ATLANTA, Oct. 14, 2015 /PRNewswire/ -- Delta Air
Lines (NYSE:DAL) today reported financial results for the
September 2015 quarter, including
adjusted net income1 of $1.4
billion or $1.74 per diluted
share, up 45% from the September quarter of 2014.
"Despite currency volatility and global economic uncertainty
which drove a modest decline in revenues, we expanded operating
margins by over five points to 21%, grew earnings per share by 45%,
and generated $1.4 billion of free
cash flow in the September quarter as demand remains solid and fuel
prices have dropped materially. We expect that strong
performance to continue in the December quarter with operating
margins of 16 to 18% and over 40% earnings per share growth," said
Richard Anderson, Delta's chief
executive officer. "It's an honor to recognize the hard work
of 80,000 outstanding Delta employees with over $1 billion of profit sharing accrued so far this
year. Our team consistently delivers best-in-class operations
and service to our customers, develops innovative solutions with
our global partners, and produces strong returns for our
shareholders."
Revenue Environment
Delta's operating revenue for the September quarter decreased
0.6%, or $71 million, including
$235 million in foreign currency
pressures. Passenger unit revenues declined 4.9%, which
includes approximately 2.5 points of impact from foreign
currency.
Delta continues to successfully implement its Branded Fares
initiative, increasing paid first class load factor by 8 points to
56% and expanding its Basic Economy product to over 450
markets. In total, Branded Fares products produced more than
$75 million in incremental revenue in
the September quarter.
"Our commercial initiatives are delivering solid benefits as
we've expanded our revenue premium to the industry, strengthened
our hubs in New York, Seattle and Los
Angeles, and deepened our partnerships around the
globe. However, low fuel prices and foreign currency have
pressured our revenue performance," said Ed
Bastian, Delta's president. "By keeping our system
capacity flat for the December quarter, we are taking action to
drive improvement in our unit revenues which we forecast will
decline 2.5-4.5% for the quarter including 2 points of impact from
foreign currency. Our conservative growth in this low fuel
environment is evidence of our commitment to getting RASM back on a
positive trajectory, which is a key component to achieving our
long-term margin targets."
Bastian continued, "As we look ahead, fuel prices remain
volatile and we are not recasting the business for low fuel
prices. Our plan is for 2016 capacity growth of 0-2%, which
we believe is the appropriate level to balance supply and demand
and to ensure the momentum in our business continues."
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease)
|
|
|
|
|
|
3Q15 versus
3Q14
|
|
|
|
|
|
Change
|
Unit
|
|
|
|
Passenger
Revenue
|
3Q15
($M)
|
|
YoY
|
Revenue
|
Yield
|
Capacity
|
|
|
Mainline
|
4,774
|
|
3.8 %
|
(2.3) %
|
(2.5) %
|
6.3 %
|
|
|
Regional
|
1,536
|
|
(5.9) %
|
(2.3) %
|
(4.3) %
|
(3.7) %
|
|
Total
Domestic
|
6,310
|
|
1.3 %
|
(3.0) %
|
(3.6) %
|
4.4 %
|
|
|
Atlantic
|
1,816
|
|
(5.6) %
|
(9.5) %
|
(7.8) %
|
4.3 %
|
|
|
Pacific
|
887
|
|
(12.7) %
|
(9.3) %
|
(13.1) %
|
(3.7) %
|
|
|
Latin
America
|
582
|
|
(3.8) %
|
(5.3) %
|
(6.3) %
|
1.6 %
|
|
Total
Passenger
|
9,595
|
|
(1.9) %
|
(4.9) %
|
(5.4) %
|
3.2 %
|
|
Cargo
Revenue
|
196
|
|
(19.7) %
|
|
|
|
|
Other
Revenue
|
1,316
|
|
13.6 %
|
|
|
|
|
Total
Revenue
|
11,107
|
|
(0.6) %
|
|
|
|
December 2015
Quarter Guidance
Following are Delta's projections
for the December 2015 quarter:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4Q15
Forecast
|
|
Passenger unit
revenue (compared to 4Q14)
|
|
(2.5%) -
(4.5%)
|
|
Operating
margin
|
|
16% - 18%
|
|
Fuel price, including
taxes, settled hedges and refinery impact
|
|
$1.75-$1.80
|
|
CASM - Ex (compared
to 4Q14)
|
|
Up ~2%
|
|
System capacity
(compared to 4Q14)
|
|
Flat
|
Cost Performance
Adjusted fuel
expense2 declined over $1.1
billion compared to the same period in 2014, as 50% lower
market fuel prices and an $87 million
increase in profit at the refinery offset $250 million in settled hedge losses.
CASM-Ex3 increased 0.9% for the September quarter on
a year-over-year basis, with foreign exchange and the benefits of
Delta's domestic refleeting and other cost initiatives offsetting
the company's investments in its employees, products and
operations. The September quarter also included approximately
1 point of unit cost pressure from benefit accruals related to
recently announced pay increases for Delta employees.
Delta's debt reduction initiative continued to improve the
company's interest expense, producing $33
million in interest savings for the quarter compared to the
same period in 2014.
"We continue to benefit from the decline in fuel prices, which
provided a $1 billion-plus tailwind
this quarter and, at current prices, will drive a $750 million benefit in the December quarter,"
said Paul Jacobson, Delta's chief
financial officer. "With volatile fuel prices and revenues
under pressure, we are using the current environment to evaluate
and prune costs across all parts of the business, including our
overhead functions, making sure we're investing in the right parts
of the airline and at levels we can sustain over time."
