ATLANTA, Oct. 15, 2008 (GLOBE NEWSWIRE) -- Delta Air Lines (NYSE:DAL) today reported results for the quarter ended September 30, 2008. Key points include:
* Excluding special items, Delta's net loss for the September 2008
quarter was $26 million, or $0.07 per diluted share, despite a
more than $800 million year-over-year increase in fuel costs
related to higher prices.(1),(2)
* Delta's reported GAAP net loss for the September 2008 quarter
was $50 million, or $0.13 per diluted share.
* Delta and Northwest remain on track to close their merger during
the fourth quarter of 2008.
* As of September 30, 2008, Delta had $3.1 billion in unrestricted
cash, cash equivalents and short-term investments.
Delta reported a pre-tax loss of $50 million for the September 2008 quarter. Excluding special items described below, Delta reported a pre-tax loss of $26 million in the third quarter of 2008 compared to pre-tax income of $363 million in the third quarter of 2007. The year-over-year decrease in pre-tax income was driven by higher fuel prices, partially offset by a 9% increase in operating revenue.
"As the industry deals with turbulent times in the financial markets and an uncertain demand environment, Delta holds a strong hand that will allow us to manage through the current crisis -- strong revenue growth, best-in-class cost structure and a solid liquidity position. In addition, our game-changing merger with Northwest significantly improves our ability to deal with the economic problems facing the industry and clearly differentiates Delta from its peers by creating a premier global carrier with a more durable financial future," said Richard Anderson, Delta's chief executive officer. "Throughout these challenging times, the persistence and dedication of Delta people never wavers. We are committed to building a world class global airline that provides our customers with safe, reliable operations and exceptional customer service."
Merger with Northwest
During the September 2008 quarter, Delta and Northwest achieved many significant milestones on the path toward closing the merger and completing a seamless integration of the airlines, including:
* Ratification of a joint collective bargaining agreement by Delta
and Northwest pilots. The contract will apply to both pilot
groups upon closing of the Delta-Northwest merger and run
through 2012;
* Acceptance by the Federal Aviation Administration (FAA) of the
plans the airlines submitted for the transition to a Single
Operating Certificate. This significant milestone lays the
groundwork for a smooth integration of the companies' operations
over the next 18 months;
* Overwhelming approval by both Delta and Northwest stockholders
of the pending merger. Delta stockholders approved (1) the
issuance of 1.25 shares of Delta common stock for each
outstanding share of Northwest stock to be distributed upon
closing of the merger, and (2) an amendment to Delta's broad-
based employee compensation program that will allow the company
to distribute equity to U.S.-based employees of the combined
company shortly after the merger closes;
* Amendment of the terms of the Northwest exit facility to allow
both the Delta and Northwest exit facilities to remain
outstanding until the companies are fully integrated; and
* Unconditional clearance from the European Commission of the
proposed merger, with the Commission noting the transaction
would not impede effective competition in Europe or trans-
Atlantic markets.
Revenue Momentum
Delta's total operating revenue grew 9%, or almost $500 million, in the September 2008 quarter, despite a 1% decrease in capacity. The company has continued to deliver strong top-line growth through its international expansion, pricing actions, increased passenger fees, and growth in cargo and ancillary revenue. Based on the most recently available ATA data, Delta achieved a revenue premium to the industry -- its consolidated length of haul adjusted passenger unit revenue (PRASM) was 102% of industry average PRASM (excluding Delta) for the first eight months of the year. During the September 2008 quarter, 41% of Delta's capacity was deployed on international routes and 59% on domestic routes.
