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UNITED STATES FORM 8-K CURRENT REPORT Date of Report (Date of earliest event reported): July 21, 2005 P.O. Box 20706, Atlanta, Georgia 30320-6001 Registrant’s telephone
number, including area code: (404) 715-2600 Registrant’s Web site
address: www.delta.com Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): Item 2.02 Results of Operations and Financial Condition. Delta Air Lines, Inc. (Delta) today issued a press release reporting financial results for the quarter ended June 30, 2005. The press release is furnished as Exhibit 99.1. 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. Item 7.01 Regulation FD Disclosure. Delta also will be providing supplemental data for the June 2005 quarter to certain analysts. The supplemental data is furnished as Exhibit 99.2. 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. Item 9.01 Financial Statements and Exhibits. (c) Exhibits. -2- SIGNATURES 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. -3- EXHIBIT INDEX -4-
EXHIBIT 99.1
Delta Air Lines Reports Results for June 2005 Quarter
ATLANTA, July
21, 2005 Delta Air Lines (NYSE: DAL) today reported results for
the quarter ended June 30, 2005. Key points
include:
Delta reported a
net loss for the June 2005 quarter of $382 million, or $2.64 per share, compared
to a net loss of $2.0 billion, or $15.79 per share, in the prior year quarter.
Excluding the special items described below, the June 2005 quarter net loss
was $304 million, or $2.11 per share, compared to a net loss of $312 million,
or $2.55 per share, in the prior year quarter.2
Deltas operating loss
for the June 2005 quarter was $129 million. Excluding the special items
described
below, the operating loss for the June 2005 quarter was $33 million. Both
figures include a
$385 million increase in fuel expense over the prior year quarter.
Deltas second quarter results reflect both the solid progress we are making in implementation of our transformation plan, and the substantial challenges we are facing, said Gerald Grinstein,
Deltas chief executive officer. As part of our companywide focus on reducing costs and increasing revenue, we have pursued a wide range of initiatives, including fuel conservation measures, debt-for-equity exchanges, implementation of a
new revenue management system, surcharges on many of our trans-Atlantic flights and additional significant fare initiatives, among many others. Improvements in unit costs, passenger revenue and revenue per available seat mile are proof that these
efforts are working.
At the same time, however, record-high fuel prices and other factors out of our control during the quarter outpaced our transformation initiatives and masked our progress. Our
management team recognizes that further change is essential and it must be implemented with even greater speed if we are to achieve our goals in the increasingly competitive aviation marketplace. I am confident everyone at Delta will
rise to the challenge as we strive to improve our competitive and financial positions, while continuing to provide the travel experience our customers expect, Grinstein concluded.
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Due to sharply higher fuel costs, operating expenses for the June 2005 quarter increased 2.7 percent from the prior year quarter, although consolidated system unit costs decreased 2.0
percent and mainline unit costs decreased 3.9 percent compared to the prior year period.
Excluding the special items described below, operating expenses for the June 2005 quarter increased 3.3 percent from the prior year period, although consolidated system unit costs decreased 1.5 percent and mainline unit costs decreased 3.2 percent as compared to the prior year period. Excluding fuel expense and the special items described below, consolidated system unit costs decreased 11.6 percent and mainline unit costs
decreased 14.3 percent.
Fuel expense increased 57.5 percent, or $385 million, over the prior year period with approximately 95 percent of the increase resulting from higher fuel prices. Average fuel price per gallon for the June 2005 quarter was $1.60, a 53.3 percent increase over the prior year period. Based on Deltas expected fuel consumption for 2005, every one cent increase in the average annual cost per gallon of jet fuel results in
approximately $25 million in additional mainline fuel expense per year.
Guidance on capacity, unit costs and other items is provided below.
Liquidity and Financial Transactions
During the June 2005 quarter, two financial covenants under Deltas financing agreements with General Electric Capital Corporation and American Express were amended. The changes:
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During the quarter, Delta also completed the sale of one MD-11 aircraft, resulting in proceeds of $26 million.
In addition, Delta deferred delivery of eight Boeing 737-800 aircraft from 2006 to 2008. As a result of these deferrals, Delta has no mainline aircraft deliveries scheduled in 2006.
Explanation of Special Items
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
of incorporation)
File Number)
Identification No.)
(Address of principal executive offices)
Written communications pursuant
to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Exhibit 99.1
Press Release dated July 21, 2005
titled “Delta Air Lines Reports Results for June 2005 Quarter”
Exhibit 99.2
Supplemental Information dated July
21, 2005 titled “Supplemental June 2005 Quarter Data”
DELTA AIR LINES, INC.