Cash Flow, Shareholder Returns, and Adjusted
Net Debt4
Delta generated $2.4 billion of adjusted operating cash flow and
$1.4 billion of free cash flow during
the quarter. The company used this strong cash generation to
reinvest $1.0 billion back into the
business, including $450 million for
its 3.5% ownership position in China
Eastern. The company returned $532 million to its owners through $107 million of dividends and $425 million of share repurchases, while also
strengthening its balance sheet by reducing its adjusted net debt
to $6.4 billion.
During the quarter, Delta refinanced its senior secured credit
facility ahead of its scheduled maturity. The new borrowings
include a $1.5 billion undrawn
revolver, a $500 million term loan,
and a $500 million EETC with a
blended rate of 3.77%. The improved strength of Delta's
balance sheet allowed it to lower the overall rate on the borrowing
and increase its revolver capacity by $275
million. In addition, the company reduced the
outstanding principal amount by $320
million as it continues toward its $4
billion debt target by 2017.
"The strong cash flows we are producing are allowing us to
reinvest in our business and our employees, while working toward
achieving an investment grade balance sheet and also returning
increasing levels of cash to shareholders," Jacobson
continued. "Since initiating our capital return program, we
have already retired 8% of Delta's outstanding share count while
reducing our adjusted net debt by nearly $4
billion over that same time period."
GAAP Metrics Related to Fuel, Cost Performance and Cash
Flow
Below are GAAP metrics corresponding to the
non-GAAP figures cited above.
($ in millions except
per share and unit costs)
|
|
|
Change
|
|
3Q15
|
3Q14
|
$
|
%
|
Net income
|
1,315
|
357
|
958
|
NM
|
Diluted earnings per
share
|
1.65
|
0.42
|
1.23
|
NM
|
Fuel expense
(including regional carriers)
|
2,076
|
3,444
|
(1,368)
|
(40%)
|
Consolidated unit
cost
|
13.07
|
15.69
|
(2.62)
|
(17%)
|
Operating cash
flow
|
2,067
|
1,358
|
709
|
52%
|
Special Items
Special items, net of taxes, in the September 2015 quarter totaled $69 million, including:
- A $69 million charge primarily
for mark-to-market adjustments on fuel hedges settling in future
periods.
Special items, net of taxes, in the September 2014 quarter totaled $657 million, including:
- a $397 million charge for fleet
and other items;
- a $215 million charge for
mark-to-market adjustments on fuel hedges settling in future
periods;
- an $87 million charge for debt
extinguishment and other items; and
- a $42 million gain related to a
litigation settlement.
About Delta
Delta Air Lines serves more than 170 million customers each
year. Delta was named to FORTUNE magazine's top 50 World's Most
Admired Companies in addition to being named the most admired
airline for the fourth time in five years. Additionally, Delta has
ranked No.1 in the Business Travel News Annual Airline survey for
four consecutive years, a first for any airline. With an
industry-leading global network, Delta and the Delta Connection
carriers offer service to 318 destinations in 58 countries on six
continents. Headquartered in Atlanta, Delta employs nearly 80,000 employees
worldwide and operates a mainline fleet of more than 800 aircraft.
The airline is a founding member of the SkyTeam global alliance and
participates in the industry's leading trans-Atlantic joint venture
with Air France-KLM and Alitalia as well as a joint venture with
Virgin Atlantic. Including its worldwide alliance partners, Delta
offers customers more than 15,000 daily flights, with key hubs and
markets including Amsterdam, Atlanta, Boston, Detroit, Los Angeles,
Minneapolis/St. Paul, New York-JFK, New York-LaGuardia,
Paris-Charles de Gaulle, Salt Lake City, Seattle and Tokyo-Narita.
Delta has invested billions of dollars in airport facilities,
global products and services, and technology to enhance the
customer experience in the air and on the ground. Additional
information is available on the Delta News Hub, as well as
delta.com, Twitter @DeltaNewsHub, Google.com/+Delta,
Facebook.com/delta and Delta's blog takingoff.delta.com.
End Notes
(1)
|
Note A to the
attached Consolidated Statements of Operations provides a
reconciliation of non-GAAP financial measures used in this release
to the comparable GAAP metric and provides the reasons management
uses those measures.
|
|
|
(2)
|
Adjusted fuel expense
reflects, among other things, the impact of mark-to-market ("MTM")
adjustments and settlements. MTM adjustments are defined as fair
value changes recorded in periods other than the settlement period.
Such fair value changes are not necessarily indicative of the
actual settlement value of the underlying hedge in the contract
settlement period. Settlements represent cash received or paid on
hedge contracts settled during the period. These items adjust fuel
expense to show the economic impact of hedging, including cash
received or paid on hedge contracts during the period. See Note A
for a reconciliation of adjusted fuel expense and average fuel
price per gallon to the comparable GAAP metric.
|
|
|
(3)
|
CASM - Ex: In
addition to fuel expense, profit sharing and special
items, Delta believes adjusting for certain other expenses is
helpful to investors because other expenses are not related to the
generation of a seat mile. These expenses include aircraft
maintenance and staffing services Delta provides to third parties,
Delta's vacation wholesale operations, and refinery cost of sales
to third parties. The amounts excluded were $306
million and $239 million for the September
2015 and September 2014 quarters, respectively and
$945 million and $616 million for the nine months ended September
30, 2015 and 2014, respectively. Management believes this
methodology provides a more consistent and comparable reflection of
Delta's airline operations.
|
|
|
(4)
|
Adjusted net debt
includes $381 million of hedge margin receivable, which is cash
that we have posted with counterparties as hedge margin. See Note A
for additional information about our calculation of adjusted net
debt.
|
|
|
Forward Looking Statements
Statements in this press release that are not historical facts,
including statements regarding 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. All forward-looking
statements involve a number of risks and uncertainties that could
cause actual results to differ materially from the estimates,
expectations, beliefs, intentions, projections and strategies
reflected in or suggested by the forward-looking statements.
