ATLANTA, Jan. 27, 2009 (GLOBE NEWSWIRE) -- Delta Air Lines (NYSE:DAL) today reported financial results for the quarter and year ended Dec. 31, 2008. Key points include:
* Delta's net loss for the December 2008 quarter was $340 million, or $0.50 per diluted share, excluding special items described below, and the impact of out-of-period fuel hedges.(1) Results include $0.12 per diluted share from the negative non-cash impact of purchase accounting. * Delta would have reported a $167 million net profit excluding special items in the December 2008 quarter, if fuel had been purchased at market prices. * Delta's reported net loss for the December 2008 quarter was $1.4 billion, including an over $900 million charge related to broad-based employee equity awards, and a $91 million loss on out-of-period fuel hedges. * Delta completed its merger with Northwest on Oct. 29, 2008, creating the world's largest airline. * As of December 31, 2008, Delta had $6.1 billion in total liquidity and cash collateral posted with hedge counterparties.
Delta's 2008 net loss was $503 million, or $1.08 per diluted share, excluding (1) special items that primarily consist of an over $900 million non-cash charge related to employee equity awards that were issued or vested in connection with the merger and $7.3 billion in non-cash goodwill and other intangible asset impairment charges reported earlier this year, and (2) a $91 million loss on out-of-period fuel hedges. Delta's reported 2008 net loss was $8.9 billion, or $19.08 per diluted share.
Unless otherwise indicated, Delta's financial results for the December quarter and full year 2008 are presented on a GAAP basis, which include results for Northwest Airlines following the completion of the merger for the period Oct. 30, 2008 through Dec. 31, 2008.(2) As a result of the merger, Delta's financial results include approximately $80 million in higher expenses from the non-cash impact of purchase accounting, or $0.12 per diluted share for the December 2008 quarter.
"I want to thank my 85,000 Delta colleagues for their outstanding achievements in 2008 - a year where we not only faced the severe challenges brought on by over $2 billion in increased fuel costs and the onset of a global recession, but also closed our merger with Northwest and began a smooth integration process," said Richard Anderson, Delta's chief executive officer. "Despite the difficult economic environment, we expect to be solidly profitable in 2009 driven by lower fuel costs, capacity discipline, and merger synergies. Delta people have a great track record for achieving their goals, and I am confident that 2009 will be another successful year."
Merger with Northwest
Delta completed its merger with Northwest during the fourth quarter, creating the world's largest airline, and expects the merger to generate $500 million in synergies in 2009 and $2 billion in annual run-rate synergies by 2012. As a result of significant integration planning activities that began prior to the merger, the company is on track in its integration efforts and achieved many milestones during the quarter, including:
* Delta placed its code on over 90% of Northwest routes, creating thousands of additional connecting opportunities for its customers; * Delta extended its exclusive co-brand credit card partnership with American Express through 2015, which provided the company over $1 billion in immediate liquidity and is expected to provide an additional $1 billion in contract enhancements over the next two years; * Delta and Northwest pilots, represented by the Air Line Pilots Association, achieved a single seniority list for the combined group. More than 25 percent of Delta's total workforce has now resolved seniority integration, including pilots, flight dispatchers, meteorologists, aircraft maintenance technicians and other TechOps employees; * The National Mediation Board ruled that Delta and Northwest now constitute a single transportation system for representation purposes under the Railway Labor Act. This is an important milestone toward resolving representation issues, which will allow alignment of pay, benefits and work rules for all employees of the new Delta; * Elite members of both airlines' loyalty programs gained immediate complimentary upgrade reciprocity; and * Delta completed the re-branding of approximately 50 of the airports in which Northwest operates and began a program to paint all Northwest mainline aircraft in the Delta livery by the end of 2010.
Revenue Environment
Delta's GAAP operating revenue grew to $6.7 billion in the December 2008 quarter as a result of its merger with Northwest Airlines. The company believes it is more meaningful to compare results year-over-year on a combined basis, shown below, which includes three full months in the December 2007 and 2008 quarters for Northwest. On this basis, operating revenue was flat year-over-year on a 4% decline in capacity.
GAAP(3) Combined(4)
--------------- ---------------
(in millions) Incr Incr
4Q08 4Q07 (Decr) 4Q08 4Q07 (Decr)
--------------- ------ --------------- ------
Passenger $5,735 $4,067 41% $6,657 $6,711 (1%)
Cargo 230 132 74% 285 374 (24%)
Other, net 748 484 55% 826 705 17%
------ ------ ------ ------
Total Operating
Revenue $6,713 $4,683 43% $7,768 $7,790 0%
------ ------ ------ ------
On a combined basis:
* Passenger revenue fell 1%, or $54 million, compared to the prior year period due to a 4% decline in capacity, partially offset by a 3% increase in unit revenue. These results reflect the weakening of the revenue environment during the quarter caused by the global economic recession; * Cargo revenue declined 24%, or $89 million, due primarily to proactive reductions of Northwest freighter capacity; and * Other, net revenue grew 17%, or $121 million, primarily due to increased revenue from baggage fees.
Based on ATA data for 2008, Delta and Northwest each achieved a revenue premium to the industry. The consolidated length of haul adjusted passenger unit revenue (PRASM) was 101% and 103%, respectively, of industry average PRASM (excluding Delta and Northwest) for the year. During the December 2008 quarter, 40% of Delta and Northwest combined capacity was deployed on international routes and 60% on domestic routes.
