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): January 14, 2004
DELTA AIR LINES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-5424 58-0218548
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
P.O. Box 20706, Atlanta, Georgia 30320-6001
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(Address of principal executive offices)
Registrant's telephone number, including area code: (404) 715-2600
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Not Applicable
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(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 and Year Ended December 31, 2003
Delta Air Lines, Inc. (Delta) today issued a press release reporting financial
results for the quarter and full year ended December 31, 2003. The press release
is furnished as Attachment A. Delta also will be providing supplemental data for
the December 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: January 14, 2004
ATTACHMENT A
FOR IMMEDIATE DISTRIBUTION
CONTACT: Corporate Communications Investor Relations
404-715-2554 404-715-6679
DELTA AIR LINES REPORTS FOURTH QUARTER AND FULL YEAR 2003 RESULTS
ATLANTA, Jan. 14, 2004 -- Delta Air Lines (NYSE: DAL) today reported results for
the quarter and full year ending Dec. 31, 2003, and other significant news. The
key points are, Delta:
- REPORTS A FOURTH QUARTER NET LOSS OF $327 MILLION, OR $2.69 LOSS PER
COMMON SHARE. FULL YEAR 2003 NET LOSS IS $773 MILLION, OR $6.40 LOSS
PER SHARE.
- EXCLUDING THE UNUSUAL ITEMS DESCRIBED BELOW, REPORTS A FOURTH QUARTER
NET LOSS OF $207 MILLION, OR $1.71 LOSS PER COMMON SHARE. EXCLUDING
UNUSUAL ITEMS, FULL YEAR 2003 NET LOSS IS $1.0 BILLION, OR $8.58 LOSS
PER SHARE.
- ENDS QUARTER WITH $2.9 BILLION IN CASH, OF WHICH $2.7 BILLION IS
UNRESTRICTED CASH.
- AS CHALLENGES CONTINUE INTO 2004, REAFFIRMS ITS FOCUS ON COST
CONTAINMENT AND IMPROVING CUSTOMER SERVICE.
Delta Air Lines reported a net loss of $327 million and a loss per
share of $2.69 for the December 2003 quarter. In the December 2002 quarter,
Delta reported a net loss of $363 million and a loss per share of $2.98. For the
full year 2003, Delta reported a net loss of $773 million and a loss per share
of $6.40. This is compared to a net loss of $1.3 billion and $10.44 loss per
share for the full year 2002.
Excluding the unusual items described below, the December 2003 quarter
net loss and loss per share were $207 million and $1.71, respectively, compared
to a net loss of $230 million and loss per share of $1.90 in the December 2002
quarter(1). The First Call mean estimate for the December 2003 quarter was a
loss per share of $1.66, excluding unusual items, with estimates ranging between
a loss per share of $1.58 and $1.85. Excluding the unusual items described
below, the full year 2003 net loss was $1.0 billion and loss per share was $8.58
compared to a net loss of $958 million and loss per share of $7.89 for calendar
year 2002(1).
"While in line with our expectations, today's financial results are
disappointing, especially given the expected performance of the other air
carriers," said Gerald Grinstein, Delta's chief executive officer. "2003 was a
year full of significant financial challenges for Delta. While we have made
progress in addressing these challenges, Delta still faces many hurdles in 2004.
Accordingly, we have begun a complete strategic reassessment of our business to
ensure we are competitive in the rapidly changing industry environment. Delta
must continue toward its goal of maximizing the use of its resources and
creating business efficiencies across the company. We will continue to focus on
our priorities to reduce costs, improve customer service and work with Delta
people to find solutions to our challenges."
EARNINGS PERFORMANCE
Fourth quarter operating revenues increased 2.7 percent and passenger
unit revenues increased 4.6 percent, compared to the December 2002 quarter. The
load factor for the December 2003 quarter was 72.7 percent, a 1.5 point increase
as compared to the December 2002 quarter. System capacity was down 1.8 percent
and mainline capacity was down 4.8 percent from the prior year. Detailed
traffic, capacity, load factor, yield and unit revenue information is provided
in Table 1 below.