Comparisons of passenger revenue-related statistics are as follows:
Increase (Decrease) in Sept. 2008
Quarter vs. Sept. 2007 Quarter
------------------------------------
Passenger
Revenue Passenger Unit
($M) Revenue Revenue Yield Capacity
--------- ------------------------------------
Domestic * $ 2,058 (3.5%) 8.1% 5.3% (9.8%)
Atlantic 1,402 33.7% 14.5% 14.0% 16.8%
Latin America 365 19.5% 17.1% 17.1% 2.1%
Pacific 96 82.5% 1.3% 6.5% 80.1%
Total mainline $ 3,921 10.8% 10.2% 8.9% 0.5%
Regional $ 1,057 (3.8%) 9.1% 8.1% (11.9%)
Consolidated $ 4,978 7.3% 8.8% 7.5% (1.4%)
* Unit revenue, yield and capacity exclude charter operations
Revenue from Cargo operations increased 35% year over year, to $162 million, due to improved yields and higher volume, particularly in international markets. Other, net revenue grew 23%, to $579 million, reflecting an increase in passenger fees, and growth in third-party Maintenance Repair and Overhaul (MRO) business.
"While near-term demand remains solid, the current economic crisis creates uncertainty about the longer-term revenue outlook. We believe the diversity we've built into our network, coupled with fleet flexibility, will help mitigate revenue risk; however, we are monitoring the demand environment at a market level and are prepared to take quick and decisive action at the first sign of weakness," said Edward Bastian, Delta's president and chief financial officer. "At the same time, economic concerns have driven the price of fuel down steeply, which will provide significant savings to us."
Cost Discipline
Delta's operating expenses increased $814 million, or 17%, compared to the September 2007 quarter, which reflects a more than $800 million increase in fuel costs due to higher prices.
Delta's mainline unit cost (CASM)(3) increased 18% to 11.96 cents for the September 2008 quarter compared to the prior year period, reflecting the significant increase in fuel costs and the special charges described below. Excluding fuel expense, special charges and 2007 profit sharing, mainline CASM increased 3% to 6.72 cents compared to the September 2007 quarter. This increase was driven primarily by higher revenue-related expenses, foreign exchange pressures, and favorable items recorded in the prior year.
Non-operating expenses increased $90 million in the September 2008 quarter. This increase includes $26 million in foreign exchange losses, $25 million in FAS 133 charges related to fuel hedges, and a $13 million impairment charge related to Delta's investment in the Reserve Primary Fund money market fund (Primary Fund).
Liquidity Position
At Sept. 30, 2008, Delta had $3.1 billion in unrestricted cash, cash equivalents and short-term investments. During the quarter, Delta borrowed the entire amount of its $1 billion revolving credit facility to increase financial flexibility as the company moves toward closing the merger with Northwest.
At the end of the third quarter, the company's unrestricted liquidity balance included an $818 million investment in the Primary Fund, after giving effect to the impairment charge discussed above, which is classified as short-term investments at Sept. 30. Based on information received from the Primary Fund, the company expects to receive approximately $300 million in the initial distribution this month.
In July, Delta amended its Visa/MasterCard credit card processing agreement to extend the contract period through Dec. 31, 2011. There continues to be no cash holdback, or reserve, required under the amended agreement.
Capital expenditures during the September 2008 quarter were $288 million, including $246 million for investments in aircraft, parts and modifications.
Fuel Hedging
During the September 2008 quarter, Delta hedged 51% of its fuel consumption, resulting in an average fuel price of $3.45 per gallon.
As of Oct. 10, 2008, Delta had the following fuel hedges in place:
Jet Fuel
Percent Equivalent
Hedged Cap
------------------------
Q4 2008 69% $3.22
Q1 2009 69% $3.33
Q2 2009 45% $3.39
Q3 2009 25% $3.34
Q4 2009 14% $2.99
2010 5% $2.93
September 2008 Quarter Highlights
During the September 2008 quarter, Delta continued the positive momentum in its business, demonstrating its ongoing commitment to maintain strong employee relations and deliver an industry-leading customer experience. Highlights include:
* Providing superior operational performance by ranking in the top
tier of its competitive set for on-time performance for the last
twelve months and by reducing the number of mishandled bags by
40% year-over-year in the September quarter;
* 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;
* Accepting delivery of four new B737-700 aircraft that will allow
the addition of service at unique airports with short runways,
extreme temperatures and high altitudes such as Tegucigalpa,
Honduras beginning in December 2008;
* Announcing new nonstop flights between Hartsfield-Jackson
Atlanta International Airport and Mumbai, India, and Kuwait
City, Kuwait beginning in November 2008;
* Announcing plans to add new full-flat beds 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 summer 2009;
* For the fourth year in a row, Delta employees and customers
partnered with the Breast Cancer Research Foundation to add to
the nearly $1 million already raised through pink product sales
and donations made on board; and
* The National Mediation Board upheld the decision by Delta flight
attendants to reject union representation and dismissed the
Association of Flight Attendants' allegations of interference in
the May 2008 representation election at Delta.