These risks and uncertainties include, but are not limited
to, the cost of aircraft fuel; the availability of aircraft fuel;
the impact of rebalancing our hedge portfolio, recording
mark-to-market adjustments or posting collateral in connection with
our fuel hedge contracts; the possible effects of accidents
involving our aircraft; the restrictions that financial covenants
in our financing agreements will have on our financial and business
operations; labor issues; interruptions or disruptions in service
at one of our hub or gateway airports; disruptions or security
breaches of our information technology infrastructure; our
dependence on technology in our operations; the effects of weather,
natural disasters and seasonality on our business; the effects of
an extended disruption in services provided by third party regional
carriers; failure or inability of insurance to cover a significant
liability at Monroe's Trainer
refinery; the impact of environmental regulation on the Trainer
refinery, including costs related to renewable fuel standard
regulations; our ability to retain management and key employees;
competitive conditions in the airline industry; the effects of
extensive government regulation on our business; the sensitivity of
the airline industry to prolonged periods of stagnant or weak
economic conditions; the effects of terrorist attacks or
geopolitical conflict; and the effects of the rapid spread of
contagious illnesses.
Additional information concerning risks and uncertainties that
could cause differences between actual results and forward-looking
statements is contained in our Securities and Exchange Commission
filings, including our Annual Report on Form 10-K for the fiscal
year ended Dec. 31, 2014.
Caution should be taken not to place undue reliance on our
forward-looking statements, which represent our views only as of
Oct. 14, 2015, and which we have no
current intention to update.
DELTA AIR LINES,
INC.
|
Consolidated
Statements of Operations
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September
30,
|
|
|
|
Nine Months
Ended
September
30,
|
|
|
(in millions, except
per share data)
|
2015
|
2014
|
$
Change
|
%
Change
|
|
2015
|
2014
|
$
Change
|
%
Change
|
Operating
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Passenger:
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$ 8,059
|
$ 8,144
|
$
(85)
|
(1)%
|
|
$ 22,195
|
$ 21,950
|
$
245
|
1%
|
|
|
Regional
carriers
|
1,536
|
1,632
|
(96)
|
(6)%
|
|
4,462
|
4,769
|
(307)
|
(6)%
|
|
|
Total passenger
revenue
|
9,595
|
9,776
|
(181)
|
(2)%
|
|
26,657
|
26,719
|
(62)
|
-%
|
|
Cargo
|
196
|
244
|
(48)
|
(20)%
|
|
620
|
691
|
(71)
|
(10)%
|
|
Other
|
1,316
|
1,158
|
158
|
14%
|
|
3,925
|
3,305
|
620
|
19%
|
|
|
Total operating
revenue
|
11,107
|
11,178
|
(71)
|
(1)%
|
|
31,202
|
30,715
|
487
|
2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expense:
|
|
|
|
|
|
|
|
|
|
|
Salaries and related
costs
|
2,276
|
2,069
|
207
|
10%
|
|
6,563
|
6,084
|
479
|
8%
|
|
Aircraft fuel and
related taxes
|
1,819
|
2,952
|
(1,133)
|
(38)%
|
|
5,111
|
7,612
|
(2,501)
|
(33)%
|
|
Regional carrier
expense
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
257
|
492
|
(235)
|
(48)%
|
|
816
|
1,465
|
(649)
|
(44)%
|
|
|
Other
|
816
|
861
|
(45)
|
(5)%
|
|
2,407
|
2,568
|
(161)
|
(6)%
|
|
Aircraft maintenance
materials and outside repairs
|
479
|
440
|
39
|
9%
|
|
1,430
|
1,354
|
76
|
6%
|
|
Depreciation and
amortization
|
466
|
440
|
26
|
6%
|
|
1,384
|
1,333
|
51
|
4%
|
|
Contracted
services
|
477
|
459
|
18
|
4%
|
|
1,375
|
1,326
|
49
|
4%
|
|
Passenger commissions
and other selling expenses
|
463
|
476
|
(13)
|
(3)%
|
|
1,270
|
1,289
|
(19)
|
(1)%
|
|
Landing fees and
other rents
|
403
|
393
|
10
|
3%
|
|
1,164
|
1,089
|
75
|
7%
|
|
Profit
sharing
|
563
|
384
|
179
|
47%
|
|
1,110
|
823
|
287
|
35%
|
|
Passenger
service
|
247
|
227
|
20
|
9%
|
|
664
|
615
|
49
|
8%
|
|
Aircraft
rent
|
63
|
65
|
(2)
|
(3)%
|
|
183
|
172
|
11
|
6%
|
|
Restructuring and
other items
|
-
|
570
|
(570)
|
NM
|
|
35
|
649
|
(614)
|
NM
|
|
Other
|
565
|
515
|
50
|
10%
|
|
1,605
|
1,302
|
303
|
23%
|
|
|
Total operating
expense
|
8,894
|
10,343
|
(1,449)
|
(14)%
|
|
25,117
|
27,681
|
(2,564)
|
(9)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
2,213
|
835
|
1,378
|
NM
|
|
6,085
|
3,034
|
3,051
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Expense)
Income:
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(121)
|
(154)
|
33
|
(21)%
|
|
(379)
|
(513)
|
134
|
(26)%
|
|
Miscellaneous,
net
|
(20)
|
(102)
|
82
|
(80)%
|
|
(82)
|
(309)
|
227
|
(73)%
|
|
|
Total other expense,
net
|
(141)
|
(256)
|
115
|
(45)%
|
|
(461)
|
(822)
|
361
|
(44)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before
Income Taxes
|
2,072
|
579
|
1,493
|
NM
|
|
5,624
|
2,212
|
3,412
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax
Provision
|
(757)
|
(222)
|
(535)
|
NM
|
|
(2,078)
|
(841)
|
(1,237)
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
$ 1,315
|
$
357
|
$
958
|
NM
|
|
$ 3,546
|
$ 1,371
|
$ 2,175
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
$
1.67
|
$
0.43
|
|
|
|
$
4.42
|
$
1.63
|
|
|
Diluted Earnings
Per Share
|
$
1.65
|
$
0.42
|
|
|
|
$
4.37
|
$
1.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Weighted
Average Shares Outstanding
|
788
|
834
|
|
|
|
803
|
840
|
|
|
Diluted Weighted
Average Shares Outstanding
|
795
|
843
|
|
|
|
811
|
849
|
|
|
DELTA AIR LINES,
INC.
