domestic to international service, to continue its international
expansion strategy. International routes launched during the June
2007 quarter include new service from Atlanta to Dubai, Prague,
Seoul, and Vienna and from New York-JFK to Bucharest and Pisa;
-- Confirming an additional order for a B777-LR aircraft, and
announcing the planned installation of winglets on more than 60
Boeing 737-NG, 757-200 and 767-300ER aircraft over the next 2 years;
-- Completing its redesigned, state-of-the-art lobby at
Hartsfield-Jackson Atlanta International Airport to provide its
customers with a faster, more convenient check-in process;
-- Opening a dedicated check-in facility at Terminal 2 at
New York-JFK, offering the only exclusively premium check-in
facility at that airport; and
-- Unveiling its new corporate brand and livery, which features the
new all-red Delta "widget" to recognize Delta's rich heritage and
highlight the company's bold, new identity.
"The June quarter results announced today include $1.1 billion in free cash flow showing solid evidence that our plan is working. As a result of our strong operating performance, we're pleased to report that we accrued $79 million in profit sharing for the quarter that we expect will be paid to employees early next year to reward them for all their hard work," said Edward H. Bastian, Delta's executive vice president and chief financial officer. "Our turnaround continues to take hold, but is not complete -- we must remain vigilant in driving revenue and cost improvements, especially in light of increasing fuel prices."
Operational Performance
Based on the most recent available DOT data for the year-to-date period ended May 31, 2007, Delta ranks first of the network carriers in on-time performance. In addition, exchange carrier data for the month of June 2007 indicates similar rankings through the end of the second quarter. Delta's June 2007 quarter completion factor was 99.1 percent.
"Delta people continue to step up to day-to-day operational challenges and have again achieved top tier operational performance, which is even more impressive when considered against the severe weather and record load factors during the quarter," said Jim Whitehurst, Delta's chief operating officer. "This drive to deliver excellent customer service was recognized in Delta's second place ranking of the network carriers - for the second year in a row - in the JD Power Customer Satisfaction Survey."
Reorganization and Related Items
In the second quarter of 2007, Delta recorded income of $1.5 billion from reorganization and related items, primarily due to the discharge of claims and liabilities in connection with its bankruptcy proceedings and the adoption of fresh start reporting.
In the second quarter of 2006, Delta recorded a $2.4 billion charge for reorganization items primarily related to the allowed general, unsecured pre-petition claim in conjunction with changes to the Delta pilot collective bargaining agreement.
Fuel Hedging
During the June 2007 quarter, Delta hedged 48% of its fuel consumption resulting in an average fuel price per gallon of $2.05. Due to fresh start accounting eliminating much of the hedge benefits toward fuel costs, the average reported fuel price per gallon was $2.09 for the June 2007 quarter. Delta realized approximately $40 million in cash gains on fuel hedge contracts settled during the quarter.
As of July 18, 2007, Delta has hedged 21% of its projected fuel consumption for the September 2007 quarter utilizing heating oil collars with an average cap of $1.80.
Other Matters
Included with this press release are Delta's Consolidated Statements of Operations for the three and six month periods ended June 30, 2007 and 2006; a statistical summary for those periods; selected balance sheet data as of June 30, 2007 and Dec. 31, 2006; and a reconciliation of certain non-GAAP financial measures.
About Delta
Delta Air Lines (NYSE:DAL) offers customers service to more destinations than any global airline with Delta and Delta Connection carrier service to 333 destinations in 57 countries. With more than 60 new international routes introduced in the last year, Delta has added more international capacity than all other U.S. airlines combined and is the leader across the Atlantic with flights to 36 trans-Atlantic destinations. To Latin America and the Caribbean, Delta offers nearly 700 weekly flights to more than 60 destinations. Delta's marketing alliances also allow customers to earn and redeem SkyMiles on nearly 15,000 flights offered by SkyTeam and other partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. Including its SkyTeam and worldwide codeshare partners, Delta offers flights to 479 worldwide destinations in 105 countries. Customers can check in for flights, print boarding passes and check flight status at delta.com.