By:
/s/ Edward H. Bastian
Date: July 21, 2005
Edward H. Bastian
Executive Vice President and Chief Financial Officer
Exhibit Number
Description
Exhibit 99.1
Press Release dated July 21,
2005 titled “Delta Air Lines Reports Results for June 2005 Quarter”
Exhibit 99.2
Supplemental Information dated
July 21, 2005 titled “Supplemental June 2005 Quarter Data”
CONTACT:
Deltas second quarter
net loss was $382 million, or $2.64 per share
Excluding special items, the
second quarter net loss was $304 million, or $2.11 per share
Mainline unit costs decreased
3.9 percent compared to the June 2004 quarter; excluding fuel
expense and special items, mainline unit costs decreased 14.3 percent
compared to the prior year
quarter1,2
Deltas second quarter
operating loss was $129 million, including a $385 million year-over-year
increase in fuel expense
lowered the level of EBITDAR (earnings
before interest, taxes, depreciation, amortization and aircraft rent,
as defined) that Delta must achieve for certain specified periods; and
increased the unrestricted funds Delta
is required to maintain to not less than $1 billion until December 2007.
(1) | A $96 million net charge associated with pension and related items. This net charge primarily reflects a $104 million settlement charge related to lump sum distributions to 354 pilots who retired under the companys defined benefit pension plan for pilots (Pilot Plan). As a result of these distributions, Delta must accelerate the recognition of actuarial losses in accordance with Statement of Financial Accounting Standards No. 883; and | |
(2) | An $18 million benefit from a net reduction in Delta's required deferred income tax asset reserve. |
Transformation Plan
In late 2004, Delta announced its comprehensive transformation plan, with the goal of delivering approximately $5 billion in annual benefits by the end of 2006 (as compared to 2002) while also improving the service Delta provides to its customers. As of June 30, 2005, Delta has implemented initiatives intended to achieve approximately 85 percent of the targets of the transformation plan, and believes it is on track to deliver the full $5 billion in benefits by the end of 2006. Due largely to successful implementation of these initiatives, Deltas operating expenses, excluding fuel, were down significantly in the June 2005 quarter, compared to the prior year period, despite an increase in capacity.
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SimpliFaresTM
2005 Guidance
Capital expenditures for the September 2005 quarter are estimated to be approximately $200 million, including approximately $60 million for aircraft. Capital expenditures for 2005 are estimated to be approximately $800 million, including approximately $360 million for aircraft. Delta has agreements in place for the financing of its regional jet aircraft deliveries in 2005. The final mainline aircraft delivered in 2005 was immediately sold to a third party upon delivery from the manufacturer in July, pursuant to a previously announced agreement.
The following table includes certain projected information for the periods presented.
Year-Over-Year Changes | ||
Q3 2005 |
Full Year 2005 |
|
Capacity | Up 6 to 7% | Up 5 to 6% |
Consolidated unit costs, excluding fuel expense and special items4 (vs. prior year unit costs, excluding fuel expense and special items) | Down 13 to 15% | Down 11 to 13% |
Mainline unit costs, excluding fuel expense and special items4 (vs. prior year unit costs, excluding fuel expense and special items) | Down 15 to 17% | Down 13 to 15% |
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Other Matters
Webcast
About Delta
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Page 6
Endnotes
1 Delta presents mainline unit costs excluding fuel expense and special items because management believes (a) the record high fuel prices during the June 2005 quarter mask the progress the Company achieved toward its transformation plan targets and (b) the exclusion of the special items is helpful to investors to evaluate the Companys recurring operational performance.
2 Note 1 to the attached Consolidated Statements of Operations shows a reconciliation of Deltas net loss reported under accounting principles generally accepted in the United States (GAAP) to the net loss excluding special items, as well as reconciliations of other financial measures including and excluding special items.
3 Statement of Financial Accounting Standards No. 88, Employers Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits.
4 Delta is unable to reconcile this financial measure to unit costs under GAAP for the future periods presented because Delta cannot project in the future periods presented (1) the special items that may occur or (2) fuel costs due to the current volatility in the market.
Statements in this news release that are not historical facts, including statements regarding Deltas estimates, beliefs, expectations, intentions, strategies or projections, 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, 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, our ability to reduce operating expenses, our ability to meet our liquidity needs, our ability to renew or replace our existing Visa/MasterCard processing contract, our ability to comply with financial covenants in our loan agreements, our debt and pension plan funding obligations, pilot early retirements, the cost of aircraft fuel, the effect of credit ratings downgrades, interruptions or disruptions in service at one of our hub airports, our increasing dependence on technology in our operations, labor issues, restructurings by competitors, the effects of terrorist attacks and competitive conditions in the airline industry. Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in Deltas Securities and Exchange Commission filings, including its Form 10-Q, filed with the Commission on May 10, 2005. Caution should be taken not to place undue reliance on Deltas forward-looking statements, which represent Deltas views only as of July 21, 2005, and which Delta has no current intention to update.
