ATLANTA, April 14, 2016 /PRNewswire/ -- Delta Air
Lines (NYSE:DAL) today reported financial results for the
March 2016 quarter, including
adjusted pre-tax income of $1.56
billion, a $966 million
increase over March 2015
quarter. Adjusted net income was $1.0
billion or $1.32 per diluted
share.
![Delta Air Lines and the Delta Connection carriers offer service to nearly 370 destinations on six continents. For more information visit news.delta.com. Delta Air Lines and the Delta Connection carriers offer service to nearly 370 destinations on six continents. For more information visit news.delta.com.](http://photos.prnewswire.com/prnvar/20090202/DELTALOGO)
"We have started 2016 with tremendous momentum, generating over
$1.5 billion in adjusted pre-tax
income, delivering industry-leading operations including 49 days of
perfect mainline completion factor for our customers, and reaching
our goal of becoming an investment grade company. With these
results, the Delta people have proven again that they are the very
best in the industry," said Ed
Bastian, Delta's incoming chief executive officer. "We
will continue to be disciplined with our business in the face of
volatile fuel prices, strengthen our foundation, and prove our
position as the airline that consistently delivers top results for
our employees, our owners and the customers and communities we
serve."
Revenue Environment
Delta's operating revenue
for the March quarter decreased 1.5 percent, or $137 million, driven by $125 million in foreign currency pressures and a
$5 million impact from the recent
events in Brussels. Passenger unit revenues declined 4.6
percent, including 2 points of impact from foreign currency, on a
2.7 percent increase in capacity.
"The momentum with our commercial initiatives, including
corporate share gains, Branded Fares, and our partnership with
American Express, allowed us to maintain our top line performance
in the March quarter despite 40 percent lower market fuel prices
and $125 million of pressure from
foreign currency," said Glen
Hauenstein, Delta's incoming president. "We are
forecasting a unit revenue decline of 2.5 – 4.5 percent for the
June quarter. While this is an improvement over our March
quarter performance, we are focused on getting unit revenues back
to a positive trajectory and we will make adjustments to our fall
capacity levels if we are not making sufficient progress over the
coming months."
|
|
|
|
Increase
(Decrease)
|
|
|
|
|
1Q16 versus
1Q15
|
|
|
|
|
Change
|
Unit
|
|
|
Passenger
Revenue
|
1Q16
($M)
|
|
YoY
|
Revenue
|
Yield
|
Capacity
|
|
Mainline
|
4,211
|
|
3.2 %
|
(4.4) %
|
(3.7) %
|
8.0 %
|
|
Regional
|
1,318
|
|
(4.1) %
|
(4.2) %
|
(4.5) %
|
0.1 %
|
Total
Domestic
|
5,529
|
|
1.4 %
|
(4.8) %
|
(4.4) %
|
6.5 %
|
|
Atlantic
|
919
|
|
(9.7) %
|
(6.4) %
|
(6.6) %
|
(3.5) %
|
|
Pacific
|
637
|
|
(13.9) %
|
(5.3) %
|
(9.2) %
|
(9.0) %
|
|
Latin
America
|
677
|
|
(4.8) %
|
(9.2) %
|
(10.8) %
|
4.8 %
|
Total
Passenger
|
7,762
|
|
(2.0) %
|
(4.6) %
|
(5.1) %
|
2.7 %
|
Cargo
Revenue
|
162
|
|
(25.3) %
|
|
|
|
Other
Revenue
|
1,327
|
|
6.3 %
|
|
|
|
Total
Revenue
|
9,251
|
|
(1.5) %
|
|
|
|
June 2016
Quarter Guidance
Following are Delta's projections for the June 2016 quarter:
|
2Q16
Forecast
|
Operating
margin
|
21% - 23%
|
Passenger unit
revenue (compared to 2Q15)
|
Down 2.5% -
4.5%
|
Fuel price, including
taxes, settled hedges and refinery impact
|
$1.48 -
$1.53
|
CASM – Ex including
profit sharing (compared to 2Q15)
|
Up ~ 2%
|
System Capacity
(compared to 2Q15)
|
Up 2% - 3%
|
Cost Performance
Adjusted fuel
expense2 declined $1.45
billion compared to the same period in 2015, on 40 percent
lower market fuel prices. For the quarter, the refinery
produced a loss of $28 million.
Settled hedge losses were $118
million.