The Delta Air Lines, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=1825
Endnotes
(1) In connection with its emergence from bankruptcy on April 30, 2007, Delta adopted fresh start reporting in accordance with American Institute of Certified Public Accountants' Statement of Position 90-7 "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." The adoption of fresh start reporting results in Delta's becoming a new entity for financial reporting purposes. Accordingly, Delta's consolidated financial statements after April 30, 2007 are not comparable to its financial statements for any period prior to emergence. However, to provide a basis of comparison to prior year results, Delta has combined the results for (a) the one month ended April 30, 2007 with the two months ended June 30, 2007 and (b) the four months ended April 30, 2007 with the two months ended June 30, 2007. References in this press release to "Successor" refer to Delta on or after May 1, 2007, giving effect to fresh start reporting. References to "Predecessor" refer to Delta prior to May 1, 2007.
(2) Note 4 to the following Consolidated Statements of Operations provides a reconciliation of certain non-GAAP financial measures used in this release and provides the reasons management uses those measures.
(3) Reorganization items refers to revenues, expenses, gains or losses that are realized or incurred by us that are due to our reorganization under Chapter 11 of the U.S. Bankruptcy Code. In accordance with GAAP, these items are required to be separately classified in the Consolidated Statements of Operations.
(4) These changes are described in Delta's Current Reports on Form 8-K dated May 2, 2007 and June 13, 2007.
(5) Delta excludes from mainline unit costs expenses related to maintenance and staffing services which the company provides to third parties because these expenses are not related to the generation of a seat mile. Similarly, Delta excludes from passenger unit revenues, and includes in other revenue, revenues received for providing maintenance and staffing services to third parties. Management believes these classifications provide a more consistent and comparable reflection of Delta's mainline operations.
Statements in this news release that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections and strategies reflected in or suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the actions and decisions of our creditors and other third parties with continuing interests arising in connection with our Chapter 11 proceedings; the cost of aircraft fuel; the impact that our indebtedness will have on our financial and operating activities and our ability to incur additional debt; the restrictions that financial covenants in our financing agreements will have on our financial and business operations; labor issues; interruptions or disruptions in service at one of our hub airports; our increasing dependence on technology in our operations; our ability to retain management and key employees; the effects of terrorist attacks; and competitive conditions in the airline industry.
Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in Delta's Securities and Exchange Commission filings, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2006.
Caution should be taken not to place undue reliance on Delta's forward-looking statements, which represent Delta's views only as of July 18, 2007, and which Delta has no current intention to update.
DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
(in millions)
(Prede- (Suc- (Prede-
cessor) cessor) (Combined) cessor)
One Two Three Three