Operating expenses for the December 2003 quarter increased 2.6 percent
and unit costs increased 4.5 percent from the December 2002 quarter. Excluding
unusual items, unit costs increased 2.3 percent and fuel price neutralized unit
costs(2) increased 0.8 percent.
Delta's profit improvement initiatives achieved approximately $1.2
billion in gross cost savings and revenue benefits for the full year 2003.
Netted against related cost pressures, the amount achieved is approximately $700
million. Much of the cost savings is attributable to productivity gains
resulting from the additional use of technology and the hard work of Delta's
employees.
"Delta had significant cost pressures in 2003, but thanks to our profit
improvement initiatives and the efforts of Delta people, we were able to
mitigate the pressures," said M. Michele Burns, Delta's executive vice president
and chief financial officer. "We know that there is much more work to be done
and we are committed to continuing our progress."
In the December 2003 quarter, Delta's fuel hedging program reduced
costs by $21 million, pretax. Delta hedged 46 percent of its jet fuel
requirements in the quarter at an average price of $0.76 per gallon, excluding
fuel taxes. Delta's total fuel price for the December 2003 quarter was $0.85 per
gallon. Guidance on fuel hedging, capacity, unit costs and other items is
provided in Table 2 below.
LIQUIDITY AND FINANCING TRANSACTIONS
At Dec. 31, 2003, Delta had $2.9 billion in cash, of which $2.7 billion
was unrestricted. For the December 2003 quarter, Delta had positive cash flow
from operations of $82 million and non-fleet capital expenditures of $125
million, resulting in a cash burn for the quarter.
During the December 2003 quarter, Delta received cash proceeds of
approximately $45 million from the sale of certain equity investments in Orbitz
and Hotwire. These transactions resulted in a net gain of $21 million, net of
tax, in Delta's Consolidated Statements of Operations. Subsequent to the sale,
Delta has a 13 percent equity stake in Orbitz.
As announced in November, Delta recorded a non-cash charge to equity
related to its pension plans during the December 2003 quarter(3). This charge of
$1.1 billion, net of tax, impacted Delta's balance sheet, but did not affect the
results of operations for the December 2003 quarter. The actual amount was
greater than previously estimated due to the impact of changes to actuarial
assumptions caused by updated demographic data. The charge does not impact
Delta's current cash funding obligations to its pension plans. Delta's pension
plans meet all funding requirements and Delta intends to continue to fund its
pension plans as required by law.
As previously announced in October 2003, Delta entered into a
definitive agreement to sell to a third party 11 Boeing 737-800 aircraft
immediately after those aircraft are delivered to Delta by the manufacturer in
2005. This transaction is expected to reduce Delta's capital expenditures by
approximately $500 million through 2005. As a result of this transaction, Delta
recognized a $26 million charge, net of tax, in the December 2003 quarter. Also
as previously announced, Delta intends to defer until 2008 the delivery of eight
additional B737-800 aircraft, which were also scheduled for delivery in 2005.
The deferrals are expected to further reduce Delta's capital expenditures
through 2005 by approximately $360 million.
EXPLANATION OF UNUSUAL ITEMS
December 2003 Quarter
In the December 2003 quarter, Delta recorded, net of tax, (1) a $134
million settlement charge related to the pilots' defined benefit pension plan;
(2) a $26 million charge associated with the planned sale of 11 B737-800
aircraft; (3) a $21 million net gain related to the sale of certain equity
investments in Orbitz and Hotwire; (4) a $14 million reduction to operating
expenses resulting from revised estimates of remaining costs associated with
Delta's 2002 workforce reduction programs; and (5) a $5 million gain 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 December 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 unusual items are not representative of core
operations; and (2) the SFAS No. 133 gain reflects volatility in earnings driven
by changes in the market, which are beyond the company's control.
