0000950144-01-508261.txt : 20011106 0000950144-01-508261.hdr.sgml : 20011106 ACCESSION NUMBER: 0000950144-01-508261 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20011101 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20011101 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELTA AIR LINES INC /DE/ CENTRAL INDEX KEY: 0000027904 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 580218548 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05424 FILM NUMBER: 1772572 BUSINESS ADDRESS: STREET 1: HARTSFIELD ATLANTA INTL AIRPORT STREET 2: 1030 DELTA BLVD CITY: ATLANTA STATE: GA ZIP: 30320-6001 BUSINESS PHONE: 4047152600 MAIL ADDRESS: STREET 1: 1030 DELTA BLVD STREET 2: DEPT 971 CITY: ATLANTA STATE: GA ZIP: 30320-6001 FORMER COMPANY: FORMER CONFORMED NAME: DELTA AIR CORP DATE OF NAME CHANGE: 19660908 8-K 1 g72420e8-k.txt DELTA AIR LINES INC 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): November 1, 2001 DELTA AIR LINES, INC. ----------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 1-5424 58-0218548 -------------------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.)
Hartsfield Atlanta International Airport, Atlanta, Georgia 30320 ---------------------------------------------------------------- (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 5. OTHER EVENTS AND REGULATION FD DISCLOSURE Press Release Reporting September Quarter 2001 Results Delta issued a press release today reporting September 2001 quarter results and supplemental data. That press release and the supplemental data are filed as Exhibits to this Report on Form 8-K. Forward-Looking Statements Statements in the Exhibits to this Report (or otherwise made by Delta or on Delta's behalf) which are not historical facts, including statements about Delta's estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or Delta's present expectations. Factors that could cause these differences include, but are not limited to: 1. the many effects on Delta and the airline industry from the terrorist attacks on the United States on September 11, 2001, including the following: a. the adverse impact of the terrorist attacks on the economy in general and the demand for air travel in particular; b. the cost to Delta from the shutdown of the U.S. air transportation system; c. the change in Delta's operations and higher costs resulting from new airline security directives; d. the availability and cost of war risk and other insurance for Delta and for other critical participants in the air travel industry, such as the companies providing security services at airports; e. the extent to which Delta receives additional financial assistance under the Air Transportation Safety and System Stabilization Act; f. the credit downgrade of Delta and other airlines by Moody's Investors Service and Standard & Poor's, and the possibility of additional downgrades, to the extent it makes it more difficult and/or more costly for us to obtain financing; g. potential declines in the values of the aircraft in Delta's fleet or facilities and related asset impairment charges; 2 h. additional terrorist activity and/or war; 2. general economic conditions, both in the United States and in our markets outside the United States, including the extent of the weakening in the U.S. economy and the related decline in business travel; 3. competitive factors in our industry, such as mergers and acquisitions, the airline pricing environment, international alliances, codesharing programs, and capacity decisions by competitors; 4. outcomes of negotiations on collective bargaining agreements and other labor issues, including a pending union representation election among Delta's flight attendants and union organizing efforts among other employee groups; 5. changes in aircraft fuel prices, the availability of fuel, and the availability and cost of fuel hedges; 6. disruptions to operations due to adverse weather conditions and air traffic control-related constraints; 7. fluctuations in foreign currency exchange rates; 8. actions by the United States or foreign governments, including the Federal Aviation Administration and other regulatory agencies; 9. the willingness of customers to travel generally, and with Delta specifically, which could be affected by factors such as Delta's and the industry's safety record, Delta's on-time performance, Delta's baggage handling performance and how well Delta responds to customer complaints; and 10. the outcome of Delta's litigation. Caution should be taken not to place undue reliance on Delta's forward-looking statements, which represent Delta's views only as of November 1, 2001, and which Delta has no current intention to update. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits. 99.1 Press release dated November 1, 2001 titled "Delta Air Lines Reports September Quarter 2001 Results" 99.2 Supplemental September 2001 Quarter Data 3 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: November 1, 2001 4 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION ----------- ----------- 99.1 Press Release dated November 1, 2001 titled "Delta Air Lines Reports September Quarter 2001 Results" 99.2 Supplemental September 2001 Quarter Data
