EXHIBIT 99.1
FOR IMMEDIATE DISTRIBUTION
CONTACT: Corporate Communications Investor Relations
404-715-2554 404-715-6679
DELTA AIR LINES REPORTS FOURTH QUARTER, FULL YEAR 2002 RESULTS
ATLANTA, January 16, 2003 - Delta Air Lines (NYSE:DAL) today reported results
for the quarter ending December 31, 2002 and other significant news. The key
points are, Delta:
- - REPORTS A FOURTH QUARTER NET LOSS OF $363 MILLION, OR $2.98 LOSS PER
COMMON SHARE. FULL YEAR 2002 NET LOSS IS $1.3 BILLION, OR $10.44 LOSS
PER SHARE.
- - EXCLUDING UNUSUAL ITEMS, REPORTS A FOURTH QUARTER NET LOSS OF $230
MILLION, OR $1.90 LOSS PER COMMON SHARE. ON THE SAME BASIS, FULL YEAR
2002 NET LOSS IS $958 MILLION, OR $7.89 LOSS PER SHARE.
- - ENDS QUARTER WITH CASH AND SHORT-TERM LIQUIDITY OF $2.6 BILLION,
CONSISTING OF $2.0 BILLION IN UNRESTRICTED CASH, $134 MILLION IN
RESTRICTED CASH AND $500 MILLION IN SHORT-TERM LIQUIDITY.
- - DELTA MAINTAINED SOUND LIQUIDITY AND STRONG OPERATIONS DESPITE
INDUSTRY TURMOIL.
Delta Air Lines reported a net loss of $363 million and a loss per
share of $2.98 for the December 2002 quarter. This is compared to a net loss of
$734 million and loss per share of $5.98 for the December 2001 quarter.
Excluding unusual items, the December 2002 quarter net loss and loss per share
were $230 million and $1.90, respectively, compared to a net loss of $486
million and loss per share of $3.97 in the December 2001 quarter. For the full
year 2002, Delta reported a net loss of $1.3 billion and loss per share of
$10.44. Excluding unusual items, Delta reported a net loss of $958 million and
loss per share of $7.89 for calendar year 2002. Note 2 to the attached
consolidated statements of operations shows a reconciliation of the net loss
excluding unusual items to the reported net loss.
FINANCIAL PERFORMANCE
"During the past year, Delta, like all airlines, continued to feel the
serious financial blows from the post-9/11 industry turmoil and the slumping
economy. While we have experienced unsustainable losses, the hard work and
tough decisions of Delta's management and people have allowed the company to
remain fundamentally sound," said Leo F. Mullin, Delta chairman and chief
executive officer. "Although pressures and changes within our industry are
certain to continue, Delta will make the difficult but necessary moves to
position our company as an industry leader when we emerge from these uncertain
times."
Year-over-year comparisons of both financial and operational
performance continue to be significantly impacted by the 9/11 terrorist
attacks. Fourth quarter operating revenues increased 15.5 percent, and
passenger unit revenues increased 12.2 percent, compared to the December 2001
quarter.
Operating expenses for the December 2002 quarter decreased 7.9
percent. Excluding unusual items, operating expenses for the quarter increased
1.8 percent, primarily as a result of higher pension expenses and fuel costs.
Unit costs decreased 1.5 percent and unit costs on a fuel price neutralized
basis (1) decreased 3.9 percent, excluding unusual items.
Delta had positive cash flow from operations for the December 2002
quarter of $177 million. Even after funding non-fleet capital expenditures,
Delta's cash flow remained slightly positive for the quarter.
The load factor for the quarter was 71.2 percent on 3.3 percent
additional capacity, compared to 63.6 percent for the same period a year ago.
"Delta outperformed analyst expectations in the December quarter
through our disciplined approach to the entire operating environment," said M.
Michele Burns, executive vice president and chief financial officer. "The steps
we took to optimize our network and implement cost savings initiatives led to
improved cost and revenue performance in each month of the quarter."