December 2002 Quarter
In the December 2002 quarter, Delta recorded charges related to (1) the
severance and related costs associated with Delta's 2002 workforce reduction
programs; (2) the repurchase of a portion of outstanding ESOP Notes; (3) the
impairment of Embraer 120 aircraft and related spare parts; (4) the cost to
defer the delivery of certain Boeing aircraft; (5) the closure of certain leased
facilities; (6) the temporary carrying costs of surplus pilots and grounded
aircraft; and (7) derivative and hedging activities accounted for under SFAS No.
133. Additionally, during the same period, Delta recorded reductions to
operating expenses resulting from (1) Delta's decision to return to service nine
B-737 leased aircraft previously removed from service; and (2) revised estimates
of remaining costs associated with prior year restructuring activities. These
items totaled a net charge of $133 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 12 months ended Dec. 31, 2003, and 2002; a
statistical summary for those periods; selected balance sheet data as of Dec.
31, 2003, and Dec. 31, 2002; and a reconciliation of certain non-GAAP to GAAP
financial measures.
Delta will host a Webcast to discuss its quarterly earnings today, Jan.
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
7,318 flights each day to 487 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 visit delta.com.
DECEMBER 2003 QUARTER TRAFFIC, CAPACITY, LOAD FACTOR, YIELD AND UNIT REVENUE VS.
DECEMBER 2002 QUARTER
Table 1 Year-over-Year Change
North America Atlantic Latin America Pacific
------------- -------- ------------- -------
Traffic 1.1% (4.1%) (0.9%) 9.1%
Capacity 0.8% (10.7%) (16.3%) 2.1%
Load Factor 0.2 pts. 5.5 pts. 10.8 pts. 5.2 pts.
Yield 0.9% 10.7% 5.5% (11.0%)
Revenue per Available Seat 1.1% 18.9% 24.9% (4.9%)
Mile
2004 GUIDANCE
Delta estimates its funding obligation for its defined benefit pension
plans in 2004 will be approximately $450 million(4).
Delta expects to have capital expenditures of approximately $1.2
billion in 2004. This includes approximately $600 million for aircraft, $300
million for aircraft modifications and inventory, and $300 million for non-fleet
related expenditures.
The following table includes certain projected information for the
periods presented.
Table 2 Q1 2004 Q2 2004 Full Year 2004
-------
Percent of projected aircraft fuel 52% 33% 32%
requirements hedged
Average aircraft fuel hedge price per 80.1(cent) 75.2(cent) 76.5(cent)
gallon (excluding fuel tax)
Capacity Up 2 to 4% Up 15 to 17% Up 8 to 10%
year-over-year year-over-year(5) year-over-year
Unit costs, excluding unusual items(6) Down approximately 2% Down approximately 5%
year-over-year ------------- year-over-year
Fuel price neutralized unit costs, Down approximately 2% Down 5 to 6%
excluding unusual items (6),(7) year-over-year ------------- year-over-year
(vs. prior year unit costs, excluding
unusual items)
ENDNOTES
(1)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.
(2)"Fuel price neutralized unit costs" means 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.
(3)This additional minimum pension liability charge to equity was recorded in
accordance with SFAS No. 87, "Employers' Accounting for Pensions."
(4)Estimates of Delta's future funding obligations under its defined benefit
pension plans are based on various assumptions, including the actual market
performance of the plan assets, future 30-year U.S. Treasury bond yields and
regulatory requirements.
(5)A significant portion of the planned second quarter 2004 year-over-year
capacity increase results from the restoration of capacity that was reduced in
the second quarter of 2003 due to the war in Iraq.
(6) 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 2003.
(7)Average aircraft fuel price per gallon was $0.87 for the three months ended
March 31, 2003 and $0.82 for the year ended December 31, 2003.
Statements in this news release that are not historical facts, including
statements regarding Delta's beliefs, expectations, intentions, strategies or
projections, 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, strategies and
projections 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, the demand for air travel, the availability and cost of
aircraft fuel, competitive factors in the airline industry, the outcome of
negotiations on collective bargaining agreements and other labor issues and the
results achieved through the profit improvement initiatives or other means.