Month Months Months Months
Ended Ended Ended Ended
April 30, June 30, June 30, June 30,
2007 2007 2007 2006
-------- ------- ------- -------
OPERATING REVENUE:
Passenger:
Mainline $ 1,046 $ 2,338 $ 3,384 $ 3,176
Regional affiliates 349 760 1,109 1,035
Cargo 36 82 118 128
Other, net 124 268 392 402
-------- ------- ------- -------
Total operating revenue 1,555 3,448 5,003 4,741
OPERATING EXPENSES:
Salaries and related costs 345 694 1,039 1,070
Aircraft fuel 322 790 1,112 1,142
Contract carrier arrangements 239 530 769 660
Depreciation and amortization 95 193 288 318
Contracted services 83 160 243 218
Landing fees and other rents 60 122 182 194
Passenger commissions and
other selling expenses 78 175 253 234
Aircraft maintenance materials
and outside repairs 82 165 247 232
Aircraft rent 20 36 56 73
Passenger service 24 61 85 81
Other 62 98 160 150
Profit sharing -- 79 79 --
-------- ------- ------- -------
Total operating expenses 1,410 3,103 4,513 4,372
-------- ------- ------- -------
OPERATING INCOME 145 345 490 369
OTHER (EXPENSE) INCOME:
Interest expense (62) (120) (182) (227)
Interest income 4 33 37 18
Miscellaneous, net (2) 9 7 19
-------- ------- ------- -------
Total other expense, net (60) (78) (138) (190)
-------- ------- ------- -------
INCOME BEFORE REORGANIZATION
ITEMS, NET 85 267 352 179
REORGANIZATION ITEMS, NET 1,515 -- 1,515 (2,380)
-------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME
TAXES 1,600 267 1,867 (2,201)
INCOME TAX (PROVISION) BENEFIT 4 (103) (99) (4)
-------- ------- ------- -------
NET INCOME (LOSS) $ 1,604 $ 164 $ 1,768 ($2,205)
======== ======= ======= =======
DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
(in millions)
(Prede- (Suc- (Prede-
cessor) cessor) (Combined) cessor)
Four Two Six Six
Months Months Months Months
Ended Ended Ended Ended
April 30, June 30, June 30, June 30,
2007 2007 2007 2006
-------- ------- ------- -------
OPERATING REVENUE:
Passenger:
Mainline $ 3,829 $ 2,338 $ 6,167 $ 5,669
Regional affiliates 1,296 760 2,056 1,893
Cargo 148 82 230 251
Other, net 523 268 791 722
-------- ------- ------- -------
Total operating revenue 5,796 3,448 9,244 8,535
OPERATING EXPENSES:
Salaries and related costs 1,316 694 2,010 2,293
Aircraft fuel 1,270 790 2,060 2,101
Contract carrier arrangements 956 530 1,486 1,269
Depreciation and amortization 386 193 579 619
Contracted services 326 160 486 440
Landing fees and other rents 250 122 372 491
Passenger commissions and other
selling expenses 298 175 473 446
Aircraft maintenance materials
and outside repairs 320 165 485 459
Aircraft rent 90 36 126 168
Passenger service 95 61 156 154
Other 189 98 287 211
Profit sharing -- 79 79 --
-------- ------- ------- -------
Total operating expenses 5,496 3,103 8,599 8,651
-------- ------- ------- -------
OPERATING INCOME (LOSS) 300 345 645 (116)
OTHER (EXPENSE) INCOME:
Interest expense (262) (120) (382) (441)
Interest income 14 33 47 30
Miscellaneous, net 27 9 36 19
-------- ------- ------- -------
Total other expense, net (221) (78) (299) (392)
-------- ------- ------- -------
INCOME (LOSS) BEFORE
REORGANIZATION ITEMS, NET 79 267 346 (508)
REORGANIZATION ITEMS, NET 1,391 -- 1,391 (3,783)
-------- ------- ------- -------
INCOME (LOSS) BEFORE
INCOME TAXES 1,470 267 1,737 (4,291)
INCOME TAX (PROVISION) BENEFIT 4 (103) (99) 17
-------- ------- ------- -------
NET INCOME (LOSS) 1,474 164 1,638 (4,274)
PREFERRED STOCK DIVIDENDS -- -- -- (2)
-------- ------- ------- -------
NET INCOME (LOSS) ATTRIBUTABLE
TO COMMON SHAREOWNERS $ 1,474 $ 164 $ 1,638 ($4,276)
======== ======= ======= ========
DELTA AIR LINES, INC.