In the December 2002 quarter, Delta's fuel hedging program reduced
costs by $40 million, pretax. Delta hedged 54 percent of its jet fuel
requirements in the December 2002 quarter at an average price of $0.68 per
gallon. Delta's total fuel price for the period was $0.76 per gallon. For the
March 2003 quarter, Delta has hedged 63 percent of its expected jet fuel
requirements at an average price of $0.77 per gallon. For the June 2003
quarter, Delta has hedged 65 percent of its expected jet fuel requirements at
an average price of $0.75 per gallon and for the full year 2003, Delta has
hedged 50 percent of its expected jet fuel requirements at an average price of
$0.75 per gallon.
Delta continued to adjust capacity during the fourth quarter. Compared
to the December 2001 quarter, system capacity for the December 2002 quarter was
up 3.3 percent and mainline capacity was up 1.4 percent. Compared to the
December 2000 quarter, system capacity was down 8.4 percent and mainline
capacity was down 11.2 percent. Delta's system capacity for the full-year 2003
is expected to be down 1.0 to 2.0 percent with mainline capacity down 4.0 to
5.0 percent as compared to 2002.
Delta preserved its financial flexibility throughout 2002. With the
current uncertainty in the geo-political environment and two carriers in
bankruptcy, Delta maintained sound liquidity through a series of strategic
initiatives. At December 31, 2002, Delta had cash and short-term liquidity
totaling $2.6 billion, of which $2.0 billion is unrestricted cash and cash
equivalents, $134 million is restricted cash and $500 million is short-term
liquidity available under an existing credit agreement. Delta also has
unencumbered aircraft with an estimated value of approximately $4.6 billion of
which $1.8 billion is eligible under Section 1110 of the U.S. Bankruptcy Code.
These aircraft are available for use in potential financing transactions.
"Delta continues to focus on maintaining financial headroom in the
face of an uncertain environment," said M. Michele Burns. "Throughout the year,
we have been strategic in managing the portfolio within our balance sheet, in
particular the proportion of cash to liquidity that we carry. By
- ---------
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.
managing this portfolio, we have been able to minimize carrying costs by
leveraging our deep pool of aircraft collateral and low short-term interest
rates."
Delta expects to meet its obligations as they become due through
available cash and cash equivalents, investments, internally generated funds,
borrowings and new financing transactions.
During the December 2002 quarter, Delta recorded a non-cash charge to
equity related to its pension plans totaling approximately $1.6 billion, net of
tax. This charge exceeded previously announced estimates of $700-800 million,
net of tax, as a result of the reduction in both interest rates and the value
of pension plan assets since the original estimate.
UNUSUAL ITEMS
December 2002 Quarter
In the December 2002 quarter, Delta recorded unusual charges totaling
$133 million, net of tax, consisting primarily of the following:
Charges
- - An $80 million charge, net of tax, for severance and related costs
associated with job reduction programs announced in October 2002.
- - A $26 million charge, net of tax, related to the purchase of a portion
of outstanding ESOP Notes.
- - A $23 million charge, net of tax, primarily related to the impairment
of Delta's EMB-120 turbo prop fleet and related spare parts. This
charge results from the decision to accelerate the removal of these
assets from the fleet, as well as their reduction in market value.
These aircraft will be removed from service during 2003.
- - A $19 million charge, net of tax, reflecting the cost to defer the
receipt of certain aircraft in accordance with previously announced
changes in Delta's fleet plan.
Offsetting these charges is the reversal of a reserve totaling $35
million, net of tax, related to nine Boeing 737 leased aircraft previously
removed from service. As a result of the previously announced retirement of the
B727s and the grounding of the MD-11 aircraft, the B737 aircraft will be
returned to service beginning in 2003.
December 2001 Quarter
In the December 2001 quarter, Delta recorded unusual charges totaling
$248 million, net of tax, consisting primarily of the following:
Charges
- - A $309 million charge, net of tax, related to staffing reduction
programs implemented as a result of the September 11 terrorist
attacks.
- - A $188 million charge, net of tax, related to the writedown of certain
aircraft.
- - A $90 million charge, net of tax, related primarily to discontinued
contracts, facilities and information technology projects.