|
Statistical
Summary
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
Sept. 30,
|
|
Nine Months Ended
Sept. 30,
|
|
2015
|
2014
|
Change
|
|
2015
|
2014
|
Change
|
Consolidated:
|
|
|
|
|
|
|
|
Revenue passenger
miles (millions)
|
59,076
|
56,955
|
4%
|
|
160,052
|
154,897
|
3%
|
Available seat miles
(millions)
|
68,031
|
65,926
|
3%
|
|
188,565
|
181,647
|
4%
|
Passenger mile yield
(cents)
|
16.24
|
17.16
|
(5)%
|
|
16.66
|
17.25
|
(3)%
|
Passenger revenue per
available seat mile (cents)
|
14.10
|
14.83
|
(5)%
|
|
14.14
|
14.71
|
(4)%
|
Operating cost per
available seat mile (cents)
|
13.07
|
15.69
|
(17)%
|
|
13.32
|
15.24
|
(13)%
|
CASM-Ex - see Note A
(cents)
|
8.74
|
8.66
|
1%
|
|
9.07
|
9.10
|
-%
|
Passenger load
factor
|
86.8%
|
86.4%
|
0.4 pt
|
|
84.9%
|
85.3%
|
(0.4) pt
|
Fuel gallons consumed
(millions)
|
1,096
|
1,067
|
3%
|
|
3,043
|
2,949
|
3%
|
Average price per
fuel gallon, adjusted - see Note A
|
$ 1.80
|
$ 2.90
|
(38)%
|
|
$ 2.35
|
$ 2.95
|
(20)%
|
Number of aircraft in
fleet, end of period
|
925
|
916
|
9
|
|
|
|
|
Full-time equivalent
employees, end of period
|
83,033
|
79,714
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
|
Revenue passenger
miles (millions)
|
53,526
|
51,309
|
4%
|
|
144,134
|
138,472
|
4%
|
Available seat miles
(millions)
|
61,270
|
58,908
|
4%
|
|
168,783
|
161,042
|
5%
|
Operating cost per
available seat mile (cents)
|
12.68
|
14.90
|
(15)%
|
|
12.80
|
14.34
|
(11)%
|
CASM-Ex - see Note A
(cents)
|
8.35
|
8.04
|
4%
|
|
8.61
|
8.46
|
2%
|
Fuel gallons consumed
(millions)
|
939
|
905
|
4%
|
|
2,589
|
2,473
|
5%
|
Average price per
fuel gallon, adjusted - see Note A
|
$ 1.82
|
$ 2.87
|
(37)%
|
|
$ 2.44
|
$ 2.92
|
(16)%
|
Number of aircraft in
fleet, end of period
|
809
|
764
|
45
|
|
|
|
|
Note except for full-time equivalent employees and number of
aircraft in fleet, consolidated data presented includes operations
under Delta's contract carrier arrangements.
DELTA AIR LINES,
INC.
|
Consolidated
Statements of Cash Flows
|
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
September
30,
|
(in
millions)
|
2015
|
|
2014
|
Cash Flows From
Operating Activities:
|
|
|
|
Net Income
|
$ 1,315
|
|
$ 357
|
Depreciation and
amortization
|
466
|
|
440
|
Hedge derivative
contracts
|
(32)
|
|
328
|
Deferred income
taxes
|
720
|
|
217
|
Pension,
postretirement and postemployment expense in excess of
payments
|
61
|
|
37
|
Restructuring and
other
|
-
|
|
574
|
Changes
in:
|
|
|
|
Hedge margin
|
(247)
|
|
3
|
Air traffic
liability
|
(808)
|
|
(811)
|
Profit sharing
|
563
|
|
384
|
Other, net
|
29
|
|
(171)
|
Net cash provided by operating activities
|
2,067
|
|
1,358
|
|
|
|
|
Cash Flows From
Investing Activities:
|
|
|
|
Property and
equipment additions:
|
|
|
|
Flight equipment, including
advance payments
|
(406)
|
|
(322)
|
Ground property and
equipment, including technology
|
(156)
|
|
(135)
|
Purchase of equity
investments
|
(500)
|
|
-
|
Net redemptions
(purchases) of short-term investments
|
49
|
|
(1,147)
|
Other, net
|
4
|
|
21
|
Net cash used in investing activities
|
(1,009)
|
|
(1,583)
|
|
|
|
|
Cash Flows From
Financing Activities:
|
|
|
|
Payments on long-term
debt and capital lease obligations
|
(1,517)
|
|
(1,008)
|
Repurchase of common
stock
|
(425)
|
|
(250)
|
Cash
dividends
|
(107)
|
|
(75)
|
Fuel card
obligation
|
(23)
|
|
-
|
Proceeds from
long-term obligations
|
997
|
|
707
|
Other, net
|
93
|
|
(1)
|
Net cash used in financing activities
|
(982)
|
|
(627)
|
|
|
|
|
Net Increase
(Decrease) in Cash and Cash Equivalents
|
76
|
|
(852)
|
Cash and cash
equivalents at beginning of period
|
2,293
|
|
3,362
|
Cash and cash
equivalents at end of period
|
$2,369
|
|
$ 2,510
|
|
|
|
|
|
|
DELTA AIR LINES,
INC.
