UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 14, 2003
DELTA AIR LINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-5424 58-0218548
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
P.O. Box 20706, Atlanta, Georgia 30320-6001
(Address of principal executive offices)
Registrant's telephone number, including area code: (404) 715-2600
Not Applicable
(Former name or former address, if changed since last report)
ITEM 9. REGULATION FD DISCLOSURE AND
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Financial Results for the Quarter Ended September 30, 2003
Delta Air Lines, Inc. (Delta) today issued a press release reporting financial
results for the quarter ended September 30, 2003. The press release is furnished
as Attachment A. Delta also will be providing supplemental data for the
September 2003 quarter to certain analysts. The supplemental data is furnished
as Attachment B. The information furnished in this Form 8-K shall not be deemed
incorporated by reference into any other filing with the Securities and Exchange
Commission.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DELTA AIR LINES, INC.
BY: /s/ Edward H. Bastian
---------------------
Edward H. Bastian
Senior Vice President - Finance
and Controller
Date: October 14, 2003
ATTACHMENT A
FOR IMMEDIATE DISTRIBUTION
CONTACT: Corporate Communications Investor Relations
404-715-2554 404-715-6679
DELTA AIR LINES REPORTS THIRD QUARTER 2003 RESULTS
ATLANTA, Oct. 14, 2003 -- Delta Air Lines (NYSE: DAL) today reported results
for the quarter ending Sept. 30, 2003, and other significant news. The key
points are, Delta:
- REPORTS A THIRD QUARTER NET LOSS OF $164 MILLION, OR $1.36 LOSS PER
COMMON SHARE.
- EXCLUDING UNUSUAL ITEMS DESCRIBED BELOW, REPORTS A THIRD QUARTER NET
LOSS OF $172 MILLION, OR $1.43 LOSS PER COMMON SHARE.
- ENDS QUARTER WITH $2.9 BILLION IN CASH, OF WHICH $2.7 BILLION IS
UNRESTRICTED CASH.
- ANNOUNCES FURTHER CHANGES TO ITS FLEET PLAN TO ENSURE LONG-TERM
STABILITY, INCLUDING THE SALE OF 11 AIRCRAFT SCHEDULED FOR DELIVERY TO
DELTA IN 2005.
Delta Air Lines reported a net loss of $164 million and a loss per
share of $1.36 for the September 2003 quarter. In the September 2002 quarter,
Delta reported a net loss of $326 million and a loss per share of $2.67.
Excluding the unusual items described below, the September 2003
quarter net loss and loss per share were $172 million and $1.43, respectively,
compared to a net loss of $212 million and loss per share of $1.75 in the
September 2002 quarter. The First Call consensus estimate for the September
2003 quarter was a loss per share of $1.46, excluding unusual items. Positive
cash flow from operating activities was $201 million for the September 2003
quarter.
Note 1 to the attached Consolidated Statements of Operations shows a
reconciliation of Delta's net loss reported under Generally Accepted Accounting
Principles in the United States (GAAP) to the net loss excluding unusual items,
as well as reconciliations of other financial measures including and excluding
unusual items.
EARNINGS PERFORMANCE
"Over the past two years, our industry has undergone dramatic,
permanent changes. Today's results, while somewhat better than we expected,
show that Delta's challenges are not yet over," said Leo F. Mullin, Delta's
chairman and chief executive officer. "To meet these challenges, Delta people
have in place programs across the company intended to rebalance our revenue to
cost relationship. At the same time, we are making prudent and strategic
investments in technology, regional jet aircraft, our new low-fare operation,
as well as in other areas. Taken together, these steps will strengthen the
company over the long term by enhancing our cost competitiveness and
positioning us for sustained success."
1
Third quarter operating revenues increased 0.7 percent and passenger
unit revenues increased 8.0 percent, compared to the September 2002 quarter.
Delta has continued to outperform the industry in year-over-year unit revenue
comparisons for each of the last 16 months through August 2003.