Gains
- - A $288 million gain, net of tax, which reflected a portion of the
compensation that Delta received under the Stabilization Act.
- - A $66 million gain, net of tax, primarily related to the sale of
Delta's equity interest in SkyWest, Inc., the parent company of
SkyWest Airlines.
Additional details about unusual items can be found in Note 2 to the
attached consolidated statements of operations.
DELTA REMAINS COMMITTED TO OPERATIONAL EXCELLENCE AND SAFETY
Delta's primary focus continues to be operational excellence and
safety, even in the face of crisis throughout the industry. Delta's OSHA
recordable cases for 2002 were 50 percent below the industry average. This
marked the eighth consecutive year that Delta's rate has declined.
Additionally, Delta's OSHA lost work day cases in 2002 declined 16 percent
compared to 2001.
For the December 2002 quarter, Delta's completion factor was 98.9
percent versus 99.0 percent during the same period last year. For the full year
2002, Delta's completion factor was 99.0 percent, 1.5 points better than 2001.
DELTA FOCUSES ON FINANCIAL RESULTS WITH COST SAVING INITIATIVES
In the December 2002 quarter, and as outlined below, Delta has taken
and will continue to take significant actions to help improve financial
performance during 2003.
During the quarter, Delta announced a difficult, but necessary
decision to reduce its workforce by 7,000-8,000 positions, with most of these
reductions to be completed by May 2003. Once this current reduction is
complete, Delta will have reduced its workforce by approximately 16,000 since
September 11, 2001.
In the December 2002 quarter, Delta announced changes to its employee
pension program as part of its ongoing strategic benefits review initiative.
With the implementation of and migration to a new cash balance plan, Delta
expects to realize cost savings of approximately $120 million in 2003 and $600
million over the next five years. Delta has already taken steps to offset
rising healthcare costs through its strategic benefits review process,
resulting in cost savings of approximately $80 million in 2003.
Delta leveraged its flexibility through a disciplined approach to
right-sizing capacity, allowing for quick response to the ever-changing needs
of its passengers. Delta continued to optimize its network by restructuring its
Dallas/Fort Worth (DFW) hub in order to reduce operating losses. Delta will
offer customers 14 percent more flights at DFW each day by utilizing its
regional jet fleet, including the introduction of a new 70-seat aircraft. The
mainline aircraft previously serving DFW will either be retired or reallocated
to routes with better profit potential. Delta also announced plans to launch a
new low-fare subsidiary, initially focusing on Florida's leisure markets. This
new subsidiary will replace Delta Express and provide Delta with a competitive
advantage in the low cost carrier marketplace.
Delta continued to gain productivity advantages from the use of its
technology. During the quarter, Delta "went live" with its SAP inventory and
supply chain management system, delivering both on time and on budget. After
18 months of diligent work, Delta is extremely pleased with the initial results
and expects to achieve significant inventory reduction benefits over the next
three years.
REVENUE PERFORMANCE
Delta's passenger unit revenue performance, while still below December
quarter 2000 levels, continued to outperform the industry on a year-over-year
basis, up 12.2 percent from the December quarter 2001. The disciplined approach
to capacity combined with a significant number of initiatives established in
previous months, helped to drive this performance. Strategies were implemented
to reduce or eliminate corporate discounts, especially on published fares that
were already deeply discounted. Furthermore, select fares in both published and
opaque pricing channels were increased in markets exhibiting strong demand.
Yield performance was also bolstered by revenue management strategies deployed
for both the Thanksgiving and Christmas holiday period.
While Delta's year-over-year passenger unit revenue outperformed its
peers in the December quarter and the full year 2002, the revenue environment
continues to remain uncertain. A variety of factors may impact future industry
revenues, including the current geo-political environment, the economy and the
operation of two carriers under bankruptcy protection. Delta will continue to
proactively implement network and revenue enhancing initiatives to mitigate any
negative impact of the current revenue environment.
OTHER MATTERS
Attached to this earnings release are Delta's consolidated statements
of operations for the three and twelve months ended December 31, 2002; a
statistical summary for those periods; and selected balance sheet data as of
December 31, 2002.