Comparisons of combined revenue-related statistics are as follows:
Increase
(Decrease) 4Q08 versus 4Q07
----------------------------------
Combined(4) Change Unit
4Q08 ($M) YOY Revenue Yield Capacity
---------- ----------------------------------
Passenger Revenue
Domestic(5) $3,059 (8.4%) 4.1% (0.5%) (13.4%)
Atlantic 1,263 10.5% (2.8%) 1.3% 13.7%
Latin America 310 4.8% 5.5% 11.8% (0.7%)
Pacific 637 9.6% 4.6% 4.4% 4.8%
---------- ----------------------------------
Total mainline $5,269 (1.7%) 2.7% 1.4% (4.2%)
Regional 1,388 2.6% 3.7% 3.1% (1.0%)
---------- ----------------------------------
Consolidated $6,657 (0.8%) 3.1% 2.0% (3.8%)
"Delta's proactive decision to reduce domestic capacity during 2008 mitigated the impact of the decline in demand we saw over the course of the fourth quarter. We expect the worldwide economy to be difficult throughout 2009; however, if fuel prices remain at current levels, we believe the benefit of lower fuel prices will more than offset the revenue decline," said Edward Bastian, Delta's president. "Delta has the tools required to manage through these tough economic times - with the broadest, most diverse network in the industry; an estimated $2 billion in annual merger synergies to be obtained; best-in-class costs; a solid liquidity balance; unmatched fleet flexibility; and the discipline and drive of the new Delta team."
Capacity Discipline
In 2008, Delta demonstrated its firm commitment to capacity discipline and its ability to quickly reduce fixed and variable costs associated with reduced capacity. Delta led the industry in early 2008 in responding to high fuel prices and the weakening demand environment, resulting in a reduction in domestic capacity of 11% in the last six months of 2008. Delta's flexible and cost efficient fleet is a unique tool that allows the company to reduce capacity quickly. In 2009, the company plans to remove 40-50 mainline aircraft from the fleet as it eliminates the fixed costs associated with its 6 - 8% system capacity reduction. In addition, in January 2009, Delta offered its second voluntary workforce reduction program in 12 months to more closely align its staffing with lower capacity levels. Delta will continue to monitor the demand environment and has full flexibility to further reduce capacity if warranted.
Cost Discipline
Delta's GAAP operating expenses increased to $7.8 billion in the December 2008 quarter primarily due to the company's merger with Northwest Airlines. On a combined basis, operating expenses increased 23% due to $1.2 billion in mainly non-cash special items, and $301 million in higher expense from out-of-period fuel hedges.(6) In addition, operating expenses were $33 million higher due to the impact of purchase accounting, which primarily relates to marking to market Northwest pension plan assets.
GAAP(3) Combined(4)
--------------- ---------------
(in millions) Incr Incr
4Q08 4Q07 (Decr) 4Q08 4Q07 (Decr)
--------------- ------ --------------- ------
Operating expense $7,810 $4,685 67% $9,451 $7,705 23%
Operating expense
excluding special
items and impact
of out-of-period
fuel hedges $6,732 $4,685 44% $7,914 $7,726 2%
Mainline CASM 14.83 11.18 33% 15.94 11.82 35%
Mainline CASM
excluding fuel
expense and
special items 7.22 6.79 6% 7.29 7.09 3%
Non-operating expense $341 $103 NM $364 $190 NM
On a combined basis:
* Mainline unit cost (CASM(7)) excluding fuel expense and special items increased 3% year-over-year in the December 2008 quarter due to prior year credits and the impact of purchase accounting, partially offset by improved productivity; and * Non-operating expenses, increased $174 million in the December 2008 quarter due to $77 million in foreign exchange losses and $66 million lower interest income. In addition, purchase accounting drove $47 million in higher interest expense due to increased amortization of debt discount, reflecting lower fair value of Northwest debt at the merger date.
Liquidity Position
At Dec. 31, 2008, Delta had $6.1 billion in total liquidity and net cash collateral posted with hedge counterparties. Total liquidity includes $4.5 billion in cash, cash equivalents and short-term investments and $500 million available under an undrawn line of credit. Net cash collateral posted with hedge counterparties was $1.1 billion at Dec. 31, 2008.
At Dec. 31, 2008, Delta held $120 million in auction rate securities classified as long-term assets. These amounts were previously classified as short-term investments.
As previously announced, in December, Delta:
* Received $1 billion from the pre-purchase of SkyMiles in connection with the multi-year extension of its exclusive co-brand credit card partnership with American Express; and * Sold approximately 18 million shares of common stock, generating gross proceeds of $196 million. All of the shares of stock in the offering had been withheld as the employee portion of withholding taxes on the employee equity awards which were issued or vested in connection with Delta's merger with Northwest.
"Delta people, once again, met the challenge of improving productivity in 2008 to help mitigate the impact of high fuel costs and a slowing economy. Their hard work allowed the company to remove the costs associated with reduced capacity, while continuing to make critical investments in our people, product and infrastructure. We will apply the Delta tradition of cost discipline across the entire company, and I am confident that we'll meet the cost targets necessary to maintain our best-in-class unit cost structure," said Hank Halter, chief financial officer. "In addition, we expect to generate cash and improve our liquidity in 2009 through our disciplined approach to making investments in our business, right-sizing our operations in the current demand environment, and achieving targeted merger synergies."
