EXHIBIT 99.1
FOR IMMEDIATE DISTRIBUTION
CONTACT: Corporate Communications Investor Relations
404-715-2554 404-715-6679
DELTA AIR LINES REPORTS THIRD QUARTER RESULTS
ATLANTA, October 15, 2002 - Delta Air Lines (NYSE:DAL) today reported results
for the quarter ending September 30, 2002 and other significant news. The key
points are, Delta:
- - REPORTS A THIRD QUARTER NET LOSS OF $326 MILLION, OR $2.67 LOSS PER
COMMON SHARE.
- - EXCLUDING UNUSUAL ITEMS, REPORTS A THIRD QUARTER NET LOSS OF $212
MILLION, OR $1.75 LOSS PER COMMON SHARE.
- - ANNOUNCES CHANGES TO ITS FLEET PLAN FOR 2003 AND 2004 THAT WILL REDUCE
OPERATING COSTS, CAPITAL EXPENDITURES AND CAPACITY.
Delta Air Lines today reported a net loss of $326 million and a loss
per share of $2.67 for the September 2002 quarter versus a net loss of $259
million and loss per share of $2.13 in the September 2001 quarter. Excluding
unusual items, the September 2002 quarter net loss and loss per share were $212
million and $1.75, respectively, versus a net loss of $295 million and loss per
share of $2.43 in the September 2001 quarter. Note 2 to the attached
consolidated statements of operations shows a reconciliation of the net loss
excluding unusual items to the reported net loss.
"Clearly, today's results are disappointing. Our industry is
experiencing unprecedented financial challenges," said Leo F. Mullin, chairman
and chief executive officer. "As we have done for the past year, Delta will
maintain tight control of all facets of our business and make the difficult but
necessary decisions to ensure that our airline makes it successfully through
these challenging times."
FINANCIAL AND OPERATIONAL PERFORMANCE
Year-over-year comparisons of both financial and operational
performance are significantly impacted by the 9/11 terrorist attacks, as well as
the return to a normal schedule following the strike by Comair pilots in 2001.
Third quarter operating revenues increased 0.6 percent, and passenger unit
revenues increased 1.5 percent, compared to the September 2001 quarter.
Excluding unusual items, operating expenses decreased 3.7 percent, unit
costs decreased 1.3 percent and unit costs on a fuel price neutralized basis(1)
decreased 1.6 percent. Operating expenses, including unusual items, for the
September 2002 quarter increased 4.3 percent. The load factor for the quarter
was 74.3 percent on a 2.4 percent reduction in capacity, compared to 71.3
percent for the same period a year ago. For the September 2002 quarter, Delta's
completion factor was 99.3 percent versus 93.0 percent during the same period
last year.
- ------------------------
(1) The amount of operating cost incurred per available seat mile during a
reported period, adjusting the average fuel price per gallon for the current
period to equal the average fuel price per gallon for the corresponding period
in the prior year.
"We will continue to manage costs and liquidity while maintaining our
financial flexibility," said M. Michele Burns, executive vice president and
chief financial officer. "We are working to stay ahead of the business
environment rather than allow these challenges to control our decisions."
During the September 2002 quarter, and as outlined below, Delta has
taken and will continue to take significant actions to help control costs. These
include:
- Grounding all MD-11 aircraft and deferring all deliveries of
mainline aircraft to the fleet in 2003 and 2004. These actions
will reduce domestic capacity, operating costs through fleet
simplification, and $1.3 billion in capital expenditures over
the two-year period.
- Continued review of non-performing markets including the
cancellation of flights to Rio de Janeiro and Buenos Aires.
- Implementation of new customer service technology in airports
and through delta.com that provides an increase in
productivity.
In additional savings, Delta's fuel hedging program reduced costs by
$32 million, pretax, for the quarter. Delta hedged 50 percent of its jet fuel
requirements in the September 2002 quarter at an average hedge price of $0.66
per gallon. Delta's total fuel price for the period was $0.71 per gallon. For
the December 2002 quarter, Delta has hedged 50 percent of its expected jet fuel
requirements at an average price of $0.67 per gallon. For 2003, Delta has hedged
26 percent of its expected jet fuel requirements at an average price of $0.72
per gallon.
Delta continued to adjust capacity during the third quarter. Using the
year 2000 for comparison, system capacity for the September quarter was down 8.3
percent and mainline capacity was down 10.6 percent. Delta's fourth quarter
system capacity is expected to be down 9.0 - 10.0 percent with mainline capacity
down 12.0 percent from the December 2000 quarter.