Operating expenses for the September 2003 quarter decreased 7.4
percent and unit costs decreased 1.2 percent as a result of charges taken
during the September 2002 quarter. Excluding unusual items, unit costs
increased 4.1 percent and fuel price neutralized1 unit costs increased 2.8
percent. The increase in fuel price neutralized unit costs was entirely driven
by capacity reductions related to the Iraqi War.
Comparing the September 2003 quarter to the June 2003 quarter
illustrates Delta's progress on its company-wide profit improvement
initiatives. Despite an 8 percent increase in capacity, operating expenses,
excluding unusual items, for the September 2003 quarter were flat with the June
2003 quarter. Delta's increased productivity and efficiencies allowed for
significant capacity growth during the quarter at the same operating costs.
"Delta continues to make progress on its profit improvement
initiatives to reduce costs and enhance revenue," said M. Michele Burns,
executive vice president and chief financial officer. "Moreover, while the full
impact is not immediate, our strategic plan will deliver sustainable savings
for the long-term, particularly as the industry recovers and grows."
In the September 2003 quarter, Delta's fuel hedging program reduced
costs by $26 million, pretax. Delta hedged 53 percent of its jet fuel
requirements in the quarter at an average price of $0.79 per gallon, excluding
fuel taxes. Delta's total fuel price for the September 2003 quarter was $0.79
per gallon.
The load factor for the September 2003 quarter was 76.9 percent, a 2.6
point increase as compared to the September 2002 quarter. System capacity was
down 6.3 percent and mainline capacity was down 9.4 percent on a year-over-year
basis. While Delta continues to see some growth in passenger demand, traffic
has not fully returned to pre-war levels; therefore, some capacity reductions
remain in place.
Guidance on fuel hedging, capacity and unit costs is provided in Table
2 below.
LIQUIDITY AND FINANCING TRANSACTIONS
As of Sept. 30, 2003, Delta had $2.9 billion in cash, of which $2.7
billion is unrestricted. Delta also had unencumbered aircraft with an estimated
base value of $2.3 billion, of which approximately $400 million is eligible
under Section 1110 of the U.S. Bankruptcy Code2.
Delta had positive cash flow from operations for the September 2003
quarter of $201 million and generated an operating profit for two out of the
three months.
In September 2003, Delta completed a debt exchange offer for $300
million principal amount of its 6.65 percent senior notes due 2004, of which
$64.1 million was tendered by holders for cash and new 10.0 percent senior
notes due 2008. Delta also completed a debt exchange offer for $500 million
principal amount of its 7.7 percent senior notes due 2005, of which $197.8
million was tendered by holders for new 10.0 percent senior notes due 2008. In
total, Delta paid $47 million in cash; issued an aggregate of $248 million
principal amount of the new 10.0 percent senior notes; and deferred until 2008
net debt maturities totaling $220 million.
2
FLEET TRANSACTIONS SUBSEQUENT TO SEPTEMBER 2003 QUARTER
Delta today announced that it has entered into a definitive agreement
with a third party to sell 11 Boeing 737-800 aircraft scheduled for delivery to
Delta in 2005. This transaction is expected to reduce Delta's capital
expenditures by approximately $500 million through 2005.
Delta will recognize a charge of $26 million, net of tax, in the
December 2003 quarter as a result of its agreement to sell the 11 B737-800
aircraft. This transaction also includes an option for the third party to
purchase up to 10 additional aircraft scheduled for delivery to Delta in 2006
and 2007, subject to mutual agreement on terms and conditions.
In addition to the sale of the 11 B737-800 aircraft, Delta will defer
until 2008 delivery of eight additional B737-800 aircraft also scheduled for
delivery in 2005. Delta currently intends to accept delivery of two B777-200
aircraft in 2005 as scheduled.
"Providing Delta's customers with an unmatched network of service
remains a priority for Delta as we continue to explore every available option
to reduce costs and enhance liquidity," said Burns. "Taking this step to reduce
capital expenditures is the prudent thing to do at this time and will not
reduce our ability to serve our customers."
The chart below details Delta's planned mainline aircraft deliveries,
following the transactions announced today.