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DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
Three Months
Ended June 30, |
||||||||
2005 | 2004 | Percent Change |
||||||
(in millions, except share data) | ||||||||
OPERATING REVENUES: | ||||||||
Passenger: | ||||||||
Mainline | $ | 3,045 | $ | 2,895 | 5.2 | % | ||
Regional Affiliates | 830 | 761 | 9.1 | % | ||||
Cargo | 127 | 125 | 1.6 | % | ||||
Other, net | 183 | 180 | 1.7 | % | ||||
Total operating revenues | 4,185 | 3,961 | 5.7 | % | ||||
OPERATING EXPENSES: | ||||||||
Salaries and related costs | 1,298 | 1,584 | -18.1 | % | ||||
Aircraft fuel | 1,054 | 669 | 57.5 | % | ||||
Depreciation and amortization | 326 | 311 | 4.8 | % | ||||
Contracted services | 270 | 249 | 8.4 | % | ||||
Contract carrier arrangements | 211 | 237 | -11.0 | % | ||||
Landing fees and other rents | 227 | 220 | 3.2 | % | ||||
Aircraft maintenance materials and outside repairs | 206 | 164 | 25.6 | % | ||||
Aircraft rent | 151 | 182 | -17.0 | % | ||||
Passenger commissions and other selling expenses | 186 | 203 | -8.4 | % | ||||
Passenger service | 95 | 85 | 11.8 | % | ||||
Pension settlements, restructuring and related items, net | 96 | 117 | -17.9 | % | ||||
Other | 194 | 181 | 7.2 | % | ||||
Total operating expenses | 4,314 | 4,202 | 2.7 | % | ||||
OPERATING LOSS | (129 | ) | (241 | ) | 46.5 | % | ||
OTHER INCOME (EXPENSE): | ||||||||
Interest expense | (288 | ) | (197 | ) | -46.2 | % | ||
Interest income | 14 | 8 | 75.0 | % | ||||
Fair value adjustments of SFAS 133 derivatives | 3 | 5 | -40.0 | % | ||||
Miscellaneous expense, net | | (4 | ) | 100.0 | % | |||
Total other expense, net | (271 | ) | (188 | ) | -44.1 | % | ||
LOSS BEFORE INCOME TAXES | (400 | ) | (429 | ) | 6.8 | % | ||
INCOME TAX BENEFIT (PROVISION) | 18 | (1,534 | ) | 101.2 | % | |||
NET LOSS | (382 | ) | (1,963 | ) | 80.5 | % | ||
PREFERRED STOCK DIVIDENDS | (6 | ) | (5 | ) | -20.0 | % | ||
NET LOSS ATTRIBUTABLE TO COMMON | ||||||||
SHAREOWNERS | $ | (388 | ) | $ | (1,968 | ) | 80.3 | % |
BASIC AND DILUTED LOSS PER SHARE | $ | (2.64 | ) | $ | (15.79 | ) | 83.3 | % |
NET LOSS EXCLUDING SPECIAL ITEMS - see Note 1 | $ | (304 | ) | $ | (312 | ) | 2.6 | % |
BASIC AND DILUTED LOSS PER SHARE | ||||||||
EXCLUDING SPECIAL ITEMS - see Note 1 | $ | (2.11 | ) | $ | (2.55 | ) | 17.3 | % |
WEIGHTED AVERAGE SHARES USED IN BASIC AND DILUTED | ||||||||
LOSS PER SHARE COMPUTATION: | 146,820,375 | 124,690,747 | 17.7 | % | ||||
OPERATING MARGIN | -3.1 | % | -6.1 | % | 3.0 | pts | ||
Page 8
DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