5 EX-99.1 3 g72420ex99-1.txt PRESS RELEASE EXHIBIT 99.1 FOR IMMEDIATE RELEASE CONTACT: Corporate Communications Investor Relations 404/715-2554 404/715-6679 DELTA AIR LINES REPORTS SEPTEMBER QUARTER 2001 RESULTS ATLANTA, Nov 1, 2001 -- Delta Air Lines (NYSE:DAL) today reported a net loss of $295 million and a loss per share of $2.43 for the September 2001 quarter versus net income of $273 million and diluted earnings per share of $2.08 in the September 2000 quarter, excluding the unusual items described below. Including unusual items, the September 2001 quarter net loss and loss per share were $259 million and $2.13, respectively, versus net income of $133 million and diluted earnings per share of $1.01 in the September 2000 quarter. "The terrorist attacks against the United States on September 11, 2001 have had a severe impact on the airline industry," said Leo F. Mullin, Delta's chairman and chief executive officer. "Due to the dramatic decrease in passenger demand, Delta has taken several steps, including network changes and, unfortunately, employee reductions, to respond to this difficult operating environment." Delta estimates that the tragic events of September 11 negatively impacted revenues in the September 2001 quarter by approximately $400 million. This is in addition to revenues that were already projected to be down due to a weak economy and lingering effects of the 89-day Comair strike. In the September 2001 quarter, Delta's unit costs increased 4.5 percent from the September 2000 quarter, while non-fuel unit costs increased 6.4 percent, excluding unusual items. Total operating expenses decreased 1.8 percent, excluding unusual items, while available seat miles decreased 6.0 percent. Delta's fuel hedging program saved Delta $69 million, pretax, in the quarter. Delta is 67 percent hedged in the December 2001 quarter at approximately $0.59 per gallon. On September 26, Delta announced that it will reduce staffing by up to 13,000 jobs across all major work groups over the next few months. "Delta's people are Delta Air Lines," said Mullin. "This is the most difficult action I have had to take since joining Delta." Delta has offered its non-union employees in the United States and Puerto Rico six voluntary job reduction programs. Over 11,000 Delta employees elected to take the voluntary programs. "This extraordinary acceptance rate affirms the attractiveness of these programs," said Frederick Reid, president and chief operating officer of Delta. "Involuntary reductions are expected to affect only 2,000 employees -- 1,700 pilots and 300 from the other work groups." 1 In addition to the workforce reductions, Delta has instituted a broad-based recovery plan that includes eliminating discretionary spending, cutting capital expenditures, and reducing product and service offerings. In October 2001, Delta announced the closing of 35 of 70 city ticket offices, 11 of 50 Crown Room clubs, and five of 23 reservations call centers. Delta expects to record charges in the December 2001 quarter related to its early retirement program and impairment of fleet and facilities. UNUSUAL ITEMS During the September 2001 quarter, Delta recorded several unusual items, net of tax: a $33 million non-cash charge related to equity rights, primarily in priceline.com, to comply with Statement of Financial Accounting Standard (SFAS) 133; a $42 million charge related to severance costs associated with the employee reduction programs; a $104 million gain for compensation received under the Air Transportation Safety and System Stabilization Act; and a $7 million gain on the sale of its investment in Equant, N.V. In the September 2000 quarter, Delta recorded the following unusual items, net of tax: a $141 million non-cash charge related to SFAS 133; a $13 million charge related to the decision to discontinue our Pacific gateway in Portland, Ore.; and a one-time, non-cash gain of $10 million related to its equity investment in Worldspan. IMPACT OF UNUSUAL ITEMS
SEPTEMBER QUARTER 2001 NET OF TAX ($MM) EARNINGS PER SHARE ---------------- ------------------ Net Loss Excluding Unusual Items $(295) $(2.43) Unusual Items: Stabilization Act Compensation 104 0.85 Severance (42) (0.34) SFAS 133 (33) (0.27) Equant 7 0.06 Total Unusual Items -------- ------ $ 36 $ 0.30 ----- ------- Net Loss Including Unusual Items $(259) $ (2.13) ===== =======