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 Post-effective Amendment No. 3 to its
Registration Statement on Form S-3 filed with the Commission on January 8, 2004.
Caution should be taken not to place undue reliance on Delta's forward-looking
statements, which represent Delta's views only as of January 14, 2004, and which
Delta has no current intention to update.
# # #
DELTA AIR LINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in millions, except share and per share data)
Three Months Ended
December 31,
Percent
2003 2002 Change
Operating Revenues:
Passenger $ 3,142 $ 3,061 2.6%
Cargo 124 126 (1.6%)
Other, net 132 121 9.1%
Total operating revenues 3,398 3,308 2.7%
Operating Expenses:
Salaries and related costs 1,552 1,546 0.4%
Aircraft fuel 510 475 7.4%
Depreciation and
amortization 307 287 7.0%
Contracted services 227 243 (6.6%)
Landing fees and other rents 214 207 3.4%
Aircraft maintenance materials
and outside repairs 165 163 1.2%
Aircraft rent 183 177 3.4%
Other selling expenses 112 113 (0.9%)
Passenger commissions 54 54 --
Passenger service 83 85 (2.4%)
Restructuring, asset writedowns,
pension settlements and
related items, net 232 151 53.6%
Other 125 169 (26.0%)
Total operating expenses 3,764 3,670 2.6%
Operating Loss (366) (362) (1.1%)
Other Income (Expense):
Interest expense (191) (165) (15.8%)
Interest income 10 7 42.9%
Gain from sale of investments 37 -- --
Gain (loss)on extinguishment
of debt -- (42) --
Fair value adjustments of
SFAS 133 derivatives 7 (6) 216.7%
Miscellaneous expense, net (9) (18) 50.0%
Total other income (expense) (146) (224) 34.8%
Loss Before Income Taxes (512) (586) 12.6%
Income Tax Benefit 185 223 (17.0%)
Net Loss (327) (363) 9.9%
Preferred Stock Dividends (5) (4) (25.0%)
Net Loss Available
To Common Shareowners $ (332) $ (367) 9.5%
Basic And Diluted Loss
Per Share $ (2.69) $ (2.98) 9.7%
Net Loss Excluding
Unusual Items (Note 1) $ (207) $ (230) 10.0%
Basic and Diluted Loss Per Share
Excluding Unusual Items
(Note 1) $ (1.71) $ (1.90) 10.0%
Operating Margin (10.8%) (10.9%) 0.1 pts.
Weighted Average Shares Used
In Basic and Diluted Loss
Per Share Computation
(in thousands) 123,474 123,358 --
DELTA AIR LINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in millions, except share and per share data)
Twelve Months Ended
December 31,
Percent
2003 2002 Change
Operating Revenues:
Passenger $ 12,323 $ 12,321 --
Cargo 464 458 1.3%
Other, net 516 526 (1.9)%
Total operating revenues 13,303 13,305 --
Operating Expenses:
Salaries and related costs 6,342 6,165 2.9%
Aircraft fuel 1,938 1,683 15.2%
Depreciation and
amortization 1,202 1,148 4.7%
Contracted services 886 1,003 (11.7)%
Landing fees and other rents 858 834 2.9%
Aircraft maintenance materials
and outside repairs 630 711 (11.4)%
Aircraft rent 727 709 2.5%
Other selling expenses 479 539 (11.1)%
Passenger commissions 211 322 (34.5)%
Passenger service 325 372 (12.6)%
Restructuring, asset writedowns,
pension settlements and
related items, net 268 439 (39.0)%
Appropriations Act
reimbursements (398) -- --
Stabilization Act compensation -- (34) --
Other 621 723 (14.1)%
Total operating expenses 14,089 14,614 (3.6)%
Operating Loss (786) (1,309) 40.0%
Other Income (Expense):
Interest expense (732) (646) (13.3)%
Interest income 36 36 --
Gain (loss) from sale of
investments 321 (3) 10800.0%
Gain (loss)on extinguishment
of debt -- (42) --
Fair value adjustments of
SFAS 133 derivatives (9) (39) 76.9%
Misc. (expense)income, net (19) 1 (2000.0)%
Total other income (expense) (403) (693) 41.8%
Loss Before Income Taxes (1,189) (2,002) 40.6%
Income Tax Benefit 416 730 (43.0)%
Net Loss (773) (1,272) 39.2%
Preferred Stock Dividends (17) (15) (13.3)%
Net Loss Available
To Common Shareowners $ (790) $ (1,287) 38.6%
Basic and Diluted Loss
Per Share $ (6.40) $ (10.44) 38.7%
Net Loss Excluding
Unusual Items (Note 1) $ (1,042) $ (958) (8.8)%
Basic and Diluted Loss Per Share
Excluding Unusual Items
(Note 1) $ (8.58) $ (7.89) (8.7)%
Operating Margin (5.9)% (9.8)% 3.9 pts.