Six Months Ended | ||||||||
June 30, | ||||||||
Percent | ||||||||
2005 | 2004 | Change | ||||||
(in millions, except share data) | ||||||||
OPERATING REVENUES: | ||||||||
Passenger: | ||||||||
Mainline | $ | 5,694 | $ | 5,455 | 4.4 | % | ||
Regional Affiliates | 1,520 | 1,442 | 5.4 | % | ||||
Cargo | 259 | 247 | 4.9 | % | ||||
Other, net | 359 | 346 | 3.8 | % | ||||
Total operating revenues | 7,832 | 7,490 | 4.6 | % | ||||
OPERATING EXPENSES: | ||||||||
Salaries and related costs | 2,709 | 3,193 | -15.2 | % | ||||
Aircraft fuel | 1,938 | 1,243 | 55.9 | % | ||||
Depreciation and amortization | 639 | 618 | 3.4 | % | ||||
Contracted services | 542 | 490 | 10.6 | % | ||||
Contract carrier arrangements | 415 | 474 | -12.4 | % | ||||
Landing fees and other rents | 442 | 437 | 1.1 | % | ||||
Aircraft maintenance materials and outside repairs | 383 | 321 | 19.3 | % | ||||
Aircraft rent | 294 | 363 | -19.0 | % | ||||
Passenger commissions and other selling expenses | 378 | 376 | 0.5 | % | ||||
Passenger service | 179 | 163 | 9.8 | % | ||||
Pension settlements, asset writedowns, restructuring and related items, net | 627 | 117 | NM |
|||||
Other | 372 | 324 | 14.8 | % | ||||
Total operating expenses | 8,918 | 8,119 | 9.8 | % | ||||
OPERATING LOSS | (1,086 | ) | (629 | ) | -72.7 | % | ||
OTHER INCOME (EXPENSE): | ||||||||
Interest expense | (556 | ) | (391 | ) | -42.2 | % | ||
Interest income | 28 | 21 | 33.3 | % | ||||
Fair value adjustments of SFAS 133 derivatives | 1 | (18 | ) | 105.6 | % | |||
Miscellaneous expense, net | (2 | ) | (10 | ) | 80.0 | % | ||
Total other expense, net | (529 | ) | (398 | ) | -32.9 | % | ||
LOSS BEFORE INCOME TAXES | (1,615 | ) | (1,027 | ) | -57.3 | % | ||
INCOME TAX BENEFIT (PROVISION) | 162 | (1,319 | ) | -112.3 | % | |||
NET LOSS | (1,453 | ) | (2,346 | ) | 38.1 | % | ||
PREFERRED STOCK DIVIDENDS | (11 | ) | (9 | ) | -22.2 | % | ||
NET LOSS AVAILABLE TO COMMON | ||||||||
SHAREOWNERS | $ | (1,464 | ) | $ | (2,355 | ) | 37.8 | % |
BASIC AND DILUTED LOSS PER SHARE | $ | (10.17 | ) | $ | (18.95 | ) | 46.3 | % |
NET LOSS EXCLUDING SPECIAL ITEMS - see Note 1 | $ | (988 | ) | $ | (910 | ) | -8.6 | % |
BASIC AND DILUTED LOSS PER SHARE | ||||||||
EXCLUDING SPECIAL ITEMS - see Note 1 | $ | (6.94 | ) | $ | (7.39 | ) | 6.1 | % |
WEIGHTED AVERAGE SHARES USED IN BASIC AND DILUTED | ||||||||
LOSS PER SHARE COMPUTATION: | 143,888,479 | 124,284,915 | 15.8 | % | ||||
OPERATING MARGIN | -13.9 | % | -8.4 | % | -5.5 | pts | ||
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DELTA AIR LINES, INC.