Special Items
Delta recorded special charges totaling $24 million in the September 2008 quarter, including
* A $14 million charge for early termination fees under contract
carrier arrangements;
* $7 million in merger related expenses; and
* A $3 million net charge primarily for facilities restructuring
and severance.
September 2008 Quarter and Full Year 2008 Guidance
The company projects the following for the September 2008 quarter and full year 2008:
4Q 2008 Forecast 2008 Forecast
--------------------- ---------------------
approx.
Non-passenger revenue $700 million $2.8 billion
Fuel price, including
taxes and hedges $3.21 $3.17
Operating margin,
excluding special
items 1% to 3% Flat to 2%
4Q 2008 Forecast 2008 Forecast
(compared to 4Q 2007) (compared to 2007)
--------------------- ---------------------
Consolidated
passenger unit
revenue Up 8 - 10% Up 7 - 9%
Mainline unit costs -
excluding fuel and
related taxes and
special items Flat to up 2% Flat to up 2%
System capacity Down 4 - 6% Flat
Domestic Down 12 - 14% Down 8 - 10%
International Up 13 - 15% Up 14 - 16%
Mainline capacity Flat to down 2% Flat to up 2%
Domestic Down 11 - 13% Down 9 - 11%
International Up 13 - 15% Up 14 - 16%
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. MRO operating revenue increased more than 40% year over year in the September 2008 quarter and continued to post double-digit margins. The following table provides summarized financial information about these businesses for the September 2008 quarter.
Three Months Ended
September 30, 2008
-----------------------
TechOps DAL Global
(MRO) Services
-----------------------
Operating Revenue (in millions) $156 $51
Operating Margin 13% 4%
Other Matters
Included with this press release are Delta's Consolidated Statements of Operations for the three and nine months ended Sept. 30, 2008 and 2007; a statistical summary for those periods; selected balance sheet data as of Sept. 30, 2008 and Dec. 31, 2007; fleet information as of Sept. 30, 2008; and a reconciliation of certain non-GAAP financial measures.
About Delta
Delta Air Lines operates service to more worldwide destinations than any airline, with Delta and Delta Connection flights to 287 destinations in 58 countries. Delta has added more international capacity than any major U.S. airline during the last two years and is the leader across the Atlantic with flights to 42 trans-Atlantic markets. To Latin America and the Caribbean, Delta offers 315 weekly flights to 43 destinations. Delta's marketing alliances also allow customers to earn and redeem SkyMiles on more than 16,000 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 500 worldwide destinations in 105 countries. Customers can check in for flights, print boarding passes, check bags and flight status at www.delta.com.
The Delta Air Lines, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1825
Endnotes
(1) Note A to the attached 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.
(2) Includes fuel prices paid under our contract carrier arrangements.
(3) 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. Management believes these classifications provide a more consistent and comparable reflection of Delta's mainline operations.
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; and competitive conditions in the airline industry.
