EXHIBIT 99
[DELTA LOGO]
INTERNAL MEMORANDUM
DATE: August 11, 2003
TO: All Delta Employees
FROM: Leo F. Mullin - Chairman and CEO
SUBJECT: CHANGES IN EXECUTIVE COMPENSATION
As you know, since September 11, 2001, Delta has been challenged with the most
serious crisis ever to face our company. Delta, along with other airlines, has
suffered huge losses during the ensuing period. Yet throughout, Delta people
have done what is necessary to enable us to emerge successfully from this trying
period. My deepest thanks to you for this.
There are now some recent indications of a business recovery. While this is
encouraging, these indications are far from enough to ensure the secure future
to which we all aspire. Thus, we have had to design and begin implementing a
massive profit improvement effort targeted at reducing unit costs by 15% --
improving at the same time the customer service for which Delta has always been
known. It is no easy task. Yet, it is achievable, particularly by a company with
Delta's history and an employee group that, in my opinion, stands head and
shoulders above all others in the industry.
This process, however, which requires substantial commitment by everybody in the
company, has been affected by a divisive debate regarding executive
compensation. Even before that debate began, Delta's management team was engaged
in discussions with our Board of Directors concerning compensation changes that
should be made in light of the challenges ahead. The intention has been clear:
make further tangible sacrifices in executive compensation; eliminate, as much
as possible, any sense of "we versus they" on compensation philosophy, such that
everyone appreciates we are all in this together; and continue, at the same
time, to compensate all Delta people at levels that are as competitively fair as
circumstances permit.
What has emerged is a package of changes affecting the most crucial areas of
executive compensation. Executive salaries have been reduced. Incentive
compensation ("bonuses") will not be accepted, even if earned, by the five
senior-most executives in 2003. Retention agreements for the same five
executives have been voluntarily revised. And regarding the funded Supplementary
Employee Retirement Program ("funded SERP"), the final (third) payment will not
be made, also by voluntary agreement of the participants, and the funding will
be discontinued. Details of these changes are described in the attachment to
this memo.
Changes in Executive Compensation
August 11, 2003
Page Two
These compensation changes represent significant contributions by Delta's
management team to our recovery effort. I am grateful for these contributions,
as I am to all of you who have sacrificed so much since September 11.
As I have reflected on the challenges that Delta has met in the past two years,
I remain impressed with how well we have performed as a team with a common
purpose - protect our people, our customers, our company and our country. Our
ability to achieve success in the demanding period yet ahead will require a
continuing, shared commitment from all of us in the organization. The
philosopher William James once said, "Great emergencies and crises show us how
much better our vital resources are than we expected." Consistent with this, we
at Delta have already grown stronger and better than we knew we could be. The
strength and resiliency are still there, and this will assure the success of our
continuing work to make Delta the world's greatest airline.
/s/ Leo F. Mullin
----------------------
Leo F. Mullin
Attachment
ATTACHMENT
PAGE 1
SUMMARY: CHANGES IN EXECUTIVE COMPENSATION
The requirement for participation in the cost reduction process extends to every
part of Delta's organization. As part of this shared commitment, management has
identified, and Delta's Board of Directors has endorsed, at its meeting on July
24, 2003, changes in executive compensation related to salary, incentive
compensation, and retention agreements, as well as the Supplemental Executive
Retirement Plan (SERP). Some of these changes have been announced previously but
are included here to provide a complete list of related actions, as follows:
- - In the area of salary, you may recall that executive vice presidents,
senior vice presidents, and vice presidents adopted an 8% pay cut
effective March 1. These salary alterations will continue, along with
President and Chief Operating Officer Fred Reid's previously announced
10% cut and Leo Mullin's 25% reduction.
- - In terms of Annual Incentive Pay for 2003 (potential cash awards based
on Delta's achievement of performance goals), Michele Burns, Vicki
Escarra, and Bob Colman will not accept any such payment, should it be
earned. Fred Reid rescinded any Annual Incentive payment, if earned,
under terms of the Federal Appropriations Act of 2003 executive
compensation provisions. Leo Mullin announced his decision to this
effect earlier this year. You may recall, too, that, in the wake of
September 11, incentive compensation earned in 2001 was not paid to any
member of the Delta management team.
- - Revisions also have been made to the Special Retention Program. This
was the program established by Delta's Board of Directors in January
2002 to encourage management stability. According to the program's
provisions, eligible participants would have received, based on having
met certain performance goals as well as specified retention
requirements, a lump sum cash award in January 2004. Fred Reid will
rescind any retention payment for which he might be eligible, and Leo
Mullin previously announced the same decision. In addition, Michele
Burns, Vicki Escarra, and Bob Colman have agreed to defer their
retention payments over three years, to be paid in April of 2004, 2005,
and 2006. These changes reduce the amount of payout that Delta would be
required to make in 2004 and keep the retention requirement in place
for two additional years.
- - In addition, changes have been made to Delta's Supplemental Executive
Retirement Plan (SERP). As background, the decision was made, following
the unstable period after September 11, to provide funding for already
accrued but unfunded retirement benefits for executives meeting the
qualifying rules. The intention was to provide for levels of pension
protection (which varied by person based largely on age, tenure and
salary) that are widely available to employees covered by qualified
plans, but were not available through unfunded SERPs. In addition, a
management retention feature was put in place wherein the SERP funding
was provided not all at once, but in three payments with the first
payment to be made in 2002, the second in 2003, and the final in 2004.
The non-qualified portion of the accrued benefit is payable in a lump
sum, similar to the benefit under a 401K or cash balance plan.
ATTACHMENT
PAGE 2
Funding of SERP was designed not to increase the retirement benefit
level for any individual; it was instead initiated for the purpose of
providing a level of protection for the already-accrued retirement
benefit similar to that provided by Delta's qualified retirement plan.
The funding program has served its purpose. The industry environment
has become more stable. And, in contrast to some of our competitors,
Delta's management ranks have remained relatively stable. For these
reasons, the SERP has now been changed to:
- Forego the final (third) payment to current participants under
the existing funded SERP program
- Discontinue the funding of any additional SERP grantor trusts.
Because the third payment will not be made, effectively, this
will have ended the funding of the SERP program retroactively
to January 1, 2003.
Consistent with the portability features included in the new cash
balance pension plan, eligible individuals will be provided with the
option of taking the present value of the non-qualified portion of
their accrued retirement benefit as an annuity or as a lump sum payment
upon termination of their employment, regardless of age.
In April, in an earlier, related compensation action, Leo Mullin also
rescinded the stock-based awards associated with the renewal of his
five-year contract, signed November 27, 2002, that had an estimated
Black-Scholes value of $5.5 million.