FINANCIAL POSITION "An already challenging financial year for the airlines turned even more difficult when terrorist attacks struck our nation," stated M. Michele Burns, Delta's executive vice president and chief financial officer. "Delta management's quick response to reduce capacity and cut costs, combined with the assistance of government funds helped mitigate the financial pressures on our company. Nevertheless, Delta and the industry continue to face serious challenges ahead." During the September 2001 quarter, Delta received $346 million from the U.S. Government under the Air Transportation Safety and System Stabilization Act to compensate Delta for a portion of its direct 2 and incremental losses resulting from the September 11 terrorist attacks. Delta expects to receive a total of approximately $690 million under this program. For accounting purposes, Delta recognized $171 million, pretax, of the Stabilization Act compensation payment during the September 2001 quarter. Additionally, on September 17, Delta received $1.25 billion from a public sale of Enhanced Equipment Trust Certificates. As of September 30, Delta's cash balance was $2.8 billion. On October 12, 2001, Delta received $125 million in cash from the sale of its stake in SkyWest Airlines. "Delta is pleased with its relationship with SkyWest," said Burns. "This transaction was part of our ongoing initiative to monetize non-core assets and in no way signals a change in our operational relationship." OPERATIONS UPDATE The terrorist attacks on September 11, 2001 have had a significant impact on Delta's operations. From September 11 through September 13, Delta canceled over 6,500 flights. By September 16, Delta was operating approximately 80 percent of its pre-September 11 schedule. "The employees of Delta Air Lines worked extremely hard to get the operation up and running in a safe, secure, and timely manner," said Reid. "Our employees went well above and beyond the call of duty to make sure our passengers' needs were met." Delta's load factor from September 11 through September 30, 2001 was 48.8 percent on Delta's reduced capacity. For the month of October 2001, Delta's preliminary results indicate that load factor increased to 61 percent. "Although there are encouraging signs as our operations improve and passengers begin to return, business is still far from what it was before the attacks," said Reid. Delta is working with the Federal Aviation Administration and the Department of Transportation to enhance Delta's security measures. Delta has completed installation of new security devices on all of the cockpit doors on its mainline aircraft. NETWORK HIGHLIGHTS Effective November 1, 2001, Delta will reduce its capacity by approximately 16 percent, as measured by available seat miles from the level of service planned before September 11, 2001, due to the decline in passenger demand stemming from the terrorist attacks. As part of these reductions, Delta will suspend approximately 50 percent of its Delta Express capacity to Florida and will suspend certain international flights from John F. Kennedy Airport in New York including flights to Tokyo, Tel Aviv, Munich, Dublin, Shannon, Cairo, Dubai, Zurich, Brussels and Stockholm. On October 5, Delta announced a realignment of some of its Delta Connection carriers' regional jet operations to support Delta Air Lines' network adjustments. The adjustments will maintain Delta network access for all domestic markets currently served by Delta. 3 "In making these changes, Delta considered current and anticipated passenger demand, route profitability, and the ability to accommodate customers conveniently on other Delta flights," said Reid. "As demand returns, we will look to re-instate mainline service to cities where it can be done profitably." As a result of the capacity reduction, Delta is grounding 50 aircraft for the remainder of 2001. Delta is currently in negotiations with Boeing and Bombardier to defer certain new aircraft deliveries and will continually review its fleet plan based on demand and operational needs. On October 19, the U.S. and France announced an open skies air transport agreement. Delta, along with its European SkyTeam partners Air France, Alitalia and CSA Czech Airlines, filed an application for antitrust immunity with the U.S. Department of Transportation (DOT) earlier this year. This new open skies agreement will enable the U.S. Government to complete its review and consideration of the application. "We are hopeful that the DOT will now move swiftly to approve the application so passengers can begin to realize the benefits that will come from open skies and closer coordination among SkyTeam partners," said Mullin. Delta will host a webcast to discuss its quarterly earnings today, November 1, at 11:00 a.m. Eastern Standard Time. The webcast is available via the Internet at www.delta.com/inside/investors/index.jsp. Delta's goal is to become the No. 1 airline in the eyes of its customers, flying passengers and cargo from anywhere to everywhere. People choose to fly Delta more often than any other airline in the world on 4,813 flights each day to 370 cities in 64 countries on Delta, Delta Express, Delta Shuttle, Delta Connection carriers and Delta's Worldwide Partners. Delta is a founding member of SkyTeam, a global airline alliance that gives customers extensive worldwide destinations, flights and services. In addition to safely and securely making reservations and purchasing tickets at delta.com, Delta customers can select seats, upgrade, get up-to-date flight information, make accommodations reservations, and more. U.S.