Weighted Average Shares Used
in Basic and Diluted Loss
Per Share Computation
(in thousands) 123,397 123,283 --
DELTA AIR LINES, INC.
STATISTICAL SUMMARY
(unaudited)
Three Months Ended
December 31,
Percent
2003 2002 Change
Revenue Psgr Miles (millions) 25,180 25,116 0.3%
Available Seat Miles
(millions) 34,636 35,280 (1.8%)
Passenger Mile Yield (cents) 12.48 12.18 2.5%
Operating Revenue Per
Available Seat Mile (cents) 9.81 9.38 4.6%
Passenger Revenue Per
Available Seat Mile (cents) 9.07 8.67 4.6%
Operating Cost per
Available Seat Mile (cents) 10.87 10.40 4.5%
Operating Cost per Available
Seat Mile - Excluding (cents)
(Note 1) 10.20 9.97 2.3%
Fuel Price Neutralized
Operating Cost per
Available Seat Mile (cents)
(Note 1) 10.72 10.40(1) 3.1%
Fuel Price Neutralized
Operating Cost per Available
Seat Mile - Excluding (cents)
(Note 1) 10.05 9.97(2) 0.8%
Passenger Load Factor
(percent) 72.70 71.19 1.51 pts.
Breakeven Passenger Load
Factor (percent) 81.16 79.62 1.54 pts.
Breakeven Passenger Load
Factor - Excluding (percent)
(Note 1) 75.79 76.10 (0.31)pts.
Psgrs Enplaned (thousands) 26,514 27,290 (2.8%)
Revenue Ton Miles (millions) 2,897 2,909 (0.4%)
Cargo Ton Miles (millions) 380 397 (4.3%)
Cargo Ton Mile Yield (cents) 32.85 31.55 4.1%
Fuel Gallons Consumed
(millions) 602 625 (3.7%)
Average Price Per Fuel Gallon,
net of hedging gains (cents) 84.65 76.03 11.3%
Number of Aircraft in Fleet,
End of Period 833 831 0.2%
Full-Time Equivalent Employees,
End of Period 70,600 75,100 (6.0%)
(1) This amount represents operating cost per available seat mile. It is
presented for comparative purposes.
(2) This amount represents operating cost per available seat mile -
excluding. It is presented for comparative purposes.
DELTA AIR LINES, INC.
STATISTICAL SUMMARY
(unaudited)
Twelve Months Ended
December 31,
Percent
2003 2002 Change
Revenue Psgr Miles (millions) 98,674 102,029 (3.3)%
Available Seat Miles
(millions) 134,383 141,719 (5.2)%
Passenger Mile Yield (cents) 12.49 12.08 3.4%
Operating Revenue Per
Available Seat Mile (cents) 9.90 9.39 5.4%
Passenger Revenue Per
Available Seat Mile (cents) 9.17 8.69 5.5%
Operating Cost per
Available Seat Mile (cents) 10.48 10.31 1.6%
Operating Cost per Available
Seat Mile - Excluding (cents)
(Note 1) 10.58 10.03 5.5%
Fuel Price Neutralized
Operating Cost per
Available Seat Mile (cents)
(Note 1) 10.22 10.31(1) (0.9)%
Fuel Price Neutralized
Operating Cost per Available
Seat Mile - Excluding (cents)
(Note 1) 10.31 10.03(2) 2.8%
Passenger Load Factor
(percent) 73.43 71.99 1.44 pts.