CASM-Ex3 including profit sharing, increased 4.5
percent for the March 2016 quarter
compared to the prior year period, with foreign exchange and the
benefits of Delta's domestic refleeting and other cost initiatives
offsetting the company's investments in its products, operations
and employees. Half of the increase was attributable to
$136 million of higher profit sharing
expense.
Non-operating expense declined by $106
million from lower foreign exchange losses, improved
contribution from Delta's 49 percent equity stake in Virgin
Atlantic, and the benefit of the company's debt reduction
initiatives which reduced interest expense by $24 million versus prior year.
"The March quarter represented the peak of our non-fuel cost
pressures for the year and we expect our performance will improve
as we move through the remainder of the year, allowing us to
achieve our goal of keeping our non-fuel unit cost growth below 2
percent," said Paul Jacobson,
Delta's chief financial officer. "Our cost discipline,
combined with continued low fuel prices and solid outperformance on
revenue, is helping to contribute to over $8
billion in operating cash flow this year, which we are using
to invest in the business, strengthen the balance sheet and
continue to return cash to our owners."
Cash Flow, Shareholder Returns, and Adjusted
Net Debt4
Delta generated $1.35 billion of adjusted operating cash flow and
$497 million of free cash flow during
the quarter. The company used this strong cash generation to
invest $871 million into the
business, including $764 million in
fleet investments.
Delta made an $825 million cash
contribution and a $350 million stock
contribution to its pension plans during the quarter.
Subsequently, in April, Delta made an additional $135 million cash contribution, completing all
pension funding for the year.
For the March quarter, the company returned $882 million to shareholders, comprised of
$107 million of dividends and
$775 million of share
repurchases. Included in the share buyback was a $350 million accelerated share repurchase to
offset dilution to existing shareholders from the stock
contribution made to the pension plans during the quarter.
Adjusted net debt at the end of the quarter stood at
$7.0 billion. Delta is on track
to reduce adjusted net debt below $6
billion by the end of 2016. In recognition of its improved
financial strength, Delta's corporate credit rating was upgraded
during the quarter by Moody's Investors Service to Baa3, an
investment grade rating.
GAAP Metrics
Below are GAAP metrics
corresponding to the non-GAAP figures cited above.
|
|
|
Change
|
($ in millions except
per share and unit costs)
|
1Q16
|
1Q15
|
$
|
%
|
Pre-tax
income
|
1,434
|
1,186
|
248
|
21%
|
Net income
|
946
|
746
|
200
|
27%
|
Diluted earnings per
share
|
1.21
|
0.90
|
0.31
|
34%
|
Fuel expense
(including regional carriers)
|
1,394
|
2,099
|
(705)
|
(34%)
|
Consolidated unit
cost
|
13.26
|
14.12
|
(0.86)
|
(6%)
|
Operating cash
flow
|
1,011
|
1,636
|
(625)
|
(38%)
|
Special Items
Special items, net of taxes, in
the March 2016 quarter totaled
$80 million, including $98 million in mark-to-market adjustments on fuel
hedges settling in future periods.
Special items, net of taxes, in the March
2015 quarter totaled $374
million primarily comprised of mark-to-market adjustments
and settlements on fuel hedges.
About Delta
Delta Air Lines serves nearly 180 million customers each year.
In 2016, Delta was named to Fortune's top 50 Most Admired Companies
in addition to being named the most admired airline for the fifth
time in six years. Additionally, Delta has ranked No.1 in the
Business Travel News Annual Airline survey for an unprecedented
five consecutive years. With an industry-leading global network,
Delta and the Delta Connection carriers offer service to 324
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 and LaGuardia, London-Heathrow, 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, including profit
sharing: In addition to fuel expense, 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 $313 million and $293
million for the March 2016 and March
2015 quarters, respectively. Management believes this
methodology provides a more consistent and comparable reflection of
Delta's airline operations.
(4) Adjusted net debt includes $454 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 investor
update 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
impact of rebalancing our hedge portfolio, recording mark-to-market
adjustments or posting collateral in connection with our fuel hedge
contracts; the availability of aircraft fuel; the effects of
terrorist attacks or geopolitical conflict; 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; 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, 2015.
Caution should be taken not to place undue reliance on our
forward-looking statements, which represent our views only as of
Apr. 14, 2016, and which we have no
current intention to update.