|
|
|
Consolidated
Balance Sheets
|
|
|
(Unaudited)
|
|
|
|
September
30,
|
|
December
31,
|
(in
millions)
|
2015
|
|
2014
|
|
|
ASSETS
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
2,369
|
|
$
2,088
|
|
Short-term
investments
|
1,442
|
|
1,217
|
|
Accounts receivable,
net
|
1,974
|
|
2,297
|
|
Hedge margin
receivable
|
381
|
|
925
|
|
Fuel
inventory
|
381
|
|
534
|
|
Expendable parts and
supplies inventories, net
|
314
|
|
318
|
|
Hedge derivatives
asset
|
1,586
|
|
1,078
|
|
Deferred income
taxes, net
|
2,710
|
|
3,275
|
|
Prepaid expenses and
other
|
816
|
|
733
|
|
|
Total current
assets
|
11,973
|
|
12,465
|
|
|
|
|
|
|
Property and
Equipment, Net:
|
|
|
|
|
Property and
equipment, net
|
22,608
|
|
21,929
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
Goodwill
|
9,794
|
|
9,794
|
|
Identifiable
intangibles, net
|
4,589
|
|
4,603
|
|
Deferred income
taxes, net
|
2,834
|
|
4,320
|
|
Other noncurrent
assets
|
1,848
|
|
1,010
|
|
|
Total other
assets
|
19,065
|
|
19,727
|
Total
assets
|
$
53,646
|
|
$
54,121
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Current
Liabilities:
|
|
|
|
|
Current maturities of
long-term debt and capital leases
|
$
1,705
|
|
$
1,216
|
|
Air traffic
liability
|
5,231
|
|
4,296
|
|
Accounts
payable
|
2,688
|
|
2,622
|
|
Accrued salaries and
related benefits
|
2,790
|
|
2,266
|
|
Hedge derivatives
liability
|
2,194
|
|
2,772
|
|
Frequent flyer
deferred revenue
|
1,621
|
|
1,580
|
|
Other accrued
liabilities
|
1,379
|
|
2,127
|
|
|
Total current
liabilities
|
17,608
|
|
16,879
|
|
|
|
|
|
|
Noncurrent
Liabilities:
|
|
|
|
|
Long-term debt and
capital leases
|
7,096
|
|
8,561
|
|
Pension,
postretirement and related benefits
|
13,867
|
|
15,138
|
|
Frequent flyer
deferred revenue
|
2,265
|
|
2,602
|
|
Other noncurrent
liabilities
|
2,465
|
|
2,128
|
|
|
Total noncurrent
liabilities
|
25,693
|
|
28,429
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
Common
stock
|
—
|
|
—
|
|
Additional paid-in
capital
|
11,285
|
|
12,981
|
|
Retained
earnings
|
6,748
|
|
3,456
|
|
Accumulated other
comprehensive loss
|
(7,316)
|
|
(7,311)
|
|
Treasury
stock
|
(372)
|
|
(313)
|
|
|
Total stockholders'
equity
|
10,345
|
|
8,813
|
Total liabilities and
stockholders' equity
|
$
53,646
|
|
$
54,121
|
Note A: The following tables show reconciliations of non-GAAP
financial measures. The reasons Delta uses these measures are
described below.
Delta sometimes uses information ("non-GAAP financial measures")
that is derived from the Consolidated Financial Statements, but
that is not presented in accordance with accounting principles
generally accepted in the U.S. ("GAAP"). Under the U.S. Securities
and Exchange Commission rules, non-GAAP financial measures may be
considered in addition to results prepared in accordance with GAAP,
but should not be considered a substitute for or superior to GAAP
results. The tables below show reconciliations of non-GAAP
financial measures used in this release to the most directly
comparable GAAP financial measures.
Forward Looking Projections. Delta is unable to reconcile
certain forward-looking projections to GAAP as the nature or amount
of special items cannot be estimated at this time.
Pre-Tax Income and Net Income, adjusted for special
items. We adjust for the following items to
determine pre-tax income and net income, adjusted for special
items, for the reasons described below:
MTM adjustments and
settlements. MTM adjustments are defined as fair value changes
recorded in periods other than the settlement period. Such fair
value changes are not necessarily indicative of the actual
settlement value of the underlying hedge in the contract settlement
period. Settlements represent cash received or paid on hedge
contracts settled during the period. These items adjust fuel
expense to show the economic impact of hedging, including cash
received or paid on hedge contracts during the period.