Delta will host a webcast to discuss its quarterly earnings today,
January 16, at 9:30 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
5,826 flights each day to 437 destinations in 78 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 Delta's 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 Delta filed
today. Delta has no current intention to update its forward-looking statements.
# # #
DELTA AIR LINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in millions, except share data)
Three Months Twelve Months
Ended Ended
December 31, December 31,
------------------------------------ -----------------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Operating Revenues:
Passenger $ 3,061 $ 2,639 $ 12,321 $ 12,964
Cargo 126 119 458 506
Other, net 121 105 526 409
Total operating revenues 3,308 2,863 13,305 13,879
Operating Expenses:
Salaries and related costs 1,546 1,422 6,165 6,124
Aircraft fuel 475 368 1,683 1,817
Depreciation and
amortization (Note 1) 287 310 1,148 1,283
Contracted services 243 258 1,003 1,016
Landing fees and other rents 207 192 834 780
Aircraft maintenance materials
and outside repairs 163 205 711 801
Aircraft rent 177 180 709 737
Other selling expenses 113 120 539 616
Passenger commissions 54 118 322 540
Passenger service 85 101 372 466
Asset writedowns and other
nonrecurring items 151 991 439 1,119
Stabilization Act compensation -- (463) (34) (634)
Other 169 183 723 816
Total operating expenses 3,670 3,985 14,614 15,481
Operating Loss (362) (1,222) (1,309) (1,602)
Other Income (Expense):
Interest expense (165) (145) (646) (499)
Interest income 7 17 36 89
Loss on extinguishment of
ESOP notes (42) -- (42) --
Gain (loss) from sale
of investments, net -- 108 (3) 127
Fair value adjustments of
SFAS 133 derivatives (6) 24 (39) 68
Misc. income (expense), net (18) (17) 1 (47)
(224) (13) (693) (262)
Loss Before Income Taxes (586) (1,135) (2,002) (1,864)
Income Tax Benefit 223 401 730 648
Net Loss (363) (734) (1,272) (1,216)
Preferred Stock Dividends (4) (4) (15) (14)
Net Loss Available
To Common Shareowners $ (367) $ (738) $ (1,287) $ (1,230)
Diluted Loss Per Share $ (2.98) $ (5.98) $ (10.44) $ (9.99)
Net Loss Excluding
Unusual Items (Note 2) $ (230) $ (486) $ (958) $ (1,027)
Diluted Loss Per Share
Excluding Unusual Items
(Note 2) $ (1.90) $ (3.97) $ (7.89) $ (8.46)
Operating Margin -10.9% -39.2% -9.8% -11.5%
Weighted Average Shares Used
In Diluted Loss Per Share
Computation (in thousands): 123,358 123,247 123,283 123,119
DELTA AIR LINES, INC.