Forward-looking statements in the press release that relate to our proposed merger transaction with Northwest Airlines Corporation include, without limitation, our expectations with respect to the synergies, costs and charges, capitalization and anticipated financial impacts of the merger transaction and related transactions; the satisfaction of the closing conditions to the merger transaction and related transactions; and the timing of the completion of the merger transaction and related transactions. Factors that may cause the actual results to differ materially from the expected results include, but are not limited to, the possibility that the expected synergies will not be realized, or will not be realized within the expected time period, due to, among other things, (1) the airline pricing environment; (2) competitive actions taken by other airlines; (3) general economic conditions; (4) changes in jet fuel prices; (5) actions taken or conditions imposed by the United States and foreign governments; (6) the willingness of customers to travel; (7) difficulties in integrating the operations of the two airlines; (8) the impact of labor relations; and (9) fluctuations in foreign currency exchange rates. Other factors include the possibility that the merger does not close, including due to the failure to receive required regulatory approvals, or the failure of other closing conditions.
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 as updated by its Quarterly Reports on Form 10-Q. Caution should be taken not to place undue reliance on Delta's forward-looking statements, which represent Delta's views only as of October 15, 2008, and which Delta has no current intention to update.
DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
(Successor)
Three Three
Months Months
Ended Ended
(in millions, except per Sept. 30, Sept. 30, Change Change
share data) 2008 2007 $ H(L) % H(L)
------------------------------------------------------------------
OPERATING REVENUE:
Passenger:
Mainline 3,921 3,539 382 11%
Regional affiliates 1,057 1,099 (42) -4%
Cargo 162 120 42 35%
Other, net 579 469 110 23%
-------- -------- -------- --------
Total operating revenue 5,719 5,227 492 9%
OPERATING EXPENSES:
Aircraft fuel and related
taxes 1,952 1,270 682 54%
Salaries and related costs 1,086 1,109 (23) -2%
Contract carrier
arrangements (1) 905 815 90 11%
Depreciation and
amortization 293 297 (4) -1%
Aircraft maintenance
materials and outside
repairs 273 253 20 8%
Contracted services 272 264 8 3%
Passenger commissions and
other selling expenses 259 248 11 4%
Landing fees and other
rents 190 178 12 7%
Passenger service 122 94 28 30%
Aircraft rent 70 60 10 17%
Restructuring and merger-
related items 24 -- 24 NM
Profit sharing -- 79 (79) NM
Other 142 107 35 33%
-------- -------- -------- --------
Total operating expense 5,588 4,774 814 17%
-------- -------- -------- --------
OPERATING INCOME 131 453 (322) -71%
OTHER (EXPENSE) INCOME:
Interest expense (140) (132) (8) 6%
Interest income 21 42 (21) -50%
Miscellaneous, net (62) -- (62) NM
-------- -------- -------- --------
Total other expense, net (181) (90) (91) NM
-------- -------- -------- --------
(LOSS) INCOME BEFORE INCOME
TAXES (50) 363 (413) NM
INCOME TAX PROVISION -- (143) 143 NM
-------- -------- -------- --------
NET (LOSS) INCOME (50) 220 (270) NM
======== ======== ======== ========
BASIC (LOSS) INCOME PER
SHARE ($0.13) $0.56 (0.69) NM
======== ======== ======== ========
DILUTED (LOSS) INCOME PER
SHARE ($0.13) $0.56 (0.69) NM
======== ======== ======== ========
WEIGHTED AVERAGE SHARES
USED IN BASIC (LOSS)
INCOME PER SHARE
CALCULATION 395.7 393.5 2.2 1%
======== ======== ======== ========
WEIGHTED AVERAGE SHARES
USED IN DILUTED (LOSS)
INCOME PER SHARE
CALCULATION 395.7 395.1 0.6 0%
======== ======== ======== ========
(1) Contract carrier arrangements expense includes $368 million
and $265 million for the three months ended September 30, 2008
and 2007, respectively, for aircraft fuel and related taxes.
Delta Air Lines, Inc.