Adjusting for these items allows investors to better understand and
analyze our core operational performance in the periods shown.
Restructuring and other.
Because of the variability in restructuring and other, the
adjustment for this item is helpful to investors to analyze the
company's recurring core performance in the period shown.
Virgin Atlantic MTM
adjustments. We record our proportionate share of earnings from
our equity investment in Virgin Atlantic in other expense. We
adjust for Virgin Atlantic's MTM adjustments to allow investors to
better understand and analyze the company's core financial
performance in the period shown.
Loss on extinguishment of
debt. We adjusted for loss on extinguishment of debt in 2014 to
assist investors with their analysis of the company's core
financial performance.
Income tax. Pre-tax income
is adjusted for the income tax effect of special items. We believe
this adjustment allows investors to better understand and analyze
the company's core financial performance in the periods shown.
|
Three Months
Ended
|
|
Net
Income
|
|
September 30,
2015
|
|
Per Diluted
Share
|
|
Pre-Tax
|
|
Income
|
|
Net
|
|
Three Months
Ended
|
(in millions, except
per share data)
|
Income
|
|
Tax
|
|
Income
|
|
September 30,
2015
|
GAAP
|
$ 2,072
|
|
$ (757)
|
|
$ 1,315
|
|
$
1.65
|
Adjusted
for:
|
|
|
|
|
|
|
|
MTM adjustments and
settlements
|
99
|
|
(38)
|
|
61
|
|
|
Virgin Atlantic MTM
adjustments
|
13
|
|
(5)
|
|
8
|
|
|
Total
adjustments
|
112
|
|
(43)
|
|
69
|
|
0.09
|
Non-GAAP
|
$ 2,184
|
|
$ (800)
|
|
$ 1,384
|
|
$
1.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Net
Income
|
|
September 30,
2014
|
|
Per Diluted
Share
|
|
Pre-Tax
|
|
Income
|
|
Net
|
|
Three Months
Ended
|
(in millions, except
per share data)
|
Income
|
|
Tax
|
|
Income
|
|
September 30,
2014
|
GAAP
|
$ 579
|
|
$ (222)
|
|
$ 357
|
|
$
0.42
|
Adjusted
for:
|
|
|
|
|
|
|
|
MTM adjustments and
settlements
|
347
|
|
(132)
|
|
215
|
|
|
Restructuring and
other
|
570
|
|
(215)
|
|
355
|
|
|
Loss on
extinguishment of debt
|
134
|
|
(51)
|
|
83
|
|
|
Virgin Atlantic MTM
adjustments
|
7
|
|
(3)
|
|
4
|
|
|
Total
adjustments
|
1,058
|
|
(401)
|
|
657
|
|
0.78
|
Non-GAAP
|
$ 1,637
|
|
$ (623)
|
|
$ 1,014
|
|
$
1.20
|
|
|
|
|
|
|
|
|
Operating Margin, adjusted. We adjust for the
following items to determine operating margin, adjusted for the
reasons described below:
MTM adjustments and
settlements. MTM adjustments are defined as fair value changes
recorded in periods other than the settlement period. Such fair
value changes are not necessarily indicative of the actual
settlement value of the underlying hedge in the contract settlement
period. Settlements represent cash received or paid on hedge
contracts settled during the period. These items adjust fuel
expense to show the economic impact of hedging, including cash
received or paid on hedge contracts during the period.
Adjusting for these items allows investors to better understand and
analyze our core operational performance in the periods shown.
Restructuring and other.
Because of the variability in restructuring and other, the
adjustment for this item is helpful to investors to analyze the
company's recurring core performance in the periods shown.
Refinery Sales. Delta's
refinery segment provides jet fuel to the airline segment from its
own production and from jet fuel obtained through agreements with
third parties. Activities of the refinery segment are primarily for
the benefit of the airline. However, from time to time, the
refinery sells fuel by-products to third parties. These sales are
recorded gross within other revenue and other operating expense. We
believe adjusting for refinery sales allows investors to better
understand and analyze the impact of fuel cost on our results in
the periods shown.
|
|
|
|
Three Months
Ended
|
|
|
|
|
September
30,
|
|
|
|
|
2015
|
2014
|
Operating
margin
|
|
|
|
19.9%
|
7.5%
|
Adjusted
for:
|
|
|
|
|
|
MTM adjustments and
settlements
|
|
0.9%
|
3.1%
|
Restructuring and
other
|
|
|
-
|
5.1%
|
Refinery
sales
|
|
|
0.2%
|
0.1%
|
Operating margin,
adjusted
|
|
|
|
21.0%
|
15.8%
|
|
|
|
|
|
|
Free Cash Flow. We present free cash flow because
management believes this metric is helpful to investors to evaluate
the company's ability to generate cash that is available for use
for debt service or general corporate initiatives. Adjustments
include:
Hedge deferrals. During the
March 2015 quarter, we effectively
deferred settlement of a portion of our hedge portfolio until 2016
by entering into fuel derivative transactions that, excluding
market movements from the date of the transactions, would provide
approximately $150 million in cash
receipts during the September 2015
quarter and $150 million in cash
receipts for the December 2015
quarter. Additionally, these transactions will require
approximately $300 million in cash
payments in 2016 (excluding market movements from the date of the
transactions). By effectively deferring settlement of a portion of
the original derivative transactions, the restructured hedge
portfolio provides additional time for the fuel market to stabilize
while adding some hedge protection in 2016. Free cash flow is
adjusted to include these deferral transactions in order to allow
investors to better understand the net impact of hedging activities
in the period shown.