NEW DELIVERY SCHEDULE AS PLANNED DELIVERY SCHEDULE
DELIVERY YEAR AIRCRAFT TYPE OF OCTOBER 13, 2003 AS OF JUNE 30, 2003
2005 Boeing 737-800 0* 19
2005 Boeing 777-200 2 2
2006 Boeing 737-800 19 19
2006 Boeing 777-200 3 3
2007 Boeing 737-800 23 23
2008 Boeing 737-800 8 0
* Reflects the planned sale of 11 Boeing 737-800 aircraft and deferral
of eight B737-800 aircraft
EXPLANATION OF UNUSUAL ITEMS
September 2003 Quarter
In the September 2003 quarter, Delta recorded a $9 million gain, net of
tax, on the extinguishment of debt related to the debt exchange previously
discussed and a $1 million charge, net of tax, related to derivative and
hedging activities accounted for under Statement of Financial Accounting
Standard (SFAS) No. 133. The attached Consolidated Statement of Operations for
the September 2003 quarter shows Delta's net loss as reported under GAAP, as
well as net loss excluding these items. Delta believes this information is
helpful to investors to evaluate recurring operational performance because (1)
the extinguishment of debt is not representative of core operations; and (2)
the SFAS 133 charge reflects volatility in earnings driven by changes in the
market, which are beyond the company's control.
September 2002 Quarter
In the September 2002 quarter, Delta recorded charges related to (1) the
writedown of certain MD-11 and B727-200 aircraft and MD-11 spare parts
inventory and (2) the temporary carrying costs of surplus
3
pilots and grounded aircraft, as well as gains related to (1) compensation
received under the Air Transportation Safety and System Stabilization Act, (2)
the adjustment to actual requirements of certain restructuring reserves, and
(3) SFAS 133 derivatives. These items totaled a net charge of $114 million, net
of tax. In addition to the net loss as reported under GAAP, Delta also
discloses net loss excluding these items because it believes this information
is helpful to investors to evaluate recurring operational performance. For
further information, please see Note 1 to the attached Consolidated Statements
of Operations.
OTHER MATTERS
Attached to this earnings release are Delta's Consolidated Statements
of Operations for the three and nine months ended Sept. 30, 2003, and 2002; a
statistical summary for those periods; selected balance sheet data as of Sept.
30, 2003, and Dec. 31, 2002; and a reconciliation of certain GAAP to non-GAAP
financial measures.
Delta will host a Webcast to discuss its quarterly earnings today,
Oct. 14, at 10:00 a.m. Eastern Time. The Webcast is available via the Internet
at www.delta.com/inside/investors/index.jsp.
Delta Air Lines, the world's second largest airline in terms of
passengers carried and the leading U.S. carrier across the Atlantic, offers
6,130 flights each day to 453 destinations in 82 countries on Delta, Song,
Delta Shuttle, Delta Connection and Delta's worldwide partners. Delta is a
founding member of SkyTeam, a global airline alliance that provides customers
with extensive worldwide destinations, flights and services. For more
information, please go to delta.com.
GUIDANCE
Table 2 Q4 2003 Full Year
2003
------- ------- ---------
Percent of projected aircraft fuel requirements 47% 66%
hedged
Average aircraft fuel hedge price per gallon 76(cent) 78(cent)
(excluding fuel tax)
Capacity Down 2 to 3% Down 5 to 6%
(year-over-year change)
Unit costs, excluding unusual items Up approximately 2% Up 5 to 6%
(year-over-year change)(3)
Fuel price neutralized unit costs, Up approximately 1% Up approximately 3%
excluding unusual items(3,4)
(vs. prior year unit costs, excluding unusual
items)
4
ENDNOTES
(1) The amount of operating cost incurred per available seat mile during a
reporting period, adjusting the average fuel price per gallon for that period
to equal the average fuel price per gallon for the corresponding period in the
prior year.