Delta continued to preserve its financial flexibility, as discussed in
its Form 8-K filed on September 27, 2002. For the September 2002 quarter, Delta
had breakeven cash flow from operations. At September 30, 2002, Delta had cash
and cash equivalents totaling $1.7 billion. Delta also had liquidity totaling
$920 million available under existing credit agreements, as well as unencumbered
aircraft with an estimated value of approximately $5.0 billion of which about
$2.0 billion is Section 1110 eligible. These aircraft are available for use in
potential financing transactions.
Delta expects to meet its obligations as they become due through
available cash and cash equivalents, investments, internally generated funds,
borrowings under existing credit agreements and new financing transactions.
UNUSUAL ITEMS
September 2002 quarter
In the September 2002 quarter, Delta recorded $114 million of unusual
costs, net of taxes, consisting primarily of the following. Additional details
can be found in Note 2 to the attached consolidated statement of operations.
Gains
- - A $22 million gain, net of tax, related to the final compensation
received under the Stabilization Act. Delta's total compensation
received under the Act is $414 million, net of tax.
Charges
- - A $139 million charge, net of tax, for the impairment of MD-11 and
B-727 aircraft and spare parts. This amount results from the reduction
in market value of these assets.
September 2001 quarter
Delta recorded $36 million of unusual gains, net of taxes, in the
September 2001 quarter, consisting primarily of the following. Additional
details can be found in Note 2 to the attached consolidated statement of
operations.
Gains
- - A $104 million gain, net of tax, which reflected a portion of the
compensation that Delta received under the Stabilization Act.
Charges
- - A $42 million charge, net of tax, related to the announcement of
staffing reductions.
- - A $33 million non-cash charge, net of tax, for fair market value
adjustments of certain equity rights in other companies and fuel
derivative instruments to comply with Statement of Financial Accounting
Standard (SFAS) 133.
FLEET PLAN
In its continuing drive to reduce costs and capacity, Delta has
initiated steps to bring seat capacity in line with demand while simplifying the
fleet.
- Beginning early in 2003, Delta will begin to remove its 15
MD-11 aircraft from operations. Twelve of the MD-11's will be
removed by summer of 2003. These MD-11 aircraft will be
replaced on international routes by B767-300ER aircraft which
are currently used in the domestic system. The domestic flying
by the B767 aircraft will be flown by smaller mainline
aircraft, which will reduce Delta's domestic capacity by 2.0%
when the changes are fully implemented. The remaining three
MD-11 aircraft will be removed in early 2004. These aircraft
will be replaced by existing B777 aircraft.
- In addition, Delta has deferred all its deliveries of mainline
aircraft in 2003 and 2004:
Delta Revised Mainline Fleet Delivery Schedule
Time Period Planned # Revised # Aircraft Types
----------- --------- --------- --------------
2003 5 0 B737-800 (5 deferred)
2004 24 0 B737-800 (23 deferred)
-- - B777 (one deferred)
Total: 29 0
== =
As the chart shows, Delta will:
- Defer delivery of the five Boeing aircraft scheduled
for 2003. No other mainline aircraft deliveries will
occur in 2003.
- Defer delivery of 24 Boeing aircraft scheduled for
2004. No other mainline aircraft deliveries will
occur in 2004.
- These revisions will reduce the number of delivered
mainline aircraft in 2003 and 2004 from 29 to zero.
"Delta has reached agreement with Boeing to reschedule delivery of
these deferred aircraft," Burns said. "We appreciate the partnership with Boeing
in making these difficult but necessary decisions."
These fleet changes will result in a $1.3 billion capital
expenditure reduction over the two-year period. This arrangement adds greater
flexibility in making future decisions about fleet and capacity.
NETWORK HIGHLIGHTS
Delta entered into a proposed marketing agreement with Continental
Airlines and Northwest Airlines during the third quarter, which is subject to
DOT review and approval from Northwest and Delta pilots. The agreement includes:
codesharing, frequent flyer and airport lounge reciprocity, convenient schedule
connections and coordination of airport facilities. This alliance is expected to
improve Delta's revenue by approximately $150-200 million per year when fully
implemented, net of the moderating impact of the US Airways/United alliance.
"At its foundation, this is an initiative oriented to the customer,"
said Mullin. "When fully implemented, this effort will allow our customers to
travel more conveniently to more destinations around the world. From ticketing
to frequent flyer programs to baggage handling, their travel experience will
improve." The proposed marketing agreement also provides for discussions between
the three carriers and their European counterparts regarding the inclusion of
Continental, Northwest and KLM in SkyTeam.
Delta has made the strategic business decision to cancel its daily
non-stop service from Atlanta to Buenos Aires and Rio de Janeiro as of December
1. Delta remains committed to Latin America, but must focus its resources on
those markets where it can be most competitive.