Statistical Summary
(Unaudited)
(Combined) (Predecessor)
------------------
Three Months Ended
June 30,
------------------
2007 2006 Change
------ ------ --------
Consolidated:
Revenue Passenger Miles
(millions) (a) 31,578 30,053 5.1%
Available Seat Miles
(millions) (a) 38,127 37,718 1.1%
Passenger Mile Yield (a) 14.23c 14.01c 1.6%
Passenger Revenue per Available
Seat Mile (PRASM)(a)
Combined results 11.78c 11.16c 5.6%
Excluding fresh start impact
- see Note 4 11.67c 11.16c 4.6%
Operating Cost Per Available
Seat Mile (CASM) (a,b)
Combined results 11.59c 11.37c 1.9%
Excluding certain items (c)
- see Note 4 11.36c 11.37c -0.1%
Excluding fuel and certain
items (c) - see Note 4 8.44c 8.35c 1.1%
Passenger Load Factor (a) 82.8% 79.7% 3.1 pts
Breakeven Passenger Load Factor (a) 73.8% 72.7% 1.1 pts
Fuel Gallons Consumed (millions) 531 534 -0.6%
Average Price Per Fuel Gallon, net
of hedging activity
Combined results $ 2.09 $ 2.14 -2.3%
Excluding fresh start impact
- see Note 4 $ 2.05 $ 2.14 -4.2%
Number of Aircraft in Fleet,
End of Period 573 625 -8.3%
Full-Time Equivalent Employees,
End of Period 55,542 51,736 7.4%
Mainline:
Revenue Passenger Miles (millions) 26,776 25,658 4.4%
Available Seat Miles (millions) 32,130 32,101 0.1%
Operating Cost Per Available
Seat Mile (b)
Combined results 10.41c 10.23c 1.8%
Excluding certain items (c)
- see Note 4 10.13c 10.23c -1.0%
Excluding fuel and certain
items (c) - see Note 4 6.93c 6.97c -0.6%
Number of Aircraft in Fleet,
End of Period 440 457 -3.7%
Please note, c = cents
(a) Includes the operations under our contract carrier agreements
of Chautauqua Airlines, Inc., SkyWest, Inc., Atlantic Southeast
Airlines, Inc., Shuttle America Corporation and Freedom
Airlines, Inc. for all periods presented and ExpressJet
Airlines, Inc. from February 27, 2007 to June 30, 2007.
(b) Cost per available seat miles (CASM) excludes $93 million and
$82 million for the three months ended June 30, 2007 and 2006,
respectively, in expenses related to providing maintenance and
staffing services to third parties as these costs are not
associated with the generation of a seat mile.
(c) Expenses related to profit sharing and post bankruptcy-related
professional fees are excluded for the three months ended June
30, 2007.
DELTA AIR LINES, INC.
Statistical Summary
(Unaudited)
(Combined) (Predecessor)
------------------
Six Months Ended
June 30,
------------------
2007 2006 Change
------ ------ ---------
Consolidated:
Revenue Passenger Miles
(millions) (a) 58,790 56,437 4.2%
Available Seat Miles (millions) (a) 73,407 72,321 1.5%
Passenger Mile Yield (a) 13.99c 13.40c 4.4%
Passenger Revenue per Available
Seat Mile (PRASM)(a)
Combined results 11.20c 10.46c 7.1%
Excluding fresh start impact
- see Note 4 11.14c 10.46c 6.5%
Operating Cost Per Available Seat
Mile (CASM) (a,b)
Combined results 11.45c 11.75c -2.6%
Excluding certain items (c)
- see Note 4 11.33c 11.58c -2.2%
Excluding fuel and certain
items (c) - see Note 4 8.52c 8.68c -1.8%
Passenger Load Factor (a) 80.1% 78.0 2.1 pts
Breakeven Passenger Load Factor (a) 73.8% 79.2 -5.4 pts
Fuel Gallons Consumed (millions) 1,022 1,034 -1.2%
Average Price Per Fuel Gallon, net
of hedging activity
Combined results $ 2.02 $ 2.03 -0.5%
Excluding fresh start impact
- see Note 4 $ 1.99 $ 2.03 -2.0%
Number of Aircraft in Fleet,
End of Period 573 625 -8.3%
Full-Time Equivalent Employees,
End of Period 55,542 51,736 7.4%
Mainline:
Revenue Passenger Miles (millions) 49,769 48,139 3.4%
Available Seat Miles (millions) 61,684 61,529 0.3%
Operating Cost Per Available
Seat Mile (b)
Combined results 10.21c 10.67c -4.3%
Excluding certain items (c)
- see Note 4 10.07c 10.48c -3.9%
Excluding fuel and certain
items (c) - see Note 4 6.98c 7.35c -5.0%
Number of Aircraft in Fleet,
End of Period 440 457 -3.7%
(a) Includes the operations under our contract carrier agreements
of Chautauqua Airlines, Inc., SkyWest, Inc., Atlantic Southeast
Airlines, Inc., Shuttle America Corporation and Freedom
Airlines, Inc. for all periods presented and ExpressJet
Airlines, Inc. from February 27, 2007 to June 30, 2007.
(b) Cost per available seat miles (CASM) excludes $196 million and
$152 million for the six months ended June 30, 2007 and 2006,
respectively, in expenses related to providing maintenance and
staffing services to third parties as these costs are not
associated with the generation of a seat mile.