Fuel Price and Related Hedges
During the December 2008 quarter, Delta hedged 58% of its fuel consumption, resulting in an average fuel price of $2.90 per gallon.(8) Included in the fuel price is $507 million in fuel hedge losses in the fourth quarter.
Three Months Ended
Dec. 31, 2008 ($M)
-----------------------------------------
Operating Non-Operating Total
------------- ------------- -------------
Non-cash, out-of-period
loss $91 $10 $101
Loss (gain) on
settled contracts 507 (1) 506
------------- ------------- -------------
Total net losses $598 $9 $607
------------- ------------- -------------
The table below represents the fuel hedges Delta had in place as of Jan. 23, 2009 (see Note A for additional information about Delta's fuel hedges):
Avg. Jet Fuel
Equivalent* Fuel
-------------------- Price/Gal.*
Percent (at today's
Hedged Cap Floor fwd. curve)
-------- -------------------- ------------
Q1 2009 80% $2.81 $2.43 $2.34
Q2 2009 85% $2.45 $2.09 $2.17
Q3 2009 55% $2.19 $1.22 $2.10
Q4 2009 32% $2.24 $1.05 $2.00
* Includes tax and transportation costs of approximately $0.17/gallon.
2008 Highlights
In 2008, in addition to completing its merger with Northwest Airlines, Delta demonstrated its commitment to delivering an industry-leading customer experience, creating long-term value for its shareholders and recognizing the valuable contributions of its employees by:
* Investing throughout the year in its employees through almost $500 million in pension and other retirement program contributions for Delta and Northwest employees, $56 million in combined Shared Reward and Incentive Program payments, pay raises and merger- related equity awards issued in 2008; * Investing in new technology and process re-engineering, resulting in a reduction of mishandled bags at Delta and Northwest by 20% and 30%, respectively, year-over-year in the December quarter; * Launching its joint venture with Air France, further strengthening the SkyTeam alliance and filling a key position in Delta's portfolio by connecting its international gateways in Atlanta and New York to one of the world's premier business airports at London- Heathrow; * Receiving antitrust immunity for six-way alliance activities in trans-Atlantic markets for SkyTeam members Air France, Alitalia, CSA Czech Airlines, Delta, KLM Royal Dutch Airlines and Northwest Airlines, enabling the carriers to offer customers more choice in flight schedules, travel times, services and fares; * Implementing an expanded marketing alliance with Alaska Air Group, allowing the companies to offer customers more departures along the West Coast than any U.S. airline and the enhanced ability to connect passengers to Delta's growing global route system; * Continuing its international expansion to unique destinations and announcing new service from Los Angeles to Sydney, Australia to begin in July 2009, making Delta the only U.S. carrier to serve six continents; * Taking delivery of two new B777-LR aircraft to support Delta's international expansion and five B737-700 aircraft that allow the addition of service into airports requiring high-performance aircraft such as in Tegucigalpa, Honduras; * Providing SkyMiles members with more ways to redeem their miles by initiating a "Pay with Miles" program in partnership with American Express, expanding access to Medallion(r) Marketplace, growing the SkyMiles online auction program, and enhancing the Award Travel search calendar on delta.com; * Announcing plans to add new flat bed seats on Boeing 767-400 aircraft to offer customers the comfort of a 180-degree full flat bed on every Delta flight between the United States and London's Heathrow Airport by the summer of 2009; * Joining with Aircell(r) to announce that Delta customers traveling throughout the continental United States will experience the convenience of broadband Wi-Fi on board Delta's domestic fleet of more than 330 mainline aircraft by the summer of 2009; and * Earning the prestigious 2008 Green Cross for Safety Medal from The National Safety Council, which recognizes organizations and their leaders for outstanding achievements in safety and health, community service and responsible citizenship.
Special Items
Delta recorded approximately $1 billion in special items in the December 2008 quarter, including:
* Approximately $970 million in primarily non-cash, merger-related charges, including $904 million related to employee equity awards that were issued or vested in connection with the merger; * An $18 million charge related to Delta's previously announced plans to close operations in Concourse C at the Cincinnati airport; and * A $20 million write-down in the value of auction rate securities.
March 2009 Quarter and Full Year 2009 Guidance
Delta's projections for March 2009 quarter and 2009 performance are below. Financial results for Northwest Airlines are included for the entire periods of the March 2008 quarter and the full year 2008 so that year-over-year comparisons to the March 2009 quarter and full year 2009 projections are more meaningful.
1Q 2009 Forecast 2009 Forecast
--------------------- ---------------------
Non-passenger revenue(9) $1.1 billion $4.8 billion
Fuel price, including
taxes and hedges $2.34 $2.15
Operating margin (5%) - (7%) 6% - 8%
Capital expenditures $550 million $1.6 billion
1Q 2009 Forecast 2009 Forecast
(compared to 1Q 2008) (compared to 2008)
--------------------- ---------------------
Consolidated passenger
unit revenue Down 4%
Mainline unit costs -
excluding fuel expense
and profit sharing(10) Up 7% - 9% Up 5% - 7%
System capacity Down 5% - 7% Down 6% - 8%
Domestic Down 10% - 12% Down 8% - 10%
International Flat to up 2% Down 3% - 5%
Mainline capacity Down 6% - 8% Down 6% - 8%
Domestic Down 13% - 15% Down 10% - 12%
International Flat to Up 2% Down 3% - 5%
Ancillary Businesses
Delta's ancillary businesses include TechOps, the largest airline MRO organization in North America, which serves more than 100 aviation and airline customers around the world, and DAL Global Services, which provides general aviation services, training and technical services, and staffing to airlines including Delta. The following table provides summarized financial information about these businesses for the December 2008 quarter.