(2) For a discussion of the method used to estimate the value of Delta's
unencumbered aircraft, please see page 33 of Delta's Form 10-Q for the quarter
ended June 30, 2003, which was filed with the Securities and Exchange
Commission on August 13, 2003. Given the difficult business environment, there
is no assurance that Delta will have access to financing using these aircraft
as collateral. In any event, the amount that could be financed using these
aircraft would be significantly less than their base value.
(3) Delta is unable to reconcile this financial measure to unit costs
under GAAP for the periods presented because Delta cannot project specific
unusual items that may occur in the periods presented. Please see Note 1 to the
Consolidated Statements of Operations for GAAP and non-GAAP unit costs for
2002.
(4) Average aircraft fuel price per gallon was $0.76 for the three months
ended December 31, 2002 and $0.67 for the twelve months ended December 31,
2002.
Statements in this news release that are not historical facts, including
statements regarding Delta's beliefs, expectations, intentions or strategies,
may be "forward-looking statements" within the meaning of section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. All forward-looking statements involve a number of
risks and uncertainties that could cause actual results to differ materially
from the beliefs, expectations, intentions and strategies reflected in or
suggested by the forward-looking statements. These risks and uncertainties
include, but are not limited to, the effects of terrorist attacks, military
conflicts, the state of the domestic and international economy, demand for air
travel, the availability and cost of aircraft fuel, competitive factors in the
airline industry and the outcome of negotiations on collective bargaining
agreements and other labor issues. 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 Form 10-K for the year ended December 31,
2002 and its Registration Statement on Form S-4 filed with the Commission on
September 5, 2003. Caution should be taken not to place undue reliance on
Delta's forward-looking statements, which represent Delta's views only as of
October 14, 2003, and which Delta has no current intention to update.
# # #
1003/392-DUK
03SeptQtr
5
DELTA AIR LINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in millions, except share and per share data)
Three Months Ended
September 30,
------------------------------ Percent
2003 2002 Change
-------- -------- -------
Operating Revenues:
Passenger $ 3,201 $ 3,165 1.1%
Cargo 113 112 0.9%
Other, net 129 143 (9.8%)
Total operating revenues 3,443 3,420 0.7%
Operating Expenses:
Salaries and related costs 1,564 1,555 0.6%
Aircraft fuel 482 468 3.0%
Depreciation and
amortization 298 289 3.1%
Contracted services 208 256 (18.8%)
Landing fees and other rents 214 213 0.5%
Aircraft maintenance materials
and outside repairs 162 182 (11.0%)
Aircraft rent 182 175 4.0%
Other selling expenses 128 141 (9.2%)
Passenger commissions 52 72 (27.8%)
Passenger service 86 95 (9.5%)
Asset writedowns, restructuring
and related items (7) 225 (103.1%)
Stabilization Act compensation -- (34) --
Other 155 168 (7.7%)
Total operating expenses 3,524 3,805 (7.4%)
Operating Loss (81) (385) 79.0%
Other Income (Expense):
Interest expense (186) (165) (12.7%)
Interest income 9 9 --
Gain from sale of investments 1 -- --
Gain on extinguishment of debt 15 -- --
Fair value adjustments of
SFAS 133 derivatives (1) 10 (110.0%)
Misc. income (expense), net (11) 4 --
Total other income (expense) (173) (142) (21.8%)
Loss Before Income Taxes (254) (527) 51.8%
Income Tax Benefit 90 201 (55.2%)
Net Loss (164) (326) 49.7%
Preferred Stock Dividends (4) (4) --
Net Loss Available
To Common Shareowners $ (168) $ (330) 49.1%
Basic And Diluted Loss
Per Share $ (1.36) $ (2.67) 49.1%
Net Loss Excluding
Unusual Items (Note 1) $ (172) $ (212) 18.9%
Basic and Diluted Loss Per Share
Excluding Unusual Items
(Note 1) $ (1.43) $ (1.75) 18.3%
Operating Margin (2.4%) (11.3%) 8.9 pts.