Consolidated Statements of Operations
(Unaudited)
(Successor)(Combined)(Successor)(Predeccessor)
--------- -------- --------- ------------
Five Four
Months Months
Nine Months Ended Ended Ended
(in millions, except per September 30, Sept. 30, April 30,
share data) 2008 2007 2007 2007
------------------------------------------------------------------
OPERATING REVENUE:
Passenger:
Mainline $10,609 $9,706 $5,877 $3,829
Regional affiliates 3,239 3,155 1,859 1,296
Cargo 456 350 202 148
Other, net 1,680 1,260 737 523
-------- -------- -------- --------
Total operating revenue 15,984 14,471 8,675 5,796
OPERATING EXPENSE:
Aircraft fuel and
related taxes 5,052 3,330 2,060 1,270
Salaries and related
costs 3,269 3,119 1,817 1,302
Contract carrier
arrangements (1) 2,732 2,301 1,345 956
Depreciation and
amortization 892 876 490 386
Aircraft maintenance
materials and outside
repairs 836 738 418 320
Contracted services 783 750 424 326
Passenger commissions and
other selling expenses 732 721 423 298
Landing fees and other
rents 554 550 300 250
Passenger service 311 250 155 95
Aircraft rent 201 186 96 90
Impairment of goodwill
and other intangible
assets 7,296 -- -- --
Restructuring and
merger-related items 144 -- -- --
Profit sharing -- 158 144 14
Other 399 394 205 189
-------- -------- -------- --------
Total operating
expense 23,201 13,373 7,877 5,496
-------- -------- -------- --------
OPERATING (LOSS) INCOME (7,217) 1,098 798 300
OTHER (EXPENSE) INCOME:
Interest expense (428) (514) (252) (262)
Interest income 73 89 75 14
Miscellaneous, net (31) 36 9 27
-------- -------- -------- --------
Total other expense,
net (386) (389) (168) (221)
-------- -------- -------- --------
(LOSS) INCOME BEFORE
REORGANIZATION ITEMS (7,603) 709 630 79
REORGANIZATION ITEMS, NET -- 1,215 -- 1,215
-------- -------- -------- --------
(LOSS) INCOME BEFORE
INCOME TAXES (7,603) 1,924 630 1,294
INCOME TAX BENEFIT
(PROVISION) 119 (242) (246) 4
-------- -------- -------- --------
NET (LOSS) INCOME ($7,484) $1,682 $384 $1,298
======== ======== ======== ========
BASIC (LOSS) INCOME PER
SHARE ($18.91) NM $0.98 $6.58
======== ======== ======== ========
DILUTED (LOSS) INCOME PER
SHARE ($18.91) NM $0.97 $4.63
======== ======== ======== ========
BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING 395.7 NM 393.5 197.3
======== ======== ======== ========
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 395.7 NM 394.1 233.7
======== ======== ======== ========
(1) Contract carrier arrangements expense includes $1.07 billion
and $685 million for the nine months ended September 30, 2008
and 2007, respectively, in fuel expense.
DELTA AIR LINES, INC.
Statistical Summary
(Unaudited)
(Successor) (Successor)
Three Months Ended
September 30,
------------------
2008 2007 Change
-------- -------- --------
Consolidated:
Revenue Passenger Miles
(millions) (1) 33,991 34,036 (0.1%)
Available Seat Miles (millions) (1) 40,371 40,943 (1.4%)
Passenger Mile Yield (1) 14.65 c 13.63 c 7.5%
Passenger Revenue per Available Seat
Mile (PRASM)(1) 12.33 c 11.33 c 8.8%
Operating Cost Per Available Seat
Mile (CASM) (1) 13.45 c 11.35 c 18.5%
CASM excluding Special Items (1)
- See Note A 13.39 c 11.16 c 20.0%
CASM excluding Special Items and
Fuel Expense and Related Taxes -
See Note A 8.56 c 8.06 c 6.2%
Passenger Load Factor (1) 84.2 % 83.1 % 1.1 pts
Fuel Gallons Consumed (millions) 565 575 (1.7%)
Average Price Per Fuel Gallon, net
of hedging activity $ 3.45 $ 2.21 56.1%
Number of Aircraft in Fleet, End of
Period 576 578 (0.3%)
Full-Time Equivalent Employees, End
of Period 52,386 55,022 (4.8%)
Mainline:
Revenue Passenger Miles (millions) 29,550 29,048 1.7%
Available Seat Miles (millions) 34,874 34,707 0.5%
Operating Cost Per Available Seat
Mile (CASM) (1) 11.96 c 10.13 c 18.1%
CASM excluding Special Items - See
Note A 11.94 c 9.90 c 20.6%
CASM excluding Special Items and
Fuel Expense and Related Taxes -
See Note A 6.72 c 6.50 c 3.4%
Number of Aircraft in Fleet, End of
Period 451 444 1.6%
Note: c = cents
(1) Includes the operations under our contract carrier agreements
of Atlantic Southeast Airlines, Inc., Chautauqua Airlines, Inc.,
Freedom Airlines, Inc., Shuttle America Corporation, and
SkyWest, Inc. for all periods presented; ExpressJet Airlines,
Inc. for the one month ended September 30, 2007 and the two
months ended August 31, 2008; and Pinnacle Airlines, Inc. for
the three months ended September 30, 2008.