-based travel agencies also can access Delta Web fares for their customers via delta.com's Online Agency Service Center. For more information, go to delta.com. Statements in this press release (or otherwise made by Delta or on Delta's behalf) which are not historical facts, including statements about our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations. Factors that could cause these differences include those listed in the Report on Form 8-K dated November 1, 2001 filed with the Securities and Exchange Commission. # # # 4 DELTA AIR LINES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited; In Millions, Except Share Data)
Three Months Nine Months Ended Ended September 30, September 30, 2001 2000 2001 2000 Operating Revenues: Passenger $3,190 $4,050 $10,325 $11,906 Cargo 116 141 387 427 Other, net 92 154 304 392 Total operating revenues 3,398 4,345 11,016 12,725 Operating Expenses: Salaries and related costs 1,540 1,514 4,721 4,456 Aircraft fuel 472 533 1,449 1,428 Depreciation and amortization 318 281 973 880 Contracted services 249 239 761 703 Landing fees and other rents 203 199 601 582 Aircraft maintenance mat'ls and outside repairs 216 184 596 550 Aircraft rent 183 183 557 554 Other selling expenses 153 190 497 523 Passenger commissions 137 164 422 509 Passenger service 125 134 368 350 Other special charges 68 22 128 108 Stabilization Act compensation (171) -- (171) -- Other 156 192 594 623 Total operating expenses 3,649 3,835 11,496 11,266 Operating Income (Loss) (251) 510 (480) 1,459 Other Income (Expense): Interest expense, net (105) (58) (282) (194) Gains from sales of investments 12 -- 19 301 Fair value adjustments of SFAS 133 derivatives (51) (66) 44 (66) Misc. income(expense), net (13) 6 (30) 31 (157) (118) (249) 72 Income (Loss) Before Income Taxes (408) 392 (729) 1,531 Income Tax Benefit(Provision), Net 149 (159) 247 (621) Net Income (Loss) Before Cumulative Effect of Change In Accounting Principle (259) 233 (482) 910 Cumulative Effect of Change in Accounting Principle -- (100) -- (100) Net Income (Loss) (259) 133 (482) 810 Preferred Stock Dividends (3) (4) (10) (10) Net Income (Loss) Available To Common Shareowners $ (262) $ 129 $ (492) $ 800
5 Diluted Earnings (Loss)Per Share Before Cumulative Effect of Change in Acctg Principle $ (2.13) $ 1.77 $ (4.00) $ 6.90 Diluted Earnings (Loss) Per Share $ (2.13) $ 1.01 $ (4.00) $ 6.14 Net Income (Loss) Excluding Unusual Items* $ (295) $ 273 $ (541) $ 819 Diluted Earnings (Loss) Per Share Excluding Unusual Items* $ (2.43) $ 2.08 $ (4.48) $ 6.20 Operating Margin -7.4% 11.7% -4.4% 11.5% Weighted Average Shares Used In Diluted Income (Loss) Per Share Computation (000) 123,145 130,532 123,077 131,454 STATISTICAL SUMMARY: Revenue Psgr Miles (millions) 26,881 30,643 79,994 86,468 Available Seat Miles (millions)** 37,730 40,156 113,695 116,450 Passenger Mile Yield (cents) 11.87 13.22 12.91 13.77 Operating Revenue Per Available Seat Mile (cents) 9.00 10.82 9.69 10.93 Operating Cost per Available Seat Mile (cents) 9.67 9.55 10.11 9.67 Operating Cost Per Available Seat Mile - Excluding* 9.94 9.51 10.15 9.59 Passenger Load Factor (percent) 71.25 76.31 70.36 74.25 Breakeven Passenger Load Factor 76.86 66.70 73.63 65.15 Breakeven Passenger Load Factor - Excluding* 79.16 66.42 73.92 64.52 Psgrs Enplaned (thousands) 26,441 31,144 81,503 91,438 Revenue Ton Miles (millions) 3,065 3,516 9,218 9,915 Cargo Ton Miles (millions) 377 454 1,221 1,359 Cargo Ton Mile Yield (cents) 30.85 31.09 31.72 31.44 Fuel Gallons Consumed (millions) 678 757 2,056 2,201 Average Price Per Fuel Gallon, net of hedging gains (cents) 69.63 70.41 70.49 64.90 Number of Aircraft in Fleet at End of Period 826 821 826 821 Average Full-Time Equivalent Employees 83,500 82,800 83,300 81,700