6
DELTA AIR LINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in millions, except share and per share data)
Nine Months Ended
September 30,
------------------------------ Percent
2003 2002 Change
-------- -------- -------
Operating Revenues:
Passenger $ 9,181 $ 9,260 (0.9%)
Cargo 340 332 2.4%
Other, net 384 405 (5.2%)
Total operating revenues 9,905 9,997 (0.9%)
Operating Expenses:
Salaries and related costs 4,790 4,619 3.7%
Aircraft fuel 1,428 1,208 18.2%
Depreciation and
amortization 895 861 3.9%
Contracted services 659 760 (13.3%)
Landing fees and other rents 644 627 2.7%
Aircraft maintenance materials
and outside repairs 465 548 (15.1%)
Aircraft rent 544 532 2.3%
Other selling expenses 367 426 (13.8%)
Passenger commissions 157 268 (41.4%)
Passenger service 242 287 (15.7%)
Asset writedowns, restructuring
and related items 36 288 (87.5%)
Appropriations Act
reimbursements (398) -- --
Stabilization Act compensation -- (34) --
Other 496 554 (10.5%)
Total operating expenses 10,325 10,944 (5.7%)
Operating Loss (420) (947) 55.6%
Other Income (Expense):
Interest expense (541) (481) (12.5%)
Interest income 26 29 (10.3%)
Gain (loss) from sale of
investments 284 (3) --
Fair value adjustments of
SFAS 133 derivatives (16) (33) (51.5%)
Misc. income (expense), net (10) 19 (152.6%)
Total other income (expense) (257) (469) 45.2%
Loss Before Income Taxes (677) (1,416) 52.2%
Income Tax Benefit 231 507 (54.4%)
Net Loss (446) (909) 50.9%
Preferred Stock Dividends (12) (11) (9.1%)
Net Loss Available
To Common Shareowners $ (458) $ (920) 50.2%
Basic and Diluted Loss
Per Share $ (3.71) $ (7.46) 50.3%
Net Loss Excluding
Unusual Items (Note 1) $ (835) $ (728) (14.7%)
Basic and Diluted Loss Per Share
Excluding Unusual Items
(Note 1) $ (6.87) $ (5.99) (14.7%)
Operating Margin (4.2%) (9.5%) 5.3 pts.
7
DELTA AIR LINES, INC.
STATISTICAL SUMMARY
(unaudited)
Three Months Ended
September 30,
------------------------------ Percent
2003 2002 Change
------ ------ -------
Revenue Psgr Miles (millions) 26,536 27,364 (3.0%)
Available Seat Miles
(millions) 34,509 36,840 (6.3%)
Passenger Mile Yield (cents) 12.06 11.57 4.2%
Operating Revenue Per
Available Seat Mile (cents) 9.98 9.28 7.5%
Passenger Revenue Per
Available Seat Mile (cents) 9.28 8.59 8.0%
Operating Cost per
Available Seat Mile (cents) 10.21 10.33 (1.2%)
Operating Cost per Available
Seat Mile - Excluding (cents)
(Note 1) 10.21 9.81 4.1%
Fuel Price Neutralized
Operating Cost per
Available Seat Mile (cents) 10.08 * *
Fuel Price Neutralized
Operating Cost per Available
Seat Mile - Excluding (cents)
(Note 1) 10.08 * *
Passenger Load Factor
(percent) 76.89 74.28 2.61 pts.
Breakeven Passenger Load
Factor (percent) 78.83 83.29 (4.46)pts.
Breakeven Passenger Load
Factor - Excluding (percent)
(Note 1) 78.83 78.80 0.03 pts.