Three Months Ended
December 31, 2008
--------------------------
TechOps DAL Global
(MRO) Services
--------------------------
Operating Revenue (in millions) $142 $49
Operating Margin 11% (2%)
Other Matters
Included with this press release are Delta's Consolidated Statements of Operations for the three and twelve months ended Dec. 31, 2008 and 2007; a statistical summary for those periods; selected balance sheet data as of Dec. 31, 2008 and 2007; and a reconciliation of certain non-GAAP financial measures.
About Delta
Delta Air Lines is the world's largest airline. From its hubs in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Salt Lake City and Tokyo-Narita, Delta, its Northwest subsidiary and Delta Connection carriers offer service to more than 377 destinations worldwide in 66 countries and serves more than 170 million passengers each year. Delta's marketing alliances allow customers to earn and redeem either SkyMiles or WorldPerks on more than 16,000 daily flights offered by SkyTeam and other partners. Delta and its 75,000 worldwide employees are reshaping the aviation industry as the only U.S. airline to offer a full global network. Customers can check in for flights, print boarding passes, check bags and flight status at delta.com.
The Delta Air Lines, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1825
Endnotes
(1) Note B to the attached Consolidated Statements of Operations provides a reconciliation of non-GAAP financial measures used in this release and provides the reasons management uses those measures.
(2) Because Delta completed its merger with Northwest Airlines on Oct. 29, 2008, Delta's financial results under generally accepted accounting principles (GAAP) for 2008 and the December 2008 quarter include the results of Northwest Airlines for the period Oct. 30, 2008 through Dec. 31, 2008.
Under GAAP, Delta does not include in its financial results the results of Northwest Airlines prior to the completion of the merger. Accordingly, Delta's financial results under GAAP for the December 2007 quarter do not include the results of Northwest Airlines for that period. This impacts the comparability of Delta's financial statements under GAAP for the December 2008 and 2007 quarters.
In this press release, Delta presents its financial results for the December 2008 and December 2007 quarters under GAAP as well as on a "combined basis". "Combined basis" means the company combines the financial results of Delta and Northwest as if the merger had occurred prior to the beginning of the applicable period. For example, Delta's financial results on a combined basis for the December 2008 quarter include the financial results of Northwest Airlines for the period Oct. 1, 2008 through Dec. 31, 2008. Similarly, Delta's financial results on a combined basis for the December 2007 quarter include the financial results of Northwest Airlines for the period Oct. 1, 2007 through Dec. 31, 2007. Delta believes presenting this financial information on a combined basis provides a more meaningful basis for comparing Delta's year-over-year financial performance than the GAAP financial information.
This press release also includes guidance for the March 2009 quarter and full year 2009. Please note the year-over-year guidance comparisons assume the 2008 financial statements for the applicable periods were prepared on a combined basis, excluding special items and out-of-period fuel hedge losses.
(3) Financial results based on GAAP for the December 2008 quarter include results for Northwest Airlines for Oct. 30, 2008 through Dec. 31, 2008 compared to Delta standalone for the three months ended Dec. 31, 2007.
(4) Combined financial information includes results for both Delta and Northwest for the three months ended Dec. 31, 2008 and 2007.
(5) Domestic unit revenue, yield and capacity exclude charter operations.
(6) Reflects special items and out-of-period hedge impact for the three months ended Dec. 31, 2008.
(7) Delta excludes from mainline unit costs expenses for aircraft maintenance and staffing services which it 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 aircraft maintenance, and staffing services to third parties, freighter operations and MLT. Management believes these classifications provide a more consistent and comparable reflection of Delta's mainline operations.
(8) December 2008 quarter average fuel price of $2.90 per gallon reflects the consolidated cost per gallon for mainline, owned and contract carrier operations, net of fuel hedge impact.
(9) Includes impact of deferred revenue accounting for SkyMiles program.
(10) Delta's March 2009 quarter mainline unit cost excluding fuel expense and profit sharing is expected to increase 7-9% year-over-year due to higher pension expense and the timing of removing costs related to capacity reductions.
Forward-looking Statements
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 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 ability of our credit card processors to take significant holdbacks in certain circumstances; the effects of terrorist attacks; competitive conditions in the airline industry; and our ability to achieve expected synergies from our merger with Northwest.
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, 2007 and Form 10-Q for the quarterly period ended September 30, 2008. Caution should be taken not to place undue reliance on Delta's forward-looking statements, which represent Delta's views only as of January 27, 2009, and which Delta has no current intention to update.
DELTA AIR LINES, INC.