DELTA AIR LINES, INC.
Statistical Summary
(Unaudited)
(Successor) (Combined)
--------- ---------
Nine Months Ended
September 30,
--------------------
2008 2007 Change
--------- --------- ---------
Consolidated:
Revenue Passenger Miles
(millions) (1) 94,464 92,827 1.8%
Available Seat Miles (millions)
(1) 115,198 114,350 0.7%
Passenger Mile Yield (1) 14.66 c 13.85 c 5.8%
Passenger Revenue per Available
Seat Mile (PRASM)(1) 12.02 c 11.25 c 6.8%
Operating Cost Per Available
Seat Mile (CASM) (1) 19.76 c 11.41 c 73.2%
CASM excluding Special Items
(1) - See Note A 13.30 c 11.27 c 18.0%
CASM excluding Special Items
and Fuel Expense and Related
Taxes - See Note A 8.92 c 8.35 c 6.8%
Passenger Load Factor (1) 82.0 % 81.2 % 0.8 pts
Fuel Gallons Consumed (millions) 1,600 1,597 0.2%
Average Price Per Fuel Gallon,
net of hedging activity $ 3.16 $ 2.09 51.2%
Number of Aircraft in Fleet, End
of Period 576 578 (0.3%)
Full-Time Equivalent Employees,
End of Period 52,386 55,022 (4.8%)
Mainline:
Revenue Passenger Miles
(millions) 80,903 78,818 2.6%
Available Seat Miles (millions) 98,046 96,391 1.7%
Operating Cost Per Available
Seat Mile (CASM) (1) 19.34 c 10.18 c 90.0%
CASM excluding Special Items -
See Note A 11.77 c 10.01 c 17.6%
CASM excluding Special Items
and Fuel Expense and Related
Taxes - See Note A 7.01 c 6.81 c 2.9%
Number of Aircraft in Fleet,
End of Period 451 444 1.6%
Note: c = cents
(1) Includes the operations under our contract carrier agreements
of Atlantic Southeast Airlines, Inc., Chautauqua Airlines, Inc.,
Freedom Airlines, Inc., Shuttle America Corporation, and
SkyWest, Inc. for all periods presented; ExpressJet Airlines,
Inc. for the one month ended September 30, 2007 and the eight
months ended August 31, 2008; and Pinnacle Airlines, Inc. for
the nine months ended September 30, 2008.
DELTA AIR LINES, INC.
Selected Balance Sheet Data
(In Millions)
September 30, December 31,
------------- -------------
2008 2007
------------- -------------
(Unaudited)
Cash and cash equivalents $2,160 $2,648
Short-term investments 921 138
Restricted cash, including
noncurrent 244 535
Total assets 25,598 32,423
Total debt and capital leases,
including current maturities 10,139 9,000
Total shareowners' equity 2,391 10,113
Fleet Information
Delta's fleet, orders, options and rolling options at September 30, 2008 are summarized in the following table. Options have scheduled delivery slots. Rolling options replace options and are assigned delivery slots as options expire or are exercised.