Psgrs Enplaned (thousands) 27,059 27,713 (2.4%)
Revenue Ton Miles (millions) 2,996 3,098 (3.3%)
Cargo Ton Miles (millions) 342 362 (5.5%)
Cargo Ton Mile Yield (cents) 32.99 31.01 6.4%
Fuel Gallons Consumed
(millions) 609 656 (7.2%)
Average Price Per Fuel Gallon,
net of hedging gains (cents) 79.15 71.33 11.0%
Number of Aircraft in Fleet,
End of Period 829 822 0.9%
Full-Time Equivalent Employees,
End of Period 70,100 76,000 (7.8%)
8
Nine Months Ended
September 30,
------------------------------ Percent
2003 2002 Change
------ ------ -------
Revenue Psgr Miles (millions) 73,494 76,913 (4.4%)
Available Seat Miles
(millions) 99,747 106,439 (6.3%)
Passenger Mile Yield (cents) 12.49 12.04 3.7%
Operating Revenue Per
Available Seat Mile (cents) 9.93 9.39 5.8%
Passenger Revenue Per
Available Seat Mile (cents) 9.20 8.70 5.7%
Operating Cost per
Available Seat Mile (cents) 10.35 10.28 0.7%
Operating Cost per Available
Seat Mile - Excluding (cents)
(Note 1) 10.71 10.04 6.6%
Fuel Price Neutralized
Operating Cost per
Available Seat Mile (cents) 10.05 * *
Fuel Price Neutralized
Operating Cost per Available
Seat Mile - Excluding (cents)
(Note 1) 10.41 * *
Passenger Load Factor
(percent) 73.68 72.26 1.42 pts.
Breakeven Passenger Load
Factor (percent) 77.05 79.65 (2.60)pts.
Breakeven Passenger Load
Factor - Excluding (percent)
(Note 1) 79.90 77.66 2.24 pts.
Psgrs Enplaned (thousands) 77,938 79,758 (2.3%)
Revenue Ton Miles (millions) 8,374 8,789 (4.7%)
Cargo Ton Miles (millions) 1,024 1,098 (6.7%)
Cargo Ton Mile Yield (cents) 33.17 30.28 9.5%
Fuel Gallons Consumed
(millions) 1,768 1,889 (6.4%)
Average Price Per Fuel Gallon,
net of hedging gains (cents) 80.80 63.93 26.4%
Number of Aircraft in Fleet,
End of Period 829 822 0.9%
Full-Time Equivalent Employees,
End of Period 70,100 76,000 (7.8%)
9
SELECTED BALANCE SHEET DATA:
September 30, December 31,
2003 2002
------------- ------------
(unaudited)
(in millions)
Cash and cash equivalents $ 2,727 $ 1,969
Restricted cash 205 134
Total assets 25,761 24,720
Total debt, including current
maturities 12,442 10,740
Capital lease obligations,
current and long-term 101 127
Total shareowners' equity 497 893
Note 1: The following tables show reconciliations of certain financial measures
adjusted for the items shown below.
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -------------------------------
2003 2002 2003 2002
--------- --------- ---------- ----------
(in millions)
Net loss $ (164) $ (326) $ (446) $ (909)
Unusual items, net of tax:
Pension benefits for workforce
reductions -- -- 27 --
Loss on extinguishment of ESOP Notes -- -- 9 --
Gain on extinguishment of debt (9) -- (9) --
Appropriations Act reimbursements -- -- (251) --
Stabilization Act compensation -- (22) -- (22)
Sale of Worldspan investment -- -- (176) --
Surplus pilots / grounded aircraft -- 11 -- 51
Asset impairments -- 139 -- 139
Restructuring and other reserve
reversals -- (8) -- (8)
Fair value adjustments of
SFAS 133 derivatives 1 (6) 11 21
Total unusual items, net of tax (8) 114 (389) 181
Net loss excluding unusual items $ (172) $ (212) $ (835) $ (728)
Basic and diluted loss per share $ (1.36) $ (2.67) $ (3.71) $ (7.46)
Unusual items, net of tax:
Pension benefits for workforce
reductions -- -- 0.22 --
Loss on extinguishment of ESOP Notes -- -- 0.07 --
Gain on extinguishment of debt (0.08) -- (0.08) --
Appropriations Act reimbursements -- -- (2.03) --
Stabilization Act compensation -- (0.18) -- (0.18)