Consolidated Statements of Operations(1)
(Unaudited)
Three Three
Months Months
Ended Ended
(in millions, except per Dec. 31, Dec. 31, Change Change
share data) 2008 2007 $ H(L) % H(L)
---------------------------------------------------------------------
OPERATING REVENUE:
Passenger:
Mainline $4,528 $3,052 $1,476 48%
Regional carriers 1,207 1,015 192 19%
------ ------ ------
Total passenger revenue 5,735 4,067 1,668 41%
Cargo 230 132 98 74%
Other, net 748 484 264 55%
------ ------ ------
Total operating revenue 6,713 4,683 2,030 43%
OPERATING EXPENSES:
Aircraft fuel and related
taxes 2,294 1,356 938 69%
Salaries and related costs 1,533 1,070 463 43%
Contract carrier
arrangements (2) 884 851 33 4%
Depreciation and
amortization 374 288 86 30%
Aircraft maintenance
materials and outside
repairs 333 245 88 36%
Contracted services 370 246 124 50%
Passenger commissions and
other selling expenses 298 212 86 41%
Landing fees and other
rents 285 175 110 63%
Passenger service 129 88 41 47%
Aircraft rent 106 60 46 77%
Restructuring and merger-
related items 987 -- 987 NM
Other 217 94 123 NM
------ ------ ------
Total operating expense 7,810 4,685 3,125 67%
------ ------ ------
OPERATING LOSS (1,097) (2) (1,095) NM
OTHER (EXPENSE) INCOME:
Interest expense (277) (138) (139) NM
Interest income 19 39 (20) (51%)
Miscellaneous, net (83) (4) (79) NM
------ ------ ------
Total other expense, net (341) (103) (238) NM
------ ------ ------
LOSS BEFORE INCOME TAXES (1,438) (105) (1,333) NM
INCOME TAX BENEFIT -- 35 (35) NM
------ ------ ------
NET LOSS ($1,438) ($70) ($1,368) NM
====== ====== ======
BASIC AND DILUTED LOSS PER
SHARE ($2.11) ($0.18) NM NM
====== ====== ======
WEIGHTED AVERAGE SHARES
USED IN BASIC AND DILUTED
LOSS PER SHARE CALCULATION 682 395 NM NM
====== ====== ======
(1) Includes results for Northwest from Oct. 30, 2008 through Dec.
31, 2008.
(2) Contract carrier arrangements expense includes $268 million and
$305 million for the three months ended December 31, 2008 and
2007, respectively, for aircraft fuel and related taxes.
Delta Air Lines, Inc.
Consolidated Statements of Operations (1)
(Unaudited)
(Successor +
(Prede-
cessor) (Prede-
(Successor) (3) (Successor) cessor)
----------- ------- ----------- --------
Eight Four
Months Months
Year Ended Ended Ended
(in millions, except per December 31, Dec. 31, April 30,
share data) 2008 2007 2007 2007
-------------------------------------------------------------------
OPERATING REVENUE:
Passenger:
Mainline $15,137 $12,758 $8,929 $3,829
Regional carriers 4,446 4,170 2,874 1,296
-------- -------- -------- --------
Total passenger revenue 19,583 16,928 11,803 5,125
Cargo 686 482 334 148
Other, net 2,428 1,744 1,221 523
-------- -------- -------- --------
Total operating revenue 22,697 19,154 13,358 5,796
OPERATING EXPENSE:
Aircraft fuel and related
taxes 7,346 4,686 3,416 1,270
Salaries and related costs 4,802 4,189 2,887 1,302
Contract carrier
arrangements (2) 3,616 3,152 2,196 956
Depreciation and
amortization 1,266 1,164 778 386
Aircraft maintenance
materials and outside
repairs 1,169 983 663 320
Contracted services 1,153 996 670 326
Passenger commissions and
other selling expenses 1,030 933 635 298
Landing fees and other
rents 839 725 475 250
Passenger service 440 338 243 95
Aircraft rent 307 246 156 90
Profit sharing -- 158 144 14
Impairment of goodwill and
other intangible assets 7,296 -- -- --
Restructuring and merger-
related items 1,131 -- -- --
Other 616 488 299 189
-------- -------- -------- --------
Total operating expense 31,011 18,058 12,562 5,496
-------- -------- -------- --------
OPERATING (LOSS) INCOME (8,314) 1,096 796 300
OTHER (EXPENSE) INCOME:
Interest expense (705) (652) (390) (262)
Interest income 92 128 114 14
Miscellaneous, net (114) 32 5 27
-------- -------- -------- --------
Total other expense, net (727) (492) (271) (221)
-------- -------- -------- --------
(LOSS) INCOME BEFORE
REORGANIZATION ITEMS (9,041) 604 525 79
REORGANIZATION ITEMS, NET -- 1,215 -- 1,215
-------- -------- -------- --------
(LOSS) INCOME BEFORE INCOME
TAXES (9,041) 1,819 525 1,294
INCOME TAX BENEFIT
(PROVISION) 119 (207) (211) 4
-------- -------- -------- --------
NET (LOSS) INCOME ($8,922) $1,612 $314 $1,298
======== ======== ======== ========
BASIC (LOSS) INCOME PER
SHARE ($19.08) NM $0.80 $6.58
======== ======== ======== ========
DILUTED (LOSS) INCOME PER
SHARE ($19.08) NM $0.79 $4.63
======== ======== ======== ========
BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING 468 NM 394 197
======== ======== ======== ========
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 468 NM 395 234
======== ======== ======== ========
(1) Includes results for Northwest from Oct. 30, 2008 through Dec.