(c) Expenses related to profit sharing and post bankruptcy-related
professional fees are excluded from the six month period ending
June 30, 2007 and certain accounting adjustments, described in
Delta's Form 10-Q for the quarter ended March 31, 2006, are
excluded from the six month period ending June 30, 2006.
DELTA AIR LINES, INC.
Selected Balance Sheet Data
(In Millions)
(Successor) (Predecessor)
June 30, December 31,
----------- ------------
2007 2006
----------- ------------
(Unaudited)
Cash and cash equivalents $ 1,830 $ 2,034
Short-term investments 1,549 614
Restricted cash, including noncurrent 348 802
Total assets 33,743 19,622
Total debt and capital leases,
including current maturities 8,939 8,012
Total liabilities subject to compromise N/A 19,817
Total shareowners' equity (deficit) 9,476 (13,593)
Note 1: September 2007 Quarter and 2007 Full Year Guidance
--------------------------- --------------------- ------------------
3Q 2007 Forecast 2007 Forecast
--------------------------- --------------------- ------------------
Operating margin 6 - 8%
--------------------------- --------------------- ------------------
Fuel price, including taxes $2.28 $2.14
--------------------------- --------------------- ------------------
3Q 2007 Forecast 2007 Forecast
(compared to 3Q 2006) (compared to 2006)
--------------------------- --------------------- ------------------
Mainline unit costs -
excluding fuel, profit
sharing and bankruptcy
related professional
fees Down 1 - 2% Down 4 - 5%
--------------------------- --------------------- ------------------
System Capacity Up 1 - 3% Up 2 - 4%
Domestic Down 1 - 3% Down 2 - 4%
International Up 13 - 15% Up 16 - 18%
Mainline Capacity Up 1 - 3% Up 1 - 3%
Domestic Down 4 - 6% Down 4 - 6%
International Up 12 - 14% Up 16 - 18%
--------------------------- --------------------- ------------------
Note 2: June 2007 Quarter Traffic, Capacity, Load Factor, Yield and
Unit Revenue vs. June 2006 Quarter
---------------------------------------------------------------------
Year-Over-Year Change
---------------------------------------------------------------------
North America Latin America Atlantic Pacific
-------------- ------------- ------------- ---------- ---------
Traffic 1.2% 23.4% 11.1% 12.7%
-------------- ------------- ------------- ---------- ---------
Capacity (4.8%) 23.8% 11.8% 16.1%
-------------- ------------- ------------- ---------- ---------
Load Factor 5.9 pts 0.1 pts (0.5) pts (2.6) pts
-------------- ------------- ------------- ---------- ---------
Yield (0.5%) 7.0% 11.8% 9.2%
-------------- ------------- ------------- ---------- ---------
Passenger Unit
Revenue 5.7% 6.7% 11.1% 6.0%
-------------- ------------- ------------- ---------- ---------
Note 3: Prior Period Quarterly Results Reflecting Accounting
Reclassification Items
Upon emergence, Delta changed the classification of certain items in
its financial statements to be more consistent with reporting
throughout the industry. These items, described in Delta's Current
Reports on Form 8-K dated May 2, 2007 and June 13, 2007, include
accounting for fuel taxes, insourcing revenue, Delta Global Services,
and Crown Rooms. These reclassifications had no impact on operating
income (loss) or net income (loss) in any period presented. The table
below reflects the revised results for the period indicated, including
these reclassifications.
Delta Air Lines, Inc.