STATISTICAL SUMMARY
(unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
----------------------- -------------------------
2002 2001 2002 2001
------ ------ ------- -------
Revenue Psgr Miles (millions) 25,116 21,723 102,029 101,717
Available Seat Miles
(millions) 35,280 34,141 141,719 147,837
Passenger Mile Yield (cents) 12.18 12.14 12.08 12.74
Operating Revenue Per
Available Seat Mile (cents) 9.38 8.38 9.39 9.39
Passenger Revenue Per
Available Seat Mile (cents) 8.67 7.73 8.69 8.77
Operating Cost per
Available Seat Mile (cents) 10.40 11.67 10.31 10.47
Operating Cost per Available
Seat Mile - Excluding (cents)
(Note 2) 9.97 10.12 10.03 10.14
Passenger Load Factor
(percent) 71.19 63.63 71.99 68.80
Breakeven Passenger Load
Factor (percent) 79.62 90.69 79.64 77.31
Breakeven Passenger Load
Factor - Excluding (percent)
(Note 2) 76.10 77.96 77.27 74.73
Psgrs Enplaned (thousands) 27,290 23,440 107,048 104,943
Revenue Ton Miles (millions) 2,909 2,520 11,698 11,752
Cargo Ton Miles (millions) 397 362 1,495 1,583
Cargo Ton Mile Yield (cents) 31.55 32.71 30.62 31.95
Fuel Gallons Consumed
(millions) 625 593 2,514 2,649
Average Price Per Fuel Gallon,
net of hedging gains (cents) 76.03 62.04 66.94 68.60
Number of Aircraft in Fleet,
End of Period 831 814 831 814
Full-Time Equivalent Employees,
End of Period 75,100 76,300 75,100 76,300
SELECTED BALANCE SHEET DATA:
December 31, December 31,
2002 2001
------------ ------------
(unaudited)
(in millions)
Cash and cash equivalents $ 1,969 $ 2,210
Total assets 24,720 23,765
Total debt, including current
maturities and short-term
obligations 10,740 9,304
Capital lease obligations,
short-term and long-term 127 99
Total shareowners' equity 893 3,769
Note 1. For comparative purposes, note that we adopted Statement of Financial
Accounting Standards (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 Quarterly Report on Form 10-Q for the quarter
ended September 30, 2002 or our 2001 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 Twelve Months
Ended Ended
December 31, December 31,
----------------------- ---------------------------
2002 2001 2002 2001
------- ------- --------- ---------
(in millions, except share data)
Net Loss $ (363) $ (734) $ (1,272) $ (1,216)
Add: goodwill and
certain intangible assets
amortization, net of tax -- 15 -- 60
Adjusted net loss $ (363) $ (719) $ (1,272) $ (1,156)
Basic and diluted loss per share:
Net Loss $ (2.98) $ (5.98) $ (10.44) $ (9.99)
Add: goodwill and
certain intangible assets
amortization, net of tax -- 0.12 -- 0.49
Adjusted net loss $ (2.98) $ (5.86) $ (10.44) $ (9.50)
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 Twelve Months
Ended Ended
December 31, December 31,
------------------------- -----------------------------
2002 2001 2002 2001
------- ------- --------- ---------
(in millions, except share data)
Net loss excluding unusual
items (230) $ (486) $ (958) $ (1,027)
Unusual items, net of tax:
Severance for workforce
reductions (80) (309) (80) (351)
Loss on extinguishment
of ESOP notes (26) -- (26) --
Asset impairments (23) (188) (162) (225)
Aircraft deferral costs (19) -- (19) --
Surplus pilots and aircraft (8) (19) (59) (19)
Fair value adjustments of
SFAS 133 derivatives (4) 15 (25) 41
Restructuring and other
reserves, net 35 (4) 43 (4)
Discontinued capital projects
and contracts -- (90) -- (90)
Stabilization Act compensation -- 288 22 392
Net gain on sale of investments -- 66 -- 73
Other (8) (7) (8) (6)
Total unusual items,
net of tax (133) (248) (314) (189)
Net loss $ (363) $ (734) $ (1,272) $ (1,216)
Basic and diluted loss per share:
Net loss excluding unusual
items $ (1.90) $ (3.97) $ (7.89) $ (8.46)
Unusual items, net of tax:
Severance for workforce
reductions (0.65) (2.51) (0.65) (2.85)
Loss on extinguishment
of ESOP notes (0.21) -- (0.21) --
Asset impairments (0.19) (1.53) (1.31) (1.83)
Aircraft deferral costs (0.16) -- (0.16) --
Surplus pilots and aircraft (0.06) (0.15) (0.48) (0.15)
Fair value adjustments of
SFAS 133 derivatives (0.03) 0.12 (0.20) 0.33
Restructuring and other
reserves, net 0.28 (0.03) 0.35 (0.03)
Discontinued capital projects
and contracts -- (0.73) -- (0.73)
Stabilization Act compensation -- 2.34 0.17 3.18
Net gain on sale of investments -- 0.53 -- 0.59
Other (0.06) (0.05) (0.06) (0.04)
Total unusual items,
net of tax (1.08) (2.01) (2.55) (1.53)
Net loss $ (2.98) $ (5.98) $ (10.44) $ (9.99)