* Statistics presented exclude unusual items discussed below. Unusual Items for 2001 include: Three months ended September 2001 - fair value adjustments related to SFAS 133 equity derivatives; a gain on the sale of our investment in Equant; a charge related to our announcement to eliminate up to 13,000 jobs; and Stabilization Act compensation related to the September 11, 2001 terrorist attacks 6 Nine months ended September 2001 - items discussed above for the September 2001 quarter; fair value adjustments related to SFAS 133 derivatives for the March and June 2001 quarters; and a charge related to Delta's decision to accelerate the retirement of nine Boeing 737 aircraft Unusual Items in 2000 include: Three months ended September 2000 - costs related to our decision to close our Pacific gateway in Portland, Oregon; the cumulative effect of the adoption of SFAS 133, as well as the fair value adjustments related to FAS 133 for the September 2000 quarter; and a one-time, non-cash gain from our investment in Worldspan Nine months ended September 2000 - items discussed above for the September 2000 quarter; a special charge related to Delta's early retirement medical option; and gains on Delta's equity investments in priceline.com ** As a result of a pilot strike, Comair suspended its operations between March 26, 2001 and July 1, 2001. Accordingly, Comair had no Available Seat Miles (ASMs) during this period. Also, immediately following the September 11 terrorist attacks, the FAA closed U.S. airspace for several days. As a result, Delta, Comair and ASA had no ASMs during this period. SELECTED BALANCE SHEET DATA:
September 30, December 31, 2001 2000 (unaudited) Cash and cash equivalents $ 2,786 $ 1,364 Total Assets 24,377 21,931 Long-term debt, including current maturities 8,953 5,859 Capital lease obligations, short-term and long-term 116 139 Total shareowners' equity 4,635 5,343
7 EX-99.2 4 g72420ex99-2.txt PRESS RELEASE DATED NOVEMBER 1, 2001 EXHIBIT 99.2 November 1, 2001 SUPPLEMENTAL SEPTEMBER 2001 QUARTER DATA In an effort to make more efficient use of the time allocated for this morning's conference call, we are providing detailed variance information on major expense items to assist you in analyzing Delta's September 2001 quarterly results. This information is intended to supplement that provided in the conference call (scheduled for 11:00 a.m. EST today) and in the earnings release. September quarter revenue performance will be discussed in the conference call. SEPTEMBER 2001 QUARTER OPERATING EXPENSES - Total operating expenses for the quarter decreased 4.9% to $3.6 billion. Excluding unusual charges, operating expenses decreased 1.8% on a 6.0% decrease in capacity. - Excluding unusual charges, Delta's total unit cost increased 4.5% to 9.94 cents from 9.51 cents. Non-fuel unit costs increased 6.4% to 8.69 cents from 8.17 cents. - Salaries and related expense increased 1.7% primarily as a result of higher pilot costs. - Total fuel expense decreased 11.4%. Total gallons consumed fell 10.5% due primarily to the decrease in fuel consumption as a result of September 11 events. Delta's average fuel price per gallon, including hedge proceeds, fell 1.1% to 69.6 cents from 70.4 cents. - Depreciation and amortization increased 13.2% due to the acquisition of 54 new aircraft since September 30, 2000. - Contracted services expense increased 4.2% due primarily to aircraft repainting, and computer software maintenance. - Aircraft maintenance increased 17.4% due to an increase in volume of outside repairs on engine and other parts. - Other selling expenses decreased 19.5% due primarily to lower volume of credit card transactions as a result of September 11 events. - Passenger commissions declined by 16.5% due to lower revenues. - Passenger service decreased 6.7% due to lower volume resulting from September 11 events. - Interest expense, net increased $47 million as a result of higher levels of debt outstanding. - Gains on sales of investments includes an $11 million gain on the sale of our investment in Equant. - Miscellaneous income (expense) decreased $16 million as a result of lower income from our equity investment in Worldspan. OTHER ITEMS Aircraft Fleet Our total aircraft fleet, options and rolling options at September 30, 2001 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-727-200 57 10 67 -- -- -- B-737-200 1 51 52 -- -- -- B-737-300 -- 26 26 -- -- -- B-737-600/700/800 58 -- 58 74 60 263 B-757-200 80 41 121 -- 20 62 B-767-200 15 -- 15 -- -- -- B-767-300/300ER 55 32 87 -- 11 11 B-767-400 16 -- 16 5 24 9 B-777-200 7 -- 7 6 20 20 L-1011-100 -- -- -- -- -- -- L-1011-250 -- -- -- -- -- -- MD-11 8 7 15 -- -- -- MD-88 63 57 120 -- -- -- MD-90 16 -- 16 -- -- -- EMB-120 45 5 50 -- -- -- ATR-72 4 15 19 -- -- -- CRJ-100/200 31 126 157 69 227 -- CRJ-700 -- -- -- 57 165 -- ------ ----- ----- ----- ------ ----- Total 456 370 826 211 527 365 ====== ===== ===== ===== ====== =====
The table above reflects the following changes which occurred during the September 2001 quarter: - We accepted delivery of eight B-737-800, one B-767-300ER, and seven CRJ-200 aircraft. - We retired three B-727-200, one L-1011-100, three L-1011-250, and four EMB-120 aircraft. - We leased two owned, and subleased three CRJ-100 aircraft to a third party. - We returned two B-737-200 aircraft to their lessors. 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. Joe Kolshak