31, 2008.
(2) Contract carrier arrangements expense includes $1.3 billion and
$990 million for the year ended December 31, 2008 and 2007,
respectively, in fuel expense.
(3) 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 resulted in Delta 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 current year results, Delta
has combined the results for the four months ended April 30,
2007 with the eight months ended Dec. 31, 2007.
DELTA AIR LINES, INC.
Selected Balance Sheet Data
(In Millions)
December 31, December 31,
------------ ------------
2008 2007
------------ ------------
(Unaudited)
Cash and cash equivalents $ 4,255 $ 2,648
Short-term investments 212 138
Restricted cash and investments 453 535
Total assets 45,019 32,423
Total debt and capital leases, including
current maturities 16,571 9,000
Total shareowners' equity 848 10,113
DELTA AIR LINES
Combined Statistical Summary 1
(Unaudited)
Three Months
Ended Dec. 31,
---------------
2008 2007 Change
------ ------ ------
Consolidated:
Revenue Passenger Miles (millions) (2) 46,848 48,172 (2.7%)
Available Seat Miles (millions) (2) 58,098 60,402 (3.8%)
Passenger Load Factor (2) 80.6% 79.8% 0.8 pts
Fuel Gallons Consumed (millions) (2) 976 1,052 (7.2%)
Mainline:
Revenue Passenger Miles (millions) 40,810 42,107 (3.1%)
Available Seat Miles (millions) 50,194 52,420 (4.2%)
(Predecessor +
(Successor) Successor)
-------------- --------------
Year Ended Dec. 31,
-----------------------------
2008 2007 Change
-------------- -------------- --------
Consolidated:
Revenue Passenger Miles
(millions) (2) 202,726 200,502 1.1%
Available Seat Miles
(millions) (2) 246,164 245,259 0.4%
Passenger Load Factor (2) 82.4% 81.8% 0.6 pts
Fuel Gallons Consumed
(millions) (2) 4,158 4,254 (2.3%)
Mainline:
Revenue Passenger Miles
(millions) 177,361 176,493 0.5%
Available Seat Miles
(millions) 213,447 214,059 (0.3%)
1 Combined statistical data includes operations for both Delta and
Northwest for the three months ended December 31, 2008 and 2007.
2 Data presented includes operations under our contract carrier
arrangements.
Fleet Information
Delta's fleet and firm orders at December 31, 2008 are summarized
in the following table.
Leased
-------------------
# Average Firm
Aircraft Type A/C Age Owned Operating Capital Orders
------------------------------------------------------------ ------
Passenger
Aircraft
----------
B737-700 5 0 5 -- -- 5
B737-800 71 8 71 -- -- 30
B747-400 16 15 4 12 -- --
B757-200 159 17 92 34 33 --
B757-200ER 17 11 -- 15 2 --
B757-300 16 6 16 -- -- --
B767-300 21 18 4 17 -- --
B767-300ER 59 13 50 9 -- --
B767-400 21 8 21 -- -- --
B777-200ER 8 9 8 -- -- --
B777-200LR 2 1 2 -- -- 8
B787-800 -- n/a -- -- -- 18
A319-100 57 7 55 2 -- 5
A320-200 69 14 41 28 -- 2
A330-200 11 4 11 -- -- --
A330-300 21 3 21 -- -- --
MD-88 117 19 63 21 33 --
MD-90 16 13 16 -- -- --
DC-9 71 35 71 -- -- --
CRJ-100 78 12 21 44 13 --
CRJ-200 153 6 5 148 -- --
CRJ-700 15 5 15 -- -- --
CRJ-900 49 1 49 -- -- 10
Saab 340 49 11 -- 49 -- --
EMB 175 36 1 36 -- -- --
Freighter
Aircraft
----------
B747F 10 25 7 3 -- --
----- --------------------------- ------
Total 1,147 12.3 684 382 81 78
----- --------------------------- ------
The table above:
* Excludes 31 aircraft which will be sold to third parties
immediately following delivery of these aircraft to Delta;
* Excludes two aircraft orders assigned to Pinnacle Airlines; and
* Includes three B767-300, two MD-88, four DC-9, one B757-200 and
two B767-300ER aircraft that have been temporarily grounded.
During the December 2008 quarter, the company:
* Took delivery of one B737-700, five CRJ-900, and six EMB-175
aircraft;
* Adjusted the fleet count to add two EMB-174 aircraft that were
delivered in September, 2008, but not flown in-service until
October, 2008.
* Adjusted the fleet count to add back four DC-9s that were
temporarily grounded in a previous quarter;
* Permanently grounded six B757-200, and one 747-200F aircraft;
* Permanently grounded three CRJ-100 and four CRJ-200
aircraft pending return to lessor; and
* Sold one A-320 aircraft.
In addition, the company sold two B757-200, three A-320, and
two B747-200F aircraft that had been removed from the fleet
prior to October 1, 2008.