Current Fleet (4)
----------------------------
Aircraft Capital Operating Average Rolling
Type Owned Lease Lease Total Age Orders Options Options
-------------------------------------------------------------------
B737-700 4 -- -- 4 0.1 6 -- --
B737-800 71 -- -- 71 7.9 2 (1) 60 120
B757-200 63 33 19 115 16.7 -- -- --
B757-200ER -- 2 15 17 10.7 -- -- --
B767-300 (3) 4 -- 17 21 17.7 -- -- --
B767-300ER 50 -- 9 59 12.6 -- 6 --
B767-400ER 21 -- -- 21 7.6 -- 12 --
B777-200ER 8 -- -- 8 8.7 -- -- --
B777-200LR 2 -- -- 2 0.6 8 27 11
MD88 (3) 63 33 21 117 18.2 -- -- --
MD90 16 -- -- 16 12.8 -- -- --
CRJ100 21 13 47 81 11.2 -- -- --
CRJ200 5 -- 11 16 6.3 -- 4 --
CRJ700 15 -- -- 15 4.9 -- 5 --
CRJ900 13 -- -- 13 0.8 8 (2) 22 --
-------------------------------------------------------------------
Total 356 81 139 576 12.9 24 136 131
===================================================================
(1) Excludes 32 aircraft which will be sold to third parties
immediately following delivery of these aircraft to us.
(2) Excludes five aircraft orders we assigned to Pinnacle
Airlines.
(3) Includes three B767-300 and two MD88 aircraft that have been
temporarily grounded.
(4) During the quarter, Delta:
* Accepted delivery of four B737-700 aircraft;
* Permanently grounded two B757-200 aircraft;
* Purchased four B757-200 aircraft that were previously
leased;
* Entered into sale-leaseback arrangements on four B757-200
aircraft;
* Permanently grounded three CRJ100/200 aircraft pending
return to lessor; and
* Sold one B757-200 and one CRJ100 aircraft.
Note A: 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 $159 million and $126 million for the three months ended September 30, 2008 and 2007, respectively, and $435 million and $322 million for the nine months ended September 30, 2008 and 2007, 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 special and reorganization related items because management believes the exclusion of these items is helpful to investors to evaluate the company's recurring operational performance; * 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; and * Delta presents mainline CASM excluding fuel expense and related taxes because management believes high fuel prices mask the company's progress toward its business plan targets.
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 prior year results, Delta has combined the results for the four months ended April 30, 2007 with the five months ended September 30, 2007.
(Successor)
---------------------
Three Months Ended
September 30,
2008 2007
--------- ---------
(in millions, except per share data)
Net (loss) income ($50) $220
Items excluded:
Termination of contract carrier
arrangements 14 --
Merger related expenses 7 --
Restructuring and related items 3 --
--------- ---------
Total restructuring and merger-related
items 24 --
--------- ---------
Net income excluding special and
reorganization related items ($26) $220
--------- ---------
Basic and diluted weighted average shares
outstanding 395.7
Basic and diluted income per share
excluding special and reorganization
related items ($0.07)
=========
(in millions)
Pre-tax (loss) income ($50) $363
Items excluded:
Termination of contract carrier
arrangements 14 --
Merger related expenses 7 --
Restructuring and related items 3 --
--------- ---------
Total restructuring and merger-related
items 24 --
--------- ---------
Pre-tax (loss) income excluding
special and reorganization related items ($26) $363
========= =========
(Successor) (Successor)(Combined)
---------------- ---------------------
Three Months Nine Months
Ended Ended
September 30, September 30,
2008 2007 2008 2007
------- ------- ------- -------
CASM 13.84 c 11.66 c 20.14 c 11.69 c
Items excluded:
Aircraft maintenance to
third parties (0.33) (0.23) (0.30) (0.19)