Sale of Worldspan investment -- -- (1.42) --
Surplus pilots / grounded aircraft -- 0.09 -- 0.42
Asset impairments -- 1.13 -- 1.13
Restructuring and other reserve
reversals -- (0.07) -- (0.07)
Fair value adjustments of
SFAS 133 derivatives 0.01 (0.05) 0.08 0.17
Total unusual items, net of tax (0.07) 0.92 (3.16) 1.47
Basic and diluted loss per share
excluding unusual items $ (1.43) $ (1.75) $ (6.87) $ (5.99)
10
Note 1 (continued)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -------------------------------
2003 2002 2003 2002
--------- --------- ---------- ----------
(in millions)
Operating expenses $ 3,524 $ 3,805 $ 10,325 $ 10,944
Unusual items:
Asset impairments -- (220) -- (220)
Restructuring and other reserve
reversals -- 13 -- 13
Stabilization Act compensation -- 34 -- 34
Pension benefits for workforce
reductions -- -- (43) --
Appropriations Act reimbursements -- -- 398 --
Surplus pilots / grounded aircraft -- (18) -- (81)
Total unusual items -- (191) 355 (254)
Operating expenses
excluding unusual items $ 3,524 $ 3,614 $ 10,680 $ 10,690
Unit costs 10.21(cent) 10.33(cent) 10.35(cent) 10.28(cent)
Unusual items:
Asset impairments -- (0.60) -- (0.21)
Restructuring and other reserve
reversals -- 0.04 -- 0.02
Stabilization Act compensation -- 0.09 -- 0.03
Pension benefits for workforce
reductions -- -- (0.04) --
Appropriations Act reimbursements -- -- 0.40 --
Surplus pilots / grounded aircraft -- (0.05) -- (0.08)
Total unusual items -- (0.52) 0.36 (0.24)
Unit costs excluding unusual items 10.21(cent) 9.81(cent) 10.71(cent) 10.04(cent)
Breakeven load factor 78.83% 83.29% 77.05% 79.65%
Unusual items:
Asset impairments -- (5.16) -- (1.72)
Restructuring and other reserve
reversals -- 0.31 -- 0.11
Stabilization Act compensation -- 0.78 -- 0.26
Pension benefits for workforce
reductions -- -- (0.35) --
Appropriations Act reimbursements -- -- 3.20 --
Surplus pilots / grounded aircraft -- (0.42) -- (0.64)
Total unusual items -- (4.49) 2.85 (1.99)
Breakeven load factor
excluding unusual items 78.83% 78.80% 79.90% 77.66%
11
Note 1 (continued)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2003
------------------ -----------------
(in millions, except where noted)
Fuel price neutralized unit costs(1)(3):
Operating expenses $ 3,524 $ 10,325
Less fuel expense (482) (1,428)
Plus current year fuel gallons
x prior year fuel price(2)(4) 434 1,130
Fuel price neutralized operating expenses 3,476 10,027
ASMs 34,509 99,747
Fuel price neutralized unit costs(cents) 10.08 10.05
vs. corresponding prior period
unit costs(cents) 10.33 10.28
Change (2.4%) (2.2%)
(in cents, except where noted)
Fuel price neutralized unit costs - excluding:
Fuel price neutralized unit costs 10.08 10.05
Items excluded:
Pension benefits for workforce reductions -- (0.04)
Appropriations Act reimbursements -- 0.40
Fuel price neutralized unit costs - excluding 10.08 10.41
vs. corresponding prior period
unit costs - excluding 9.81 10.04
Change 2.8% 3.7%
(1) Operating cost per available seat mile (ASM), adjusting average fuel
price per gallon for the period to equal the average fuel price per gallon for
the corresponding period in the prior year.
(2) 609 million gallons x 71.33 cents/gallon for the three months ended
Sept. 30, 2003.
(3) We believe this non-GAAP financial measure assists investors in
understanding the impact of changes in fuel costs on our operations.
(4) 1,768 million gallons x 63.93 cents/gallon for the nine months ended
Sept. 30, 2003.