Note A:
The tables below represent additional information about fuel hedges
Delta had in place as of Jan. 23, 2009:
2009
-------------------------------------
Legacy Positions: Q1 Q2 Q3 Q4
------- ------- ------- -------
Call 6% 6% 18% 15%
Collar 40% 33% 3% --
Swap 9% -- -- --
------- ------- ------- -------
Total 55% 39% 21% 15%
------- ------- ------- -------
Avg. crude call cap $ 90 $ 90 $ 82 $ 86
Avg. crude collar cap $ 122 $ 122 $ 127 $ --
Avg. crude collar floor $ 108 $ 108 $ 118 $ --
Recent Positions:
Call 1% 5% 12% 4%
Swap 24% 41% 22% 13%
------- ------- ------- -------
Total 25% 46% 34% 17%
------- ------- ------- -------
Avg. crude cap $ 45 $ 55 $ 59 $ 61
Total hedge percent 80% 85% 55% 32%
Note B: The following tables show reconciliations of non-GAAP
financial measures. The reasons Delta uses these measures are
described below.
* Because Delta completed its merger with Northwest Airlines on
October 29, 2008, Delta's financial results under generally
accepted accounting principles (GAAP) for 2008 and the December
2008 quarter include the results of Northwest Airlines for the
period October 30, 2008 through December 31, 2008.
Under GAAP, Delta does not include in its financial results the
results of Northwest Airlines prior to the completion of the
merger. Accordingly, Delta's financial results under GAAP for
the December 2007 quarter do not include the results of Northwest
Airlines for that period. This impacts the comparability of
Delta's financial statements under GAAP for the December 2008 and
2007 quarters.
Delta presents its financial results for the December 2008 and
December 2007 quarters under GAAP as well as on a "combined
basis." "Combined basis" means the company combines the
financial results of Delta and Northwest as if the merger had
occurred prior to the beginning of the applicable period. Delta
believes presenting this financial information on a combined
basis provides a more meaningful basis for comparing Delta's
year-over-year financial performance than the GAAP financial
information.
The press release also includes guidance for the March 2009
quarter and full year 2009. Please note the year-over-year
guidance comparisons assume the 2008 financial statements for
the applicable periods were prepared on a combined basis,
excluding special items and out-of-period fuel hedge losses.
Delta is unable to reconcile certain forward-looking projections
to GAAP, including projected Mainline non-fuel CASM, as the
nature or amount of special items cannot be estimated at this
time.
* Delta excludes special items because management believes the
exclusion of these items is helpful to investors to evaluate the
company's recurring operational performance.
* Delta excludes non-cash mark-to-market (MTM) adjustments related
to fuel hedges settling in future periods in order to present
financial results related to operations in the period shown.
* Delta presents Mainline CASM excluding fuel expense and related
taxes because management believes the volatility in fuel prices
mask the progress toward achieving business plan targets.
* Mainline cost per available seat mile (CASM) excludes $221
million and $123 million for the years ended December 31, 2008
and 2007, respectively, and Combined Mainline CASM excludes
$303 million and $406 million for the years ended December 31,
2008 and 2007, respectively, in transactions with third parties
as these costs are not associated with the generation of a seat
mile. These transactions include expenses related to Delta's
providing maintenance services, staffing services and freight
operations as well as Delta's vacation wholesale operations.
* Delta presents length of haul adjusted passenger revenue per
available seat mile (PRASM), including adjustments for other
airline revenue and certain other revenue, because management
believes this provides a more meaningful comparison of the
company's PRASM to the industry.
Three
Months Year
Ended Ended
Dec. 31, Dec. 31,
2008 2008
------- -------
(in millions, except per share data)
Net loss $(1,438) $(8,922)
Items excluded:
Impairment of goodwill and other
intangible assets -- 7,296
Merger-related expenses 969 978
Restructuring and related items 18 139
Mark-to-market ("MTM") adjustments to fuel
hedges settling in 2009 91 91
Write-down in value of auction rate
securities 20 20
Termination of contract carrier arrangements -- 14
Income tax benefit associated with
intangible assets -- (119)
------- -------
Net loss excluding special items and
MTM adjustments to fuel hedges settling
in 2009 $ (340) $ (503)
======= =======
Basic and diluted weighted average shares
outstanding 682 468
Basic and diluted loss per share excluding
special items and MTM adjustments to fuel
hedges settling in 2009 $ (0.50) $ (1.08)
======= =======
Three
Months
Ended
Dec. 31,
2008
-------
Net loss excluding special items and MTM
adjustments to fuel hedges settling in
2009 per above $ (340)
Items excluded:
Fuel hedge losses on contracts that settled
in 2008 507
-------
Net income excluding fuel hedge losses,
special items and MTM adjustments to fuel
hedges settling in 2009 $ 167
=======
Passenger and
operating revenue Delta Northwest Combined
----- --------- --------
Three Three
Months Oct.1, Months
Ended 2008 to Ended Passenger
Dec. 31, Oct. 29, Dec. 31, Mile
(in millions) 2008 2008 2008 Yield PRASM