Statistical Summary
(Unaudited)
Three Months Ended | ||||||||
June 30, | ||||||||
Percent |
||||||||
2005 | 2004 | Change | ||||||
Consolidated: | ||||||||
Revenue Passenger Miles (millions) 1 | 31,664 | 29,584 | 7.0 | % | ||||
Available Seat Miles (millions) 1 | 40,475 | 38,620 | 4.8 | % | ||||
Passenger Mile Yield 1 | 12.24 | ¢ | 12.36 | ¢ |
-1.0 | % | ||
Operating Revenue Per Available Seat Mile 1 | 10.34 | ¢ | 10.26 | ¢ |
0.8 | % | ||
Passenger Revenue Per Available Seat Mile 1 | 9.58 | ¢ | 9.47 | ¢ |
1.2 | % | ||
Operating Cost Per Available Seat Mile 1 | 10.66 | ¢ | 10.88 | ¢ |
-2.0 | % | ||
Operating Cost Per Available Seat Mile - excluding special items - see Note 1 1 | 10.42 | ¢ | 10.58 | ¢ |
-1.5 | % | ||
Operating
Costs Per Available Seat Mile - excluding fuel expense and special items
- see Note 1 1 |
7.82 | ¢ | 8.85 | ¢ |
-11.6 | % | ||
Passenger Load Factor 1 | 78.23 | % |
76.60 | % |
1.6 | pts | ||
Breakeven Passenger Load Factor 1 | 80.84 | % |
81.66 | % |
(0.8 | ) | pts | |
Breakeven Passenger Load Factor - excluding special items - see Note 11 | 78.91 | % |
79.21 | % |
(0.3 | ) | pts | |
Passengers Enplaned (thousands) 1 | 31,582 | 30,833 | 2.4 | % | ||||
Fuel Gallons Consumed (millions) | 657 | 639 | 2.8 | % | ||||
Average Price Per Fuel Gallon, net of hedging gains | 160.24 | ¢ |
104.53 | ¢ |
53.3 | % | ||
Number of Aircraft in Fleet, End of Period | 869 | 842 | 3.2 | % | ||||
Full-Time Equivalent Employees, End of Period | 65,300 | 70,300 | -7.1 | % | ||||
Mainline: | ||||||||
Revenue Passenger Miles (millions) | 27,497 | 25,714 | 6.9 | % | ||||
Available Seat Miles (millions) | 34,698 | 33,198 | 4.5 | % | ||||
Operating Cost Per Available Seat Mile | 9.92 | ¢ |
10.32 | ¢ |
-3.9 | % | ||
Operating Cost Per Available Seat Mile - excluding special items - see Note 1 | 9.65 | ¢ |
9.97 | ¢ |
-3.2 | % | ||
Operating
Costs Per Available Seat Mile - excluding fuel expense and special items
- see Note 1 |
7.11 | ¢ |
8.30 | ¢ |
-14.3 | % | ||
Number of Aircraft in Fleet, End of Period | 522 | 550 | -5.1 | % |
1 The statistics above include our contract carrier arrangements with Chautauqua Airlines, Inc., Atlantic Coast Airlines (2004 statistics only) and SkyWest Airlines, Inc. |
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DELTA AIR LINES, INC.
Statistical Summary
(Unaudited)
Six Months
Ended June 30, |
|||||||
Statistical Summary: | 2005 | 2004 | Percent Change |
||||
Consolidated: | |||||||
Revenue Passenger Miles (millions) 1 | 59,840 | 54,783 | 9.2 | % | |||
Available Seat Miles (millions) 1 | 78,352 | 74,369 | 5.4 | % | |||
Passenger Mile Yield 1 | 12.06 | ¢ |
12.59 | ¢ |
-4.2 | % | |
Operating Revenue Per Available Seat Mile 1 | 10.00 | ¢ |
10.07 | ¢ |
-0.7 | % | |
Passenger Revenue Per Available Seat Mile 1 | 9.21 | ¢ |
9.27 | ¢ |
-0.6 | % | |
Operating Cost Per Available Seat Mile 1 | 11.38 | ¢ |
10.92 | ¢ |
4.2 | % | |
Operating Cost Per Available Seat Mile - excluding special items - see Note 1 1 | 10.58 | ¢ |
10.76 | ¢ |
-1.7 | % | |
Operating
Cost Per Available Seat Mile - excluding fuel expense and special
items - see Note 1 1 |
8.11 | ¢ |
9.09 | ¢ |
-10.8 | % | |
Passenger Load Factor 1 | 76.37 | % |
73.66 | % |
2.7 | pts |
|
Breakeven Passenger Load Factor 1 | 87.87 | % |
80.38 | % |
7.5 | pts |
|
Breakeven Passenger Load Factor - excluding special items- see Note 1 1 | 81.24 | % |
79.13 | % |
2.1 | pts |
|
Passengers Enplaned (thousands) 1 | 60,812 | 58,189 | 4.5 | % | |||
Fuel Gallons Consumed (millions) | 1,281 | 1,242 | 3.1 | % | |||
Average Price Per Fuel Gallon, net of hedging gains | 151.22 | ¢ |
100.02 | ¢ |
51.2 | % | |
Number of Aircraft in Fleet, End of Period | 869 | 842 | 3.2 | % | |||
Full-Time Equivalent Employees, End of Period | 65,300 | 70,300 | -7.1 | % | |||
Mainline: | |||||||
Revenue Passenger Miles (millions) | 51,982 | 47,528 | 9.4 | % | |||
Available Seat Miles (millions) | 67,159 | 63,684 | 5.5 | % | |||
Operating Cost Per Available Seat Mile | 10.74 | ¢ |
10.35 | ¢ |
3.8 | % | |
Operating Cost Per Available Seat Mile - excluding special items- see Note 1 | 9.81 | ¢ |
10.17 | ¢ |
-3.5 | % | |
Operating
Cost Per Available Seat Mile - excluding fuel expense and special
items - see Note 1 |
7.40 | ¢ |
8.56 | ¢ |
-13.5 | % | |
Number of Aircraft in Fleet, End of Period | 522 | 550 | -5.1 | % |
1 The statistics above include our contract carrier arrangements with Chautauqua Airlines, Inc., Atlantic Coast Airlines (2004 statistics only) and SkyWest Airlines, Inc. for all periods presented. |
Page 11
DELTA AIR LINES, INC.