Delta Connection will expand service at Washington-Reagan National
Airport beginning November 1 with 20 daily nonstop flights using regional jets
and serving eight new cities, in addition to Atlanta, Cincinnati and New
York-Kennedy. The new cities include Charleston, South Carolina; Columbus, Ohio;
Huntsville, Alabama; and the Florida cities of Jacksonville, Orlando, Tampa,
Fort Lauderdale and West Palm Beach.
CUSTOMER SERVICE
Delta continues to leverage its technology advantage to attract and
retain customers, as well as to eliminate the hassle factor at the airports.
Delta continues to enhance efficiency and speed through the roll out of its
self-service kiosks, which are now available at 79 airports. Delta anticipates
that by the end of the year 33 percent of its passengers will be self-service.
OTHER MATTERS
Attached to this earnings release are Delta's Consolidated Statements
of Operations for the three and nine months ended September 30, 2002; a
Statistical Summary for those periods; and Selected Balance Sheet Data at
September 30, 2002.
Delta will host a webcast to discuss its quarterly earnings today,
October 15, 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 carrier in terms of
passengers carried and the U.S. airline with the most transatlantic
destinations, offers 5,781 flights each day to 428 destinations in 77 countries
on Delta, Delta Express, Delta Shuttle, Delta Connection and Delta's worldwide
partners. Delta is a founding member of SkyTeam, a global airline alliance that
provides customers with extensive worldwide destinations, flights and services.
For more information, please go to delta.com.
Statements in this news release, which are not historical facts, including
statements regarding our beliefs, expectations, estimates, intentions or
strategies for the future, may be "forward-looking statements" under 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 plans, intentions, and expectations reflected in or
suggested by the forward-looking statements. For a list of factors that could
cause these differences, see the Form 8-K that we filed today. We have no
current intention to update our forward-looking statements.
# # #
0902/169-TRD
02SEPQTR
DELTA AIR LINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; In Millions, Except Share Data)
Three Months Nine Months
Ended Ended
September 30, September 30,
2002 2001 2002 2001
Operating Revenues:
Passenger $ 3,165 $ 3,190 $ 9,260 $ 10,325
Cargo 112 116 332 387
Other, net 143 92 405 304
Total operating revenues 3,420 3,398 9,997 11,016
Operating Expenses:
Salaries and related costs 1,555 1,534 4,619 4,701
Aircraft fuel 468 472 1,208 1,449
Depreciation and
amortization (Note 1) 289 318 861 973
Contracted services 256 248 760 758
Landing fees and other rents 213 198 627 588
Aircraft maintenance materials
and outside repairs 182 216 548 596
Aircraft rent 175 183 532 557
Other selling expenses 141 152 426 496
Passenger commissions 72 137 268 422
Passenger service 95 124 287 365
Asset writedowns and other
nonrecurring items 225 68 288 128
Stabilization Act compensation (34) (171) (34) (171)
Other 168 170 554 634
Total operating expenses 3,805 3,649 10,944 11,496
Operating Loss (385) (251) (947) (480)
Other Income (Expense):
Interest expense (165) (126) (481) (354)
Interest income 9 21 29 72
Gain (loss) from sale
of investments -- 12 (3) 19
Fair value adjustments of
SFAS 133 derivatives 10 (51) (33) 44
Misc. income (expense), net 4 (13) 19 (30)
(142) (157) (469) (249)
Loss Before Income Taxes (527) (408) (1,416) (729)
Income Tax Benefit 201 149 507 247
Net Loss (326) (259) (909) (482)
Preferred Stock Dividends (4) (3) (11) (10)
Net Loss Available
To Common Shareowners $ (330) $ (262) $ (920) $ (492)
Diluted Loss Per Share $ (2.67) $ (2.13) $ (7.46) $ (4.00)
Net Loss Excluding
Unusual Items (Note 2) $ (212) $ (295) $ (728) $ (541)
Diluted Loss Per Share
Excluding Unusual Items
(Note 2) $ (1.75) $ (2.43) $ (5.99) $ (4.48)
Operating Margin -11.3% -7.4% -9.5% -4.4%
Weighted Average Shares Used
In Diluted Loss Per Share
Computation(in thousands): 123,288 123,145 123,259 123,077
DELTA AIR LINES, INC.