Hedge margin. Free cash
flow is adjusted for hedge margin as we believe this adjustment
removes the impact of current market volatility on our unsettled
hedges and allows investors to better understand and analyze the
company's core operational performance in the period shown.
|
|
|
|
Three Months
Ended
|
(in
billions)
|
|
|
September 30,
2015
|
Net cash provided by
operating activities
|
|
|
$
2.1
|
Net cash used in
investing activities
|
|
|
(1.0)
|
Adjustments:
|
|
|
|
Hedge
deferrals
|
|
|
|
0.1
|
Hedge
margin
|
|
|
|
0.2
|
Total free cash
flow
|
|
|
$
1.4
|
|
|
|
|
|
Fuel expense, adjusted and Average fuel price per gallon,
adjusted. The tables below show the components of fuel
expense, including the impact of the refinery segment and hedging
on fuel expense and average price per gallon. We then adjust
for MTM adjustments and settlements for the reason described
below:
MTM adjustments and
settlements. MTM adjustments are defined as fair value changes
recorded in periods other than the settlement period. Such fair
value changes are not necessarily indicative of the actual
settlement value of the underlying hedge in the contract settlement
period. Settlements represent cash received or paid on hedge
contracts settled during the period. These items adjust fuel
expense to show the economic impact of hedging, including cash
received or paid on hedge contracts during the period.
Adjusting for these items allows investors to better understand and
analyze our core operational performance in the periods shown.
Consolidated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Price Per
Gallon
|
|
|
|
|
Three Months
Ended
|
|
|
Three Months
Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
(in millions, except
per gallon data)
|
|
|
2015
|
2014
|
|
|
2015
|
2014
|
Fuel purchase
cost
|
|
|
$
1,833
|
$ 3,179
|
|
|
$
1.67
|
$ 2.98
|
Airline segment fuel
hedge losses
|
|
|
349
|
284
|
|
|
0.32
|
0.27
|
Refinery segment
impact
|
|
|
(106)
|
(19)
|
|
|
(0.10)
|
(0.02)
|
Total fuel
expense
|
|
|
$
2,076
|
$ 3,444
|
|
|
$
1.89
|
$ 3.23
|
MTM adjustments and
settlements
|
|
|
(99)
|
(347)
|
|
|
(0.09)
|
(0.33)
|
Total fuel expense,
adjusted
|
|
|
$
1,977
|
$ 3,097
|
|
|
$
1.80
|
$ 2.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Price Per
Gallon
|
|
|
|
|
Nine Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
(in millions, except
per gallon data)
|
|
|
2015
|
2014
|
|
|
2015
|
2014
|
Fuel purchase
cost
|
|
|
$
5,519
|
$ 8,956
|
|
|
$
1.81
|
$ 3.04
|
Airline segment fuel
hedge losses
|
|
|
690
|
112
|
|
|
0.23
|
0.04
|
Refinery segment
impact
|
|
|
(282)
|
9
|
|
|
(0.09)
|
-
|
Total fuel
expense
|
|
|
$
5,927
|
$ 9,077
|
|
|
$
1.95
|
$ 3.08
|
MTM adjustments and
settlements
|
|
|
1,210
|
(380)
|
|
|
0.40
|
(0.13)
|
Total fuel expense,
adjusted
|
|
|
$
7,137
|
$ 8,697
|
|
|
$
2.35
|
$ 2.95
|
|
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
|
2015
|
2014
|
|
|
2015
|
2014
|
Mainline average
price per gallon
|
|
|
$
1.93
|
$
3.25
|
|
|
$
1.97
|
$ 3.07
|
MTM adjustments and
settlements
|
|
|
|
(0.11)
|
(0.38)
|
|
|
0.47
|
(0.15)
|
Mainline average
price per gallon, adjusted
|
|
|
$
1.82
|
$
2.87
|
|
|
$
2.44
|
$ 2.92
|
|
|
|
|
|
|
|
|
|
|
Non-Fuel Unit Cost or Cost per Available Seat Mile
("CASM-Ex"). We adjust CASM for the following items to
determine CASM-Ex for the reasons described below:
Aircraft fuel and related
taxes. The volatility in fuel prices impacts the comparability
of year-over-year non-fuel financial performance. The adjustment
for aircraft fuel and related taxes (including our regional
carriers) allows investors to better understand and analyze our
non-fuel costs and our year-over-year financial performance.
Profit sharing. We adjust
for profit sharing because this adjustment allows investors to
better understand and analyze our recurring cost performance and
provides a more meaningful comparison of our core operating costs
to the airline industry.
Restructuring and other.
Because of the variability in restructuring and other, the
adjustment for this item is helpful to investors to analyze the
company's recurring core performance in the periods shown.
Other expenses. Other
expenses include aircraft maintenance and staffing services we
provide to third parties, our vacation wholesale operations, and
refinery cost of sales to third parties. Because these businesses
are not related to the generation of a seat mile, we adjust for the
costs related to these sales to provide a more meaningful
comparison of the costs of our airline operations to the rest of
the airline industry.