Selected Balance Sheet Data
June 30, | December 31, | |||||
2005 | 2004 | |||||
(Unaudited) |
||||||
(in millions) | ||||||
Cash and cash equivalents | $ | 1,341 | $ | 1,463 | ||
Short-term investments | 330 | 336 | ||||
Restricted cash, including noncurrent | 370 | 350 | ||||
Total assets | 21,561 | 21,801 | ||||
Total debt and capital leases, including current maturities | 14,082 | 13,898 | ||||
Total shareowners' deficit | (6,985 | ) | (5,796 | ) | ||
Page 12
Note 1: The following tables show reconciliations of certain financial measures adjusted for the items shown below
Three Months Ended | Six Months Ended | |||||||||||
June 30, |
June 30, |
|||||||||||
(in millions) | 2005 |
2004 |
2005 |
2004 |
||||||||
Net loss | ($382 | ) | ($1,963 | ) | ($1,453 | ) | ($2,346 | ) | ||||
Items excluded: | ||||||||||||
Pension and related charges | 96 | 117 | 617 | 117 | ||||||||
Aircraft charges | | | 10 | | ||||||||
Deferred tax benefit | (18 | ) | 1,534 | (162 | ) | 1,319 | ||||||
Total items excluded | 78 | 1,651 | 465 | 1,436 | ||||||||
Net loss excluding special items | ($304 | ) | ($312 | ) | ($988 | ) | ($910 | ) | ||||
Basic and diluted loss per share | ($2.64 | ) | ($15.79 | ) | ($10.17 | ) | ($18.95 | ) | ||||
Items excluded: | ||||||||||||
Pension and related charges | 0.65 | 0.94 | 4.28 | 0.94 | ||||||||
Aircraft charges | | | 0.07 | | ||||||||
Deferred tax benefit | (0.12 | ) | 12.30 | (1.12 | ) | 10.62 | ||||||
Total items excluded | 0.53 | 13.24 | 3.23 | 11.56 | ||||||||
Basic and diluted loss per share excluding special items | ($2.11 | ) | ($2.55 | ) | ($6.94 | ) | ($7.39 | ) | ||||
(in millions) | ||||||||||||
Operating expenses | $4,314 | $4,202 | $8,918 | $8,119 | ||||||||
Items excluded: | ||||||||||||
Pension and related charges | (96 | ) | (117 | ) | (617 | ) | (117 | ) | ||||
Aircraft charges | | | (10 | ) | | |||||||
Total items excluded | (96 | ) | (117 | ) | (627 | ) | (117 | ) | ||||
Operating expenses excluding special items | $4,218 | $4,085 | $8,291 | $8,002 | ||||||||
(in millions) | ||||||||||||
Mainline operating expenses | $3,443 | $3,426 | $7,215 | $6,591 | ||||||||
Items excluded: | ||||||||||||
Pension and related charges | (96 | ) | (117 | ) | (617 | ) | (117 | ) | ||||
Aircraft charges | | | (10 | ) | | |||||||
Total items excluded | (96 | ) | (117 | ) | (627 | ) | (117 | ) | ||||
Mainline operating expenses excluding special items | $3,347 | $3,309 | $6,588 | $6,474 | ||||||||
Fuel expense | ($881 | ) | ($555 | ) | ($1,615 | ) | ($1,025 | ) | ||||
Mainline operating expenses excluding fuel expense and special items | $2,466 | $2,754 | $4,973 | $5,449 | ||||||||
CASM | 10.66 | ¢ | 10.88 | ¢ | 11.38 | ¢ | 10.92 | ¢ | ||||
Items excluded: | ||||||||||||
Pension and related charges | (0.24 | ) | (0.30 | ) | (0.79 | ) | (0.16 | ) | ||||
Aircraft charges | | | (0.01 | ) | | |||||||
Total items excluded | (0.24 | ) | (0.30 | ) | (0.80 | ) | (0.16 | ) | ||||
CASM excluding special items | 10.42 | ¢ | 10.58 | ¢ | 10.58 | ¢ | 10.76 | ¢ | ||||
Fuel expense | (2.60 | ) | (1.73 | ) | (2.47 | ) | (1.67 | ) | ||||