STATISTICAL SUMMARY
(unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
2002 2001 2002 2001
Revenue Psgr Miles (millions) 27,364 26,881 76,913 79,994
Available Seat Miles
(millions) (Note 3) 36,840 37,730 106,439 113,695
Passenger Mile Yield (cents) 11.57 11.87 12.04 12.91
Operating Revenue Per
Available Seat Mile (cents) 9.28 9.00 9.39 9.69
Passenger Revenue Per
Available Seat Mile (cents) 8.59 8.46 8.70 9.08
Operating Cost per
Available Seat Mile (cents) 10.33 9.67 10.28 10.11
Operating Cost per Available
Seat Mile - Excluding (cents)
(Note 2) 9.81 9.94 10.04 10.15
Passenger Load Factor
(percent) 74.28 71.25 72.26 70.36
Breakeven Passenger Load
Factor (percent) 83.29 76.86 79.65 73.63
Breakeven Passenger Load
Factor - Excluding (percent)
(Note 2) 78.80 79.16 77.66 73.92
Psgrs Enplaned (thousands) 27,713 26,441 79,758 81,503
Revenue Ton Miles (millions) 3,098 3,065 8,789 9,218
Cargo Ton Miles (millions) 362 377 1,098 1,221
Cargo Ton Mile Yield (cents) 31.01 30.85 30.28 31.72
Fuel Gallons Consumed
(millions) 656 678 1,889 2,056
Average Price Per Fuel Gallon,
net of hedging gains (cents) 71.33 69.63 63.93 70.49
Number of Aircraft in Fleet,
End of Period 822 828 822 828
Full-Time Equivalent Employees,
End of Period 76,000 83,000 76,000 83,000
SELECTED BALANCE SHEET DATA:
September 30, December 31,
2002 2001
(unaudited)
(in millions)
Cash and cash equivalents $ 1,657 $ 2,210
Total assets 24,037 23,765
Total debt, including current
maturities and short-term
obligations 10,141 9,304
Capital lease obligations,
short-term and long-term 75 99
Total shareowners' equity 2,845 3,769
Note 1. For comparative purposes, note that we adopted Statement of Financial
Accounting Standard (SFAS)142, "Goodwill and Other Intangible Assets" on January
1, 2002. In accordance with that standard, we no longer amortize goodwill and
certain intangible assets. For more information about our adoption of SFAS 142,
please refer to our most recently filed Quarterly Report on Form 10-Q or our
Annual Report on Form 10-K.
The following table shows a reconciliation of our reported net loss and
loss per share to adjusted net loss and loss per share as if the
non-amortization provisions of SFAS 142 had been applied in the prior periods:
Three Months Nine Months
Ended Ended
September 30, September 30,
2002 2001 2002 2001
(in millions, except
per share data)
Net Loss $ (326) $ (259) $ (909) $ (482)
Add: goodwill and
certain intangible assets
amortization, net of tax -- 15 -- 45
Adjusted net loss $ (326) $ (244) $ (909) $ (437)
Basic and diluted loss per share:
Net Loss $ (2.67) $ (2.13) $ (7.46) $ (4.00)
Add: goodwill and
certain intangible assets
amortization, net of tax -- 0.12 -- 0.37
Adjusted net loss $ (2.67) $ (2.01) $ (7.46) $ (3.63)
Note 2. The following tables show reconciliations of our net loss and loss per
share excluding unusual items to reported net loss and loss per share:
Three Months Nine Months
Ended Ended
September 30, September 30,
2002 2001 2002 2001
(in millions, except
per share data)
Net loss excluding
unusual items $ (212) $ (295) $ (728) $ (541)
Unusual items, net of tax:
Fair value adjustment
of SFAS 133 derivatives 6 (33) (21) 25
Stabilization Act compensation 22 104 22 104
Asset impairment (139) -- (139) (36)
Surplus pilots and aircraft (11) -- (51) --
Reversal of prior year
restructuring reserve 8 -- 8 --
Severance for workforce
reductions -- (42) -- (42)
Gain on sale of investment -- 7 -- 7
Other -- -- -- 1
Total unusual items,
net of tax (114) 36 (181) 59
Net loss $ (326) $ (259) $ (909) $ (482)
Basic and diluted loss per share:
Net loss excluding unusual
items $ (1.75) $ (2.43) $ (5.99) $ (4.48)
Unusual items, net of tax:
Fair value adjustment
of SFAS 133 derivatives 0.05 (0.27) (0.17) 0.20
Stabilization Act compensation 0.18 0.85 0.18 0.85
Asset impairment (1.13) -- (1.13) (0.30)
Surplus pilots and aircraft (0.09) -- (0.42) --
Reversal of prior year
restructuring reserve 0.07 -- 0.07 --
Severance for workforce
reductions -- (0.34) -- (0.34)
Gain on sale of investment -- 0.06 -- 0.06
Other -- -- -- 0.01
Total unusual items,
net of tax (0.92) 0.30 (1.47) 0.48
Net loss $ (2.67) $ (2.13) $ (7.46) $ (4.00)
Note 3. 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.