Consolidated Statements of Operations
(in millions)
(Predecessor)
---------------------------------------
Three Months Ended
---------------------------------------
Mar. 31, Sept. 30, Dec. 31, Mar. 31,
2006 2006 2006 2007
------- ------- ------- -------
OPERATING REVENUE:
Passenger:
Mainline $ 2,493 $ 3,207 $ 2,764 $ 2,783
Regional affiliates 858 1,016 944 947
Cargo 123 121 126 112
Other, net 320 407 412 399
------- ------- ------- -------
Total operating revenue 3,794 4,751 4,246 4,241
OPERATING EXPENSE:
Salaries and related costs 1,223 1,069 1,003 971
Aircraft fuel 959 1,276 1,056 948
Contract carrier arrangements 609 724 663 717
Depreciation and amortization 301 293 364 291
Passenger commissions and
other selling expenses 212 233 209 220
Aircraft maintenance materials
and outside repairs 227 230 232 238
Contracted services 222 230 248 243
Landing fees and other rents 297 201 189 190
Passenger service 73 96 82 71
Aircraft rent 95 70 78 70
Other 61 161 116 127
------- ------- ------- -------
Total operating expense 4,279 4,583 4,240 4,086
------- ------- ------- -------
OPERATING INCOME (LOSS) ($485) $ 168 $ 6 $ 155
======= ======= ======= =======
Note 4: The following tables show reconciliations of certain
financial measures. The reasons Delta uses these measures
are described below.
* Cost per available seat mile (CASM) excludes $93 million and $82
million for the three months ended June 30, 2007 and 2006,
respectively, and $196 million and $152 million for the six
months ended June 30, 2007 and 2006, respectively, in expenses
related to providing maintenance and staffing services to third
parties as these costs are not associated with the generation of
a seat mile;
* Delta excludes reorganization and related and certain items
because management believes the exclusion of these items is
helpful to investors to evaluate the company's recurring
operational performance;
* Passenger revenue per available seat mile (PRASM) excludes the
impact of fresh start reporting as management believes the
exclusion of this item is helpful to investors to evaluate the
company's recurring operational performance;
* Delta presents length of haul adjusted PRASM excluding charter
revenue because management believes this provides a more
meaningful comparison of the company's PRASM to the industry;
* Delta presents mainline CASM excluding fuel expense because
management believes high fuel prices mask the progress achieved
toward it business plan targets; and
* Delta presents free cash flow because management believes this
metric is helpful to investors to evaluate changes in the
company's liquidity position.
In connection with its emergence from bankruptcy on April 30, 2007,
Delta adopted fresh start reporting in accordance with American
Institute of Certified Public Accountants' Statement of Position 90-7
"Financial Reporting by Entities in Reorganization under the
Bankruptcy Code." The adoption of fresh start reporting results in
Delta's becoming a new entity for financial reporting purposes.
Accordingly, Delta's consolidated financial statements after April 30,
2007 are not comparable to its financial statements for any period
prior to emergence. However, to provide a basis of comparison to prior
year results, Delta has combined the results for (a) the one month
ended April 30, 2007 with the two months ended June 30, 2007 and (b)
the four months ended April 30, 2007 with the two months ended June
30, 2007.
(Combined)
Three
Months Ended
(in millions) June 30, 2007
-------------
Net income (loss) $ 1,768
Diluted weighted average shares outstanding 393.8(1)
-------
Earnings (loss) per share $ 4.49
-------
Items excluded:
Reorganization items, net (1,515)
Interest earned due to bankruptcy 12
Post-emergence bankruptcy-related fees 9
-------
Total items excluded (1,494)
-------
Net income (loss) excluding reorganization and
related items $ 274
-------
Diluted weighted average shares outstanding 393.8(1)
-------
Diluted earnings (loss) per share excluding
reorganization and related items $ 0.70
=======
(1) Excludes 233.8 million weighted average dilutive shares of the
Predecessor outstanding as of April 30, 2007.