CASM excluding fuel expense and special items | 7.82 | ¢ | 8.85 | ¢ | 8.11 | ¢ | 9.09 | ¢ | ||||
Mainline CASM | 9.92 | ¢ | 10.32 | ¢ | 10.74 | ¢ | 10.35 | ¢ | ||||
Items excluded: | ||||||||||||
Pension and related charges | (0.27 | ) | (0.35 | ) | (0.92 | ) | (0.18 | ) | ||||
Aircraft charges | | | (0.01 | ) | | |||||||
Total items excluded | (0.27 | ) | (0.35 | ) | (0.93 | ) | (0.18 | ) | ||||
Mainline CASM excluding special items | 9.65 | ¢ | 9.97 | ¢ | 9.81 | ¢ | 10.17 | ¢ | ||||
Fuel expense | (2.54 | ) | (1.67 | ) | (2.41 | ) | (1.61 | ) | ||||
Mainline CASM excluding fuel expense and special items | 7.11 | ¢ | 8.30 | ¢ | 7.40 | ¢ | 8.56 | ¢ | ||||
Breakeven load factor | 80.84 | % | 81.66 | % | 87.87 | % | 80.38 | % | ||||
Items excluded: | ||||||||||||
Pension and related charges | (1.93 | ) | (2.45 | ) | (6.52 | ) | (1.25 | ) | ||||
Aircraft charges | | | (0.11 | ) | | |||||||
Total items excluded | (1.93 | ) | (2.45 | ) | (6.63 | ) | (1.25 | ) | ||||
Breakeven load factor excluding special items | 78.91 | % | 79.21 | % | 81.24 | % | 79.13 | % | ||||
(in millions) | ||||||||||||
Operating loss | ($129 | ) | ||||||||||
Items excluded: | ||||||||||||
Pension and related charges | 96 | |||||||||||
Total items excluded | 96 | |||||||||||
Operating loss excluding special items | ($33 | ) | ||||||||||
Page 13
Capital Expenditures (in millions) |
Three Months Ended June 30, 2005 |
||
Cash used by investing activities - GAAP | |||
Flight equipment additions | $ | 233 | |
Ground property & equipment additions | 67 | ||
Add: | |||
Aircraft seller financing | 148 | ||
Less: | |||
Sale of aircraft during the quarter 1 | (193 | ) | |
Boston airport terminal project expenditures | (17 | ) | |
Other | (1 | ) | |
Capital expenditures | $ | 237 | |
1 In October 2003, we entered into a definitive agreement with a third party to sell 11 B-737-800 aircraft immediately after those aircraft are delivered to us by the manufacturer in 2005. During the June 2005 quarter, five B-737-800 aircraft were delivered to us and subsequently sold to a third party under this agreement. This line item represents the cost of the aircraft included in the flight equipment additions line item above. |
Note 2: June 2005 Quarter Traffic, Capacity, Load Factor, Yield and Unit Revenue vs. June 2004 Quarter
Year-Over-Year Change
|
||||
North America |
Atlantic |
Latin
America |
Pacific |
|
Traffic | 5.7% |
8.2% |
34.4% |
0.5% |
Capacity | 3.4% |
5.1% |
34.9% |
0.1% |
Load Factor | 1.7 pts. |
2.4 pts. |
(0.2) pts. |
0.4 pts. |
Yield | (1.7%) |
3.6% |
(3.7%) |
7.4% |
Passenger Unit Revenue |
0.5% |
6.6% |
(4.0%) |
7.8% |
EXHIBIT 99.2
July 21, 2005
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 June 2005 quarterly results. This information is intended to supplement that provided in the conference call (scheduled for 9:00 a.m. EDT today) and in the press release. Please see Note 1 to the Consolidated Statements of Operations for a reconciliation of certain financial measures including and excluding special items. June 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.