Staffing services to third
parties (0.06) (0.08) (0.08) (0.09)
------- ------- ------- -------
CASM excluding items not
related to generation of a
seat mile 13.45 c 11.35 c 19.76 c 11.41 c
Items excluded:
Impairment of goodwill and
other intangible assets -- -- (6.33) --
Restructuring and merger-
related items (0.06) -- (0.13) --
Profit sharing -- (0.19) -- (0.13)
Post bankruptcy-related
professional fees -- -- -- (0.01)
------- ------- ------- -------
Total items excluded (0.06) (0.19) (6.46) (0.14)
------- ------- ------- -------
CASM excluding special items 13.39 c 11.16 c 13.30 c 11.27 c
Fuel expense and related
taxes (4.83) (3.10) (4.38) (2.92)
------- ------- ------- -------
CASM excluding fuel expense
and related taxes and
special items 8.56 c 8.06 c 8.92 c 8.35 c
======= ======= ======= =======
Mainline CASM 12.42 c 10.49 c 19.79 c 10.52 c
Items excluded:
Aircraft maintenance to
third parties (0.38) (0.26) (0.35) (0.24)
Staffing services to third
parties (0.08) (0.10) (0.10) (0.10)
------- ------- ------- -------
Mainline CASM excluding
items not related to
generation of a seat mile 11.96 c 10.13 c 19.34 c 10.18 c
Items excluded:
Impairment of goodwill and
other intangible assets -- -- (7.44) --
Restructuring and merger-
related items (0.02) -- (0.13) --
Profit sharing -- (0.23) -- (0.16)
Post bankruptcy-related
professional fees -- -- -- (0.01)
------- ------- ------- -------
Total items excluded (0.02) (0.23) (7.57) (0.17)
------- ------- ------- -------
Mainline CASM excluding
special items 11.94 c 9.90 c 11.77 c 10.01 c
Fuel expense and related
taxes (5.22) (3.40) (4.76) (3.20)
------- ------- ------- -------
Mainline CASM excluding fuel
expense and related taxes
and special items 6.72 c 6.50 c 7.01 c 6.81 c
======= ======= ======= =======
Note: c = cents
Eight
Months Ended
August 31, 2008
---------------
PRASM 12.06 c
Length of haul adjustment,
including adjustments for
other airline and
passenger revenue 0.23
---------------
Length of haul adjusted
PRASM, including
adjustments for other
airline and passenger
revenue 12.29 c
---------------
Industry average PRASM 12.03 c
---------------
Percentage of industry
average 102%
===============
Note: c = cents
FORECAST
--------------------------------------
December 2008 Full Year 2008
Quarter Projection Projection
------------------ ------------------
GAAP operating margin
projection 1 - 3% (36) - (34)%
Items Excluded:
Impairment of goodwill and
other intangible assets -- 35%
Restructuring and merger-
related items -- 1%
------------------ ------------------
Operating margin projection
excluding special items 1 - 3% Flat - 2%
================== ==================
FORECAST
------------------------------------
December 2008
Quarter Full Year 2008
Projected Range Projected Range
---------------- ----------------
Mainline CASM projection 12.02 c 12.16 c 17.77 c 17.91 c
Items excluded:
Aircraft maintenance and
staffing services to third
parties (0.44) (0.44) (0.44) (0.44)
------ ------ ------ ------
Mainline CASM projection
excluding items not
related to generation of a
seat mile 11.58 c 11.72 c 17.33 c 17.47 c
Items excluded:
Impairment of goodwill and
other intangible assets -- -- (5.66) (5.66)
Restructuring and merger-
related items -- -- (0.10) (0.10)
------ ------ ------ ------
Total items excluded -- -- (5.76) (5.76)
------ ------ ------ ------
Mainline CASM projection
excluding special items 11.58 c 11.72 c 11.57 c 11.71 c
Fuel expense and related
taxes (4.79) (4.79) (4.77) (4.77)
------ ------ ------ ------
Mainline CASM projection
excluding fuel expense
and related taxes and
special items 6.79 c 6.93 c 6.80 c 6.94 c
====== ====== ====== ======
Change year-over-year in
Mainline CASM excluding
fuel expense and related
taxes and special items 0% 2% 0% 2%
Note: c = cents