Three Months Ended
June 30,
2003
------------------
(in millions)
Operating expenses $3,111
Unusual items:
Appropriations Act reimbursements 398
Operating expenses
excluding unusual items $3,509
12
Attachment B
October 14, 2003
Dear Investors and Analysts,
To make more efficient use of the time allocated for this morning's conference
call, we are providing detailed variance information on our operating and
non-operating expenses to assist you in analyzing Delta's September 2003
quarterly results. This information is intended to supplement that provided in
the conference call (scheduled for 10:00 a.m. ET today) and in the earnings
release. Please see Note 1 to the Consolidated Statements of Operations for a
reconciliation of certain financial measures including and excluding unusual
items. September quarter revenue performance will be discussed in the conference
call.
Please feel free to call me at 404-715-6679 if you have any questions. Thank you
for your continued support of Delta Air Lines.
Gail Grimmett
SUPPLEMENTAL SEPTEMBER 2003 QUARTER DATA
SEPTEMBER 2003 QUARTER VS. SEPTEMBER 2002 QUARTER
- Total operating expenses for the quarter decreased 7% to $3.5 billion.
Operating expenses, excluding unusual items, decreased 2% to $3.5
billion on a 6.3% decrease in capacity.
- Excluding unusual items, Delta's total unit cost increased 4.1% to
10.21 cents from 9.81 cents and fuel price neutralized unit costs
increased 2.8% to 10.08 cents from 9.81 cents.
- Salaries and related costs increased 1% due primarily to increased
pension expense, growth at ASA and Comair, and contractual increases
for pilots, offset by headcount reductions.
- Aircraft fuel expense increased 3% due primarily to an increase in fuel
prices, offset by capacity reductions and fuel efficiencies. Delta's
average fuel price per gallon, including hedge proceeds, increased 11%
to 79.15 cents from 71.33 cents.
- Depreciation and amortization increased 3% due primarily to regional
jet aircraft purchases and amortization of completed technology
projects.
- Contracted services expense decreased 19% due primarily to the
suspension of air carrier security fees, reduced spending initiatives
and lower capacity.
- Landing fees and other rents were relatively flat due primarily to
increased facility rents in certain markets offset by lower landing
fees resulting from decreased capacity.
- Aircraft maintenance materials and outside repairs decreased 11%
primarily due to reduced maintenance volume and materials consumption
resulting from process improvement initiatives, decreased capacity and
fleet simplification.
- Aircraft rent expense increased 4% due primarily to B-737 aircraft
returned to service during 2003 and sale leaseback transactions.
- Other selling expenses decreased 9% due primarily to lower booking and
credit card fees resulting from decreased capacity, partially offset by
increased advertising costs for Song.
- Passenger commissions declined by 28% primarily due to lower commission
rates.
- Passenger service expense decreased 9% due primarily to capacity
reductions and other cost savings initiatives.
- Other expenses decreased 8% primarily due to lower insurance costs and
other cost savings initiatives across the company.
- Interest expense increased 13% primarily as a result of higher levels
of debt outstanding.
1
OTHER ITEMS
Aircraft Fleet
Our aircraft fleet, orders, options and rolling options at October 13, 2003 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
--------------------------------
ROLLING
AIRCRAFT TYPE OWNED LEASED TOTAL ORDERS OPTIONS OPTIONS
------------- ----- ------ ----- ------ ------- -------
B-737-200 4 48 52 - - -
B-737-300 - 26 26 - - -
B-737-800 71 - 71 50(1) 60 227
B-757-200 77 44 121 - 20 38
B-767-200 15 - 15 - - -
B-767-300 4 24 28 - - -
B-767-300ER 51 8 59 - 10 8
B-767-400 21 - 21 - 24 -
B-777-200 8 - 8 5 20 10
MD-11 8 6 14 - - -
MD-88 63 57 120 - - -
MD-90 16 - 16 - - -
ATR-72 4 15 19 - - -
CRJ-100/200 104 122 226 - 178 -
CRJ-700 33 - 33 25 157 -
--- --- --- --- --- ---
Total 479 350 829 80 469 283
=== === === === === ===
(1) Excludes 11 B-737-800 aircraft to be sold by Delta to a third party under a
definitive agreement entered into in October 2003.
2