Breakeven Passenger Load
Factor (percent) 78.11 79.64 (1.53) pts.
Breakeven Passenger Load
Factor - Excluding (percent)
(Note 1) 78.84 77.27 1.57 pts.
Psgrs Enplaned (thousands) 104,452 107,048 (2.4)%
Revenue Ton Miles (millions) 11,271 11,698 (3.7)%
Cargo Ton Miles (millions) 1,404 1,495 (6.1)%
Cargo Ton Mile Yield (cents) 33.08 30.62 8.0%
Fuel Gallons Consumed
(millions) 2,370 2,514 (5.7)%
Average Price Per Fuel Gallon,
net of hedging gains (cents) 81.78 66.94 22.2%
Number of Aircraft in Fleet,
End of Period 833 831 0.2%
Full-Time Equivalent Employees,
End of Period 70,600 75,100 (6.0)%
(1) This amount represents operating cost per available seat mile. It is
presented for comparative purposes.
(2) This amount represents operating cost per available seat mile -
excluding. It is presented for comparative purposes.
SELECTED BALANCE SHEET DATA:
December 31, December 31,
2003 2002
(unaudited)
(in millions)
Cash and cash equivalents $ 2,710 $ 1,969
Restricted cash 236 134
Total assets 26,461 24,720
Total debt, including current
maturities 12,476 10,740
Capital lease obligations,
current and long-term 94 127
Total shareowners' (deficit)equity (862) 893
Note 1: The following tables show reconciliations of certain financial measures
adjusted for the items shown below.
Three Months Ended Twelve Months Ended
December 31, December 31,
2003 2002 2003 2002
(in millions)
Net loss $ (327) $ (363) $ (773) $(1,272)
Unusual items, net of tax:
Restructuring, asset writedowns,
pension settlements and related
items, net(1)(2) 146 95 173 277
Fair value adjustments of
SFAS 133 derivatives (5) 4 6 25
Gain from sale of investments, net(3) (21) -- (197) --
Gain(loss) on extinguishment of debt(4)(5) -- 26 -- 26
Appropriations Act reimbursements -- -- (251) --
Stabilization Act compensation -- -- -- (22)
Other -- 8 -- 8
Total unusual items, net of tax 120 133 (269) 314
Net loss excluding unusual items $ (207) $ (230) $(1,042) $ (958)
Basic and diluted loss per share $(2.69) $(2.98) $(6.40) $(10.44)
Unusual items, net of tax:
Restructuring, asset writedowns,
pension settlements and related
items, net(1)(2) 1.18 0.78 1.40 2.25
Fair value adjustments of
SFAS 133 derivatives (0.03) 0.03 0.05 0.20
Gain from sale of investments, net(3) (0.17) -- (1.59) --
Gain(loss) on extinguishment
of debt(4)(5) -- 0.21 (0.01) 0.21
Appropriations Act reimbursements -- -- (2.03) --
Stabilization Act compensation -- -- -- (0.17)
Other -- 0.06 -- 0.06
Total unusual items, net of tax 0.98 1.08 (2.18) 2.55
Basic and diluted loss per share
excluding unusual items $(1.71) $(1.90) $(8.58) $(7.89)
Note 1 (continued)
Three Months Ended Twelve Months Ended
December 31, December 30,
2003 2002 2003 2002
(in millions)
Operating expenses $3,764 $3,670 $14,089 $14,614
Unusual items:
Restructuring, asset writedowns,
pension settlements and related
items, net(1)(2) (232) (151) (275) (439)
Appropriations Act reimbursements -- -- 398 --
Stabilization Act compensation -- -- -- 34
Rounding -- -- (1) --
Total unusual items (232) (151) 122 (405)
Operating expenses
excluding unusual items $3,532 $3,519 $14,211 $14,209
Unit costs 10.87(cent) 10.40(cent) 10.48(cent) 10.31(cent)
Unusual items:
Restructuring, asset writedowns,
pension settlements and related
items, net(1)(2) (0.67) (0.43) (0.20) (0.31)
Appropriations Act reimbursements -- -- 0.30 --
Stabilization Act compensation -- -- -- 0.03
Total unusual items (0.67) (0.43) 0.10 (0.28)