Consolidated
CASM-Ex:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
|
September 30,
2015
|
|
September 30,
2014
|
|
September 30,
2015
|
|
September 30,
2014
|
CASM
(cents)
|
|
|
13.07
|
|
15.69
|
|
13.32
|
|
15.24
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and
related taxes
|
|
(3.05)
|
|
(5.22)
|
|
(3.14)
|
|
(4.99)
|
Profit
sharing
|
|
(0.83)
|
|
(0.58)
|
|
(0.59)
|
|
(0.45)
|
Restructuring and
other
|
|
-
|
|
(0.86)
|
|
(0.02)
|
|
(0.36)
|
Other
expenses
|
|
(0.45)
|
|
(0.37)
|
|
(0.50)
|
|
(0.34)
|
CASM-Ex
|
|
|
8.74
|
|
8.66
|
|
9.07
|
|
9.10
|
Year-over-year
change
|
|
|
0.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
CASM-Ex:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
|
September 30,
2015
|
|
September 30,
2014
|
|
September 30,
2015
|
|
September 30,
2014
|
Mainline CASM
(cents)
|
|
|
12.68
|
|
14.90
|
|
12.80
|
|
14.34
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and
related taxes
|
|
(2.97)
|
|
(5.00)
|
|
(3.03)
|
|
(4.72)
|
Profit
Sharing
|
|
(0.92)
|
|
(0.65)
|
|
(0.66)
|
|
(0.51)
|
Restructuring and
other
|
|
-
|
|
(0.85)
|
|
-
|
|
(0.32)
|
Other
expenses
|
|
(0.44)
|
|
(0.36)
|
|
(0.50)
|
|
(0.33)
|
Mainline
CASM-Ex
|
|
|
8.35
|
|
8.04
|
|
8.61
|
|
8.46
|
|
|
|
|
|
|
|
|
|
|
|
Operating Cash Flow, adjusted. We present adjusted
operating cash flow because management believes adjusting for these
amounts provides a more meaningful measure for investors.
Adjustments include:
Hedge deferrals. During the
March 2015 quarter, we effectively
deferred settlement of a portion of our hedge portfolio until 2016
by entering into fuel derivative transactions that, excluding
market movements from the date of the transactions, would provide
approximately $150 million in cash
receipts during the September 2015
quarter and $150 million in cash
receipts for the December 2015
quarter. Additionally, these transactions will require
approximately $300 million in cash
payments in 2016 (excluding market movements from the date of the
transactions). By effectively deferring settlement of a portion of
the original derivative transactions, the restructured hedge
portfolio provides additional time for the fuel market to stabilize
while adding some hedge protection in 2016. Operating cash
flow is adjusted to include these deferral transactions in order to
allow investors to better understand the net impact of hedging
activities in the period shown.
Hedge margin. Operating
cash flow is adjusted for hedge margin as we believe this
adjustment removes the impact of current market volatility on our
unsettled hedges and allows investors to better understand and
analyze the company's core operational performance in the period
shown.
|
|
|
Three Months
Ended
|
(in
billions)
|
|
September 30,
2015
|
Net cash provided by
operating activities (GAAP)
|
|
$
2.1
|
Adjustments:
|
|
|
Hedge
deferrals
|
|
|
0.1
|
Hedge
margin
|
|
|
0.2
|
Net cash provided by
operating activities, adjusted
|
|
$
2.4
|
|
|
|
|
Capital Expenditures, net. Delta presents net
capital expenditures, which includes strategic investments, because
management believes adjusting for these amounts provides a more
meaningful financial measure for investors. This metric is adjusted
for reimbursements related to build-to-suit leased facilities and
other because management believes investors should be informed that
these reimbursements for build-to-suit leased facilities
effectively reduce net cash provided by operating activities and
related capital expenditures.
|
|
|
Three Months
Ended
|
(in
millions)
|
|
September 30,
2015
|
Property and
equipment additions
|
|
$
562
|
Investment in China
Eastern
|
|
450
|
Investment in
GOL
|
|
50
|
Reimbursements
related to build-to-suit leased facilities and other
|
(23)
|
Capital expenditures,
net
|
|
$
1,039
|
|
|
|
|
Adjusted Net Debt. Delta uses adjusted total debt,
including aircraft rent, in addition to long-term adjusted debt and
capital leases, to present estimated financial obligations. Delta
reduces adjusted debt by cash, cash equivalents and short-term
investments, and hedge margin receivable, resulting in adjusted net
debt, to present the amount of assets needed to satisfy the debt.
Management believes this metric is helpful to investors in
assessing the company's overall debt profile. Management has
reduced adjusted debt by the amount of hedge margin receivable,
which reflects cash posted to counterparties, as we believe this
removes the impact of current market volatility on our unsettled
hedges and is a better representation of the continued progress we
have made on our debt
initiatives.
(in
billions)
|
|
September 30,
2015
|
|
|
June 30,
2013
|
Debt and capital
lease obligations
|
|
$ 8.8
|
|
|
|
$ 12.2
|
|
Plus: unamortized
discount, net from purchase accounting and fresh start
reporting
|
-
|
|
|
|
0.4
|
|
Less: debt assumed in
connection with Pinnacle acquisition
|
|
-
|
|
|
|
(0.2)
|
|
Adjusted debt and
capital lease obligations
|
|
|
$ 8.8
|
|
|
|
$ 12.4
|
Plus: 7x last twelve
months' aircraft rent
|
|
|
1.8
|
|
|
|
1.7
|
Adjusted total
debt
|
|
|
10.6
|
|
|
|
14.1
|
Less: cash, cash
equivalents and short-term investments
|
|
|
(3.8)
|
|
|
|
(3.9)
|
Less: hedge margin
receivable
|
|
|
(0.4)
|
|
|
|
-
|
Adjusted net
debt
|
|
|
$ 6.4
|
|
|
|
$ 10.2
|
|
|
|
|
|
|
|
|
|
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SOURCE Delta Air Lines