------ ------ ------ ------ ------
Passenger:
Domestic $2,639 $ 420 $3,059 13.31 c 11.14 c
Atlantic 1,129 134 1,263 12.02 9.26
Latin America 308 2 310 14.92 10.93
Pacific 452 185 637 11.71 9.90
------ ------ ------
Total mainline 4,528 741 5,269 12.91 10.50
Regional carriers 1,207 181 1,388 22.99 17.56
------ ------ ------
Total passenger
revenue 5,735 922 6,657 14.21 11.46
Cargo 230 55 285
Other, net 748 78 826
------ ------ ------
Total operating
revenue $6,713 $1,055 $7,768
====== ====== ======
Passenger
Three Months Ended Mile
December 31, 2007 Yield PRASM
--------------------------- ------ ------
(in millions) Delta Northwest Combined
----- --------- --------
Passenger:
Domestic $1,930 $1,409 $3,339 13.38 c 10.71 c
Atlantic 797 346 1,143 11.87 9.52
Latin America 277 19 296 13.35 10.36
Pacific 48 533 581 11.22 9.47
------ ------ ------
Total mainline 3,052 2,307 5,359 12.73 10.22
Regional carriers 1,015 337 1,352 22.30 16.94
------ ------ ------
Total passenger
revenue 4,067 2,644 6,711 13.93 11.11
Cargo 132 242 374
Other, net 484 221 705
------ ------ ------
Total operating
revenue $4,683 $3,107 $7,790
====== ====== ======
Year Ended
December 31, 2008
-----------------------
Delta Northwest
------- ---------
PRASM 11.82 c 12.52 c
Length of haul adjustment, including
adjustments for other airline and
passenger revenue 0.22 (0.25)
------- -------
Length of haul adjusted PRASM, including
adjustments for other airline and
passenger revenue 12.04 c 12.27 c
------- -------
Industry average PRASM 11.92 c 11.92 c
------- -------
Percentage of industry average 101% 103%
======= =======
Three Months Ended
December 31,
----------------------
(in millions) 2008 2007
------- -------
Operating expense $ 7,810 $ 4,685
Items excluded:
Merger-related items (969) --
Restructuring and related items (18) --
MTM adjustments to fuel hedges settling
in 2009 (91) --
------- -------
Operating expense excluding special items
and MTM adjustments to fuel hedges
settling in 2009 6,732 4,685
Northwest results for the period from
October 1 to October 29, 2008 and three
months ended December 31, 2007,
respectively 1,641 3,020
Items excluded:
Merger-related items (249) --
MTM adjustments to fuel hedges settling
in 2009 (210) 21
------- -------
Combined operating expense excluding
special items and MTM adjustments to fuel
hedges settling in 2009 $ 7,914 $ 7,726
======= =======
Combined operating expense including
special items and MTM adjustments to fuel
hedges settling in 2009 $ 9,451 $ 7,705
======= =======
Three Months Ended
December 31,
----------------------
2008 2007
------- -------
Mainline CASM 14.83 c 11.18 c
Items excluded:
Merger-related items (2.22) --
MTM adjustments to fuel hedges settling
in 2009 (0.21) --
Transactions with third parties and other (0.51) (0.39)
Fuel expense and related taxes (4.67) (4.00)
------- -------
Operating expense excluding fuel expense
and related taxes, special items and MTM
adjustments to fuel hedges settling in 2009 7.22 c 6.79 c
======= =======
ASMs 43,532 31,358
======= =======
Three Months Ended
December 31,
----------------------
(in millions, except per cent data) 2008 2007
------- -------
Combined Mainline CASM
Mainline operating expense $ 6,457 $ 3,507
Northwest results for the period from
October 1 to October 29, 2008 and three
months ended December 31, 2007,
respectively 1,542 2,689
------- -------
Combined Mainline operating expense $ 7,999 $ 6,196
======= =======
Combined Mainline CASM 15.94 c 11.82 c
Merger-related items (2.43) --
MTM adjustments to fuel hedges settling
in 2009 (0.60) 0.04
Transactions with third parties and other (0.60) (0.77)
Fuel expense and related taxes (5.02) (4.00)
------- -------
Combined Mainline CASM excluding fuel
expense and related taxes, special items
and MTM adjustments to fuel hedges
settling in 2009 7.29 c 7.09 c
======= =======
Combined ASMs 50,194 52,420
======= =======
Three Months
Ended
Dec. 31, 2008
-------------
Average price per fuel gallon $ 3.01
Items excluded:
MTM adjustments to fuel hedges settling
in 2009 (0.11)
-------------
Average price per fuel gallon excluding
MTM adjustments to fuel hedges settling
in 2009 $ 2.90
=============
Three Months
Ended December 31,
------------------
(in millions) 2008 2007
------- --------
Total other expense, net $ (341) $ (103)
Northwest results for the period from October 1
to October 29, 2008 and three months ended
December 31, 2007, respectively (43) (101)
Items excluded:
Write-down in value of auction rate securities 20 --
Loss on sale of interest in affiliate -- 14
------- --------
Combined Total other expense, net excluding
special items $ (364) $ (190)
======= ========
FORECAST
---------------------------------------
March 2009 Quarter Full Year 2009
Projected Range Projected Range
------------------- -----------------
Mainline CASM projection 12.36 c 12.50 c 11.62 c 11.76 c
Items excluded:
Transactions with third
parties and other (0.53) (0.53) (0.54) (0.54)
Profit Sharing -- -- (0.08) (0.08)
Fuel expense and related taxes (3.83) (3.83) (3.45) (3.45)
------------------- -----------------
Mainline CASM projection
excluding fuel expense and
related taxes and special
items 8.00 c 8.14 c 7.55 c 7.69 c
=================== =================
Change year-over-year in
Mainline CASM excluding fuel
expense and related taxes
and special items 7% 9% 5% 7%
Note: c = cents