Laura Fuselier
Supplemental June 2005 Quarter Data
June 2005 Quarter vs. June 2004 Quarter
| Total operating expenses for the quarter increased $112 million to $4.3 billion due primarily to higher fuel costs. Operating expenses, excluding special items, increased 3% to $4.2 billion on a 4.8% increase in capacity. |
| Delta’s total unit costs decreased 2.0% to 10.66 cents from 10.88 cents. Unit costs, excluding fuel expense and special items, decreased 11.6% to 7.82 cents from 8.85 cents. Mainline unit costs, excluding fuel expense and special items, decreased 14.3% to 7.11 cents from 8.30 cents. |
| Salaries and related costs decreased 18%. This decrease is primarily due to salary rate reductions and lower headcount. |
| Aircraft fuel expense increased $385 million, or 58%, due primarily to higher fuel prices. Delta’s average fuel price per gallon rose 53% to $1.60, driving $366 million of the increase in expense. |
| Contracted services increased 8% due primarily to increased capacity. |
| Expenses from our contract carrier arrangements, which represent costs associated with non-owned regional airlines, decreased by 11% primarily due to the termination of our arrangement with Flyi (formerly Atlantic Coast Airlines) in 2004, partially offset by higher expenses from increased fuel price and higher capacity under certain of these arrangements. |
| Aircraft maintenance materials and outside repairs expense increased 26% primarily due to increased volume, higher engine materials costs and heavy maintenance cost outsourcing. |
| Aircraft rent expense decreased 17% primarily due to the reclassification of certain leases from operating to capital and other lease restructuring efforts as part of our transformation plan. |
| Other expenses increased 7% primarily due to higher fuel taxes and increased navigation charges resulting from higher international capacity, partially offset by a sales and use tax refund in the June 2005 quarter. |
| Interest expense increased 46% primarily due to higher levels of outstanding debt and increased interest rates, as well as the reclassification of certain aircraft leases from operating to capital. |
Other Items
Flight Equipment
The table set forth below shows our aircraft fleet at June 30, 2005.
Current Fleet | ||||||||||||
Aircraft Type | Owned | Capital Lease |
Operating Lease |
Total Lease |
Total | Average Age |
||||||
B-737-200 | 6 | 7 | 27 | 34 | 40 | 20.5 | ||||||
B-737-300 | | | 21 | 21 | 21 | 18.4 | ||||||
B-737-800 | 71 | | | | 71 | 4.7 | ||||||
B-757-200 | 77 | 10 | 34 | 44 | 121 | 13.8 | ||||||
B-767-200 | 14 | | | | 14 | 22.1 | ||||||
B-767-300 | 4 | 10 | 14 | 24 | 28 | 15.4 | ||||||
B-767-300ER | 50 | | 9 | 9 | 59 | 9.3 | ||||||
B-767-400 | 21 | | | | 21 | 4.3 | ||||||
B-777-200 | 8 | | | | 8 | 5.4 | ||||||
MD-11 | | | 3 | 3 | 3 | 12.3 | ||||||
MD-88 | 63 | 16 | 41 | 57 | 120 | 15.0 | ||||||
MD-90 | 16 | | | | 16 | 9.6 | ||||||
FRJ-328 | | | 30 | 30 | 30 | 4.2 | ||||||
ATR-72 | 4 | | 8 | 8 | 12 | 11.7 | ||||||
CRJ-100/200 | 115 | | 128 | 128 | 243 | 5.2 | ||||||
CRJ-700 | 62 | | | | 62 | 1.7 | ||||||
Total | 511 | 43 | 315 | 358 | 869 | |||||||
Our purchase commitments (firm orders) for aircraft, as well as options to purchase additional aircraft, as of June 30, 2005, are shown below.
Delivery in Calendar Year Ending | |||||||||||||||
Aircraft on Firm Order | 2005 | 2006 | 2007 | 2008 | After 2008 |
Total | |||||||||
B-737-800 | 1 | | 36 | (1) | 14 | | 50 | ||||||||
B-777-200 | | | | 2 | 3 | 5 | |||||||||
CRJ-200 | 7 | 12 | | | | 19 | |||||||||
Total | 8 | 12 | 36 | 16 | 3 | 74 | |||||||||
(1) In July 2005, two B-737-800 aircraft deliveries scheduled for 2007 were deferred until 2010. |
Delivery in Calendar Year Ending | ||||||||||||||
Aircraft on Option (1) | 2005 | 2006 | 2007 | 2008 | After 2008 |
Total | Rolling Options |
|||||||
B-737-800 | | | | 12 | 48 | 60 | 168 | |||||||
B-767-300/300ER | | | 2 | 2 | 6 | 10 | 5 | |||||||
B-767-400 | | | 2 | 2 | 17 | 21 | | |||||||
B-777-200 | | | | 1 | 19 | 20 | 5 | |||||||
CRJ-200 | | 39 | 33 | 22 | 20 | 114 | | |||||||
CRJ-700 | | 7 | 31 | 32 | 40 | 110 | | |||||||
Total | | 46 | 68 | 71 | 150 | 335 | 178 | |||||||
(1) Aircraft options have scheduled delivery slots, while rolling options replace options and are assigned delivery slots as options expire or are exercised. |