Unit costs excluding unusual items 10.20(cent) 9.97(cent) 10.58(cent) 10.03(cent)
Breakeven load factor 81.16% 79.62% 78.11% 79.64%
Unusual items:
Restructuring, asset writedowns,
pension settlements and related
items, net(1)(2) (5.37) (3.52) (1.64) (2.57)
Appropriations Act reimbursements -- -- 2.37 --
Stabilization Act compensation -- -- -- 0.20
Total unusual items (5.37) (3.52) 0.73 (2.37)
Breakeven load factor
excluding unusual items 75.79% 76.10% 78.84% 77.27%
Note 1 (continued)
Three Months Ended Twelve Months Ended
December 31, December 31,
2003 2003
(in millions, except where noted)
Fuel price neutralized unit costs(6)(8):
Operating expenses $ 3,764 $ 14,089
Less fuel expense (510) (1,938)
Plus current year fuel gallons
x prior year fuel price(7)(9) 458 1,587
Fuel price neutralized operating expenses 3,712 13,738
ASMs 34,636 134,383
Fuel price neutralized unit costs(cents) 10.72 10.22
vs. corresponding prior period
unit costs(cents) 10.40 10.31
Change 3.1% (0.9%)
(in cents, except where noted)
Fuel price neutralized unit costs - excluding:
Fuel price neutralized unit costs 10.72 10.22
Items excluded:
Restructuring, asset writedowns,
pension settlements and related
items, net(1)(2) (0.67) (0.20)
Appropriations Act reimbursements -- 0.30
Rounding -- (0.01)
Fuel price neutralized unit costs - excluding 10.05 10.31
vs. corresponding prior period
unit costs - excluding 9.97 10.03
Change 0.8% 2.8%
Three Months Ended
December 31,
2003
(in millions)
Cash used in investing activities $ (64)
Less:
Proceeds from the sale of Orbitz
and Hotwire (45)
Flight equipment additions less aircraft
parts and modifications (11)
Boston airport terminal project
reimbursements in excess of expense (5)
Non-fleet capital expenditures $(125)
(1)The three months ended December 31, 2003, includes (1)the settlement charge
related to the pilots' defined benefit pension plan; (2)the charge related to
the planned sale of 11 B-737-800 aircraft; and (3)the reduction of operating
expenses based on revised estimates of remaining costs related to Delta's 2002
workforce reduction programs.
The twelve months ended December 31, 2003, includes these items in addition to
the charge for the cost of pension and postretirement obligations related to
Delta's 2002 workforce reduction programs.
(2)The three months ended December 31, 2002, includes (1)the charge for
severance and related costs associated with Delta's 2002 workforce reduction
programs; (2)the charge resulting from the impairment for EMB-120 aircraft and
related spare parts; (3)the cost to defer the delivery of certain Boeing
aircraft; (4)the temporary carrying costs of surplus pilots and grounded
aircraft; (5) the charge related to the closure of certain leased facilities;
and (6)the reduction of operating expenses resulting from Delta's decision to
return to service nine B-737 leased aircraft previously removed from service and
revised estimates of remaining costs associated with prior year restructuring
activities.
The twelve months ended December 31, 2002, includes these items in addition to
(1)the writedown of certain MD-11 and B-727-200 aircraft and MD-11 spare parts;
(2)the temporary carrying costs of surplus pilots and grounded aircraft for the
full year 2002; and (3) reductions of operating expenses for the full year 2002
resulting from revised estimates of prior year restructuring activities.