(Combined)
Three
Months Ended
(in millions) June 30, 2007
-------------
Operating income $ 490
=======
Operating margin 9.8%
=======
Items excluded:
Post-emergence bankruptcy-related
professional fees 9
-------
Total items excluded 9
-------
Operating income excluding post-emergence
bankruptcy-related professional fees $ 499
=======
Operating margin excluding post-emergence
bankruptcy-related professional fees 10.0%
=======
Three Months Ended
June 30,
2007 2006
(in millions) (Combined) (Predecessor)
---------- -------------
Pre-tax income (loss) $ 1,867 ($2,201)
Items excluded:
Reorganization items, net (1,515) 2,380
Interest earned due to bankruptcy 12 --
Post-emergence bankruptcy-related
professional fees 9 --
------- ---------
Total items excluded (1,494) 2,380
------- ---------
Pre-tax income (loss) excluding
reorganization and related items $ 373 $ 179
======= =========
Average price per fuel gallon $ 2.09 $ 2.02
Items excluded:
Fresh start impact (0.04) (0.03)
------- ---------
Total items excluded (0.04) (0.03)
------- ---------
Average price per fuel gallon excluding
fresh start impact $ 2.05 $ 1.99
======= =========
(Combined) (Predecessor) (Combined) (Predecessor)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
--------- ------------ --------- ------------
PRASM 11.78c 11.16c 11.20c 10.46c
Items excluded:
Fresh start impact (0.11) -- (0.06) --
------ ------ ------ ------
Total items excluded (0.11) -- (0.06) --
------ ------ ------ ------
PRASM excluding
fresh start impact 11.67c 11.16c 11.14c 10.46c
====== ====== ====== ======
Consolidated CASM 11.59c 11.37c 11.45c 11.75c
Items excluded:
Accounting
Adjustments -- -- -- (0.17)
Profit sharing (0.21) -- (0.11) --
Post-emergence
bankruptcy-related
professional fees (0.02) -- (0.01) --
------ ------ ------ ------
Total items
excluded (0.23) -- (0.12) (0.17)
------ ------ ------ ------
CASM excluding
certain items 11.36c 11.37c 11.33c 11.58c
------ ------ ------ ------
Fuel expense and
related taxes (2.92) (3.02) (2.81) (2.90)
------ ------ ------ ------
CASM excluding fuel
expense and certain
items 8.44c 8.35c 8.52c 8.68c
====== ====== ====== ======
Mainline CASM 10.41c 10.23c 10.21c 10.67c
Items excluded:
Accounting
Adjustments -- -- -- (0.19)
Profit sharing (0.25) -- (0.13) --
Post-emergence
bankruptcy-related
professional fees (0.03) -- (0.01) --
------ ------ ------ ------
Total items excluded (0.28) -- (0.14) (0.19)
------ ------ ------ ------
Mainline CASM
excluding certain
items 10.13c 10.23c 10.07c 10.48c
------ ------ ------ ------
Fuel expense (3.20) (3.26) (3.09) (3.13)
------ ------ ------ ------
Mainline CASM
excluding fuel
expense and
certain items 6.93c 6.97c 6.98c 7.35c
====== ====== ====== ======
June 30, 2007
(in millions) -------------
Net cash provided
by operating
activities $459
Net cash used in
investing
activities (77)
Adjustment:
Increase in short-
term investments,
net 759
--------
Total adjustment 759
--------
Free cash flow $ 1,141
========
(Combined) (Predecessor)
Five Year Ended
Months Ended December 31,
May 31, 2007 2005
------------ ------------
PRASM 10.96c 9.33c
Adjustment for
charter revenue (0.05) (0.05)
------------ ------------
PRASM excluding
charter revenue 10.91c 9.28c
------------ ------------
Length of haul
adjustment (0.43) (0.64)
------------ ------------
Length of Haul
adjusted PRASM
excluding charter
revenue 10.48c 8.64c
============ ============
Industry average
PRASM 10.93c 9.93c
Percentage of
industry average 96% 86%
============ ============
(Combined) (Predecessor) (Combined)
Two One Three
Months Ended Month Ended Months Ended
June 30, 2007 April 30, 2007 June 30, 2007
------------- -------------- -------------
Revenue Passenger
Miles (RPMs)
Consolidated 21,755 9,823 31,578
Mainline 18,481 8,295 26,776
Available Seat
Miles (ASMs)
Consolidated 26,069 12,058 38,127
Mainline 22,017 10,113 32,130
(Combined) (Predecessor) (Combined)
Two Four Six
Months Ended Months Ended Months Ended
June 30, 2007 April 30, 2007 June 30, 2007
------------- -------------- -------------
Revenue Passenger
Miles (RPMs)
Consolidated 21,754 37,036 58,790
Mainline 18,481 31,288 49,769
Available Seat
Miles (ASMs)
Consolidated 26,070 47,337 73,407
Mainline 22,017 39,667 61,684