(3)The three months ended December 31, 2003, includes the net gain from the sale
of Delta's equity investments in Orbitz and Hotwire.
The twelve months ended December 31, 2003, includes these items in addition to
the gain from the sale of our equity investment in Worldspan, LLP.
(4)The twelve months ended December 31, 2003, includes the loss resulting from
Delta's repurchase of a portion of outstanding ESOP Notes offset by the gain
related to the completion of our debt exchange.
(5)The three and twelve months ended December 31, 2002, includes the loss
resulting from Delta's repurchase of a portion of outstanding ESOP Notes.
(6)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.
(7)603 million gallons x 76.03 cents/gallon for the three months ended Dec. 31,
2003.
(8)We believe this non-GAAP financial measure assists investors in understanding
the impact of changes in fuel costs on our operations.
(9)2,370 million gallons x 66.94 cents/gallon for the twelve months ended Dec.
31, 2003.
ATTACHMENT B
January 14, 2004
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 December 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. December 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 DECEMBER 2003 QUARTER DATA
DECEMBER 2003 QUARTER VS. DECEMBER 2002 QUARTER
- Total operating expenses for the quarter increased 3% to $3.8 billion.
Operating expenses, excluding unusual items, remained flat at $3.5
billion on a 1.8% decrease in capacity.
- Excluding unusual items, Delta's total unit cost increased 2.3% to
10.20 cents from 9.97 cents and fuel price neutralized unit costs
increased 0.8% to 10.05 cents from 9.97 cents.
- Salaries and related costs remained flat. Increased pension expense,
growth at ASA and Comair, and contractual increases for pilots were
offset by Mainline headcount reductions.
- Aircraft fuel expense increased 7% due to an increase in fuel prices,
offset by capacity reductions. Delta's average fuel price per gallon,
net of hedging gains, increased 11% to 84.65 cents from 76.03 cents.
- Depreciation and amortization increased 7% due to regional jet aircraft
purchases and amortization of completed technology projects.
- Contracted services expense decreased 7% due to the impact of the
profit improvement initiatives.
- Landing fees and other rents increased 3% due primarily to growth at
ASA and Comair.
- Aircraft maintenance materials and outside repairs increased 1%
primarily due to the timing of certain vendor credits, offset by
decreased material volume.
- Aircraft rent expense increased 3% due to B-737 aircraft returned to
service during 2003.
- Other selling expenses decreased 1% due primarily to lower booking fees
resulting from decreased capacity, partially offset by increased
advertising costs for Song.
- Passenger service expense decreased 2% due primarily to capacity
reductions and other cost savings initiatives.
- Other expenses decreased 26% primarily due to lower insurance and
communication costs, and the impact of profit improvement initiatives
across the company.
- Interest expense increased 16% primarily as a result of higher levels
of debt outstanding.
- Interest income increased 43%, or $3 million, due primarily to interest
income received on our Worldspan, LLP note receivable.
- Miscellaneous expense, net improved 50%, or $9 million, primarily due
to the 2002 write-off of our investment in Cordiem.
OTHER ITEMS
Aircraft Fleet
Our aircraft fleet, orders, options and rolling options at December 31, 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 6 46 52 -- -- --
B-737-300 -- 26 26 -- -- --
B-737-800 71 -- 71 61(1) 60 226
B-757-200 77 44 121 -- 20 37
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 9
MD-11 8 5 13 -- -- --
MD-88 63 57 120 -- -- --
MD-90 16 -- 16 -- -- --
ATR-72 4 15 19 -- -- --
CRJ-100/200 105 124 229 -- 171 --
CRJ-700 35 -- 35 23 152 --
-------------------------------------------------------------------------
Total 484 349 833 89 457 280
========================================================================
(1) Includes 11 B-737-800 aircraft to be sold by Delta to a third party under a
definitive agreement entered into in October 2003.