DELTA AIR LINES,
INC.
|
Consolidated
Statements of Operations
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months
|
|
|
|
|
|
|
Ended March
31,
|
|
|
|
(in millions, except
per share data)
|
2016
|
2015
|
$
Change
|
%
Change
|
|
Operating
Revenue:
|
|
|
|
|
|
|
Passenger:
|
|
|
|
|
|
|
|
Mainline
|
$ 6,444
|
$ 6,549
|
$ (105)
|
(2)%
|
|
|
|
Regional
carriers
|
1,318
|
1,374
|
(56)
|
(4)%
|
|
|
|
Total passenger
revenue
|
7,762
|
7,923
|
(161)
|
(2)%
|
|
|
Cargo
|
162
|
217
|
(55)
|
(25)%
|
|
|
Other
|
1,327
|
1,248
|
79
|
6%
|
|
|
|
Total operating
revenue
|
9,251
|
9,388
|
(137)
|
(1)%
|
|
|
|
|
|
|
|
|
|
Operating
Expense:
|
|
|
|
|
|
|
Salaries and related
costs
|
2,311
|
2,092
|
219
|
10%
|
|
|
Aircraft fuel and
related taxes
|
1,227
|
1,835
|
(608)
|
(33)%
|
|
|
Regional carrier
expense
|
|
|
|
|
|
|
|
Fuel
|
167
|
264
|
(97)
|
(37)%
|
|
|
|
Other
|
839
|
789
|
50
|
6%
|
|
|
Depreciation and
amortization
|
486
|
470
|
16
|
3%
|
|
|
Contracted
services
|
476
|
441
|
35
|
8%
|
|
|
Aircraft maintenance
materials and outside repairs
|
449
|
452
|
(3)
|
(1)%
|
|
|
Passenger commissions
and other selling expenses
|
388
|
386
|
2
|
1%
|
|
|
Landing fees and
other rents
|
348
|
373
|
(25)
|
(7)%
|
|
|
Profit
sharing
|
272
|
136
|
136
|
NM
|
|
|
Passenger
service
|
189
|
190
|
(1)
|
(1)%
|
|
|
Aircraft
rent
|
66
|
60
|
6
|
10%
|
|
|
Other
|
493
|
502
|
(9)
|
(2)%
|
|
|
|
Total operating
expense
|
7,711
|
7,990
|
(279)
|
(3)%
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
1,540
|
1,398
|
142
|
10%
|
|
|
|
|
|
|
|
|
|
Non-Operating
expense:
|
|
|
|
|
|
|
Interest expense,
net
|
(107)
|
(131)
|
24
|
(18)%
|
|
|
Miscellaneous,
net
|
1
|
(81)
|
82
|
NM
|
|
|
|
Total non-operating
expense, net
|
(106)
|
(212)
|
106
|
(50)%
|
|
|
|
|
|
|
|
|
|
Income Before
Income Taxes
|
1,434
|
1,186
|
248
|
21%
|
|
|
|
|
|
|
|
|
|
Income Tax
Provision
|
(488)
|
(440)
|
(48)
|
11%
|
|
|
|
|
|
|
|
|
|
Net
Income
|
$
946
|
$
746
|
$
200
|
27%
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
$
1.22
|
$
0.91
|
|
|
|
Diluted Earnings
Per Share
|
$
1.21
|
$
0.90
|
|
|
|
|
|
|
|
|
|
|
|
Basic Weighted
Average Shares Outstanding
|
774
|
818
|
|
|
|
Diluted Weighted
Average Shares Outstanding
|
780
|
826
|
|
|
|
|
|
|
|
|
|
|
|
DELTA AIR LINES,
INC.
|
Statistical
Summary
|
(Unaudited)
|
|
|
|
|
|
|
Three Months Ended
Mar 31,
|
|
|
2016
|
2015
|
Change
|
|
Consolidated:
|
|
|
|
|
Revenue passenger
miles (millions)
|
47,725
|
46,221
|
3.3%
|
|
Available seat miles
(millions)
|
58,145
|
56,597
|
2.7%
|
|
Passenger mile yield
(cents)
|
16.26
|
17.14
|
(5.1)%
|
|
Passenger revenue per
available seat mile (cents)
|
13.35
|
14.00
|
(4.6)%
|
|
Operating cost per
available seat mile (cents)
|
13.26
|
14.12
|
(6.1)%
|
|
CASM-Ex, including
profit sharing - see Note A (cents)
|
10.33
|
9.88
|
4.5%
|
|
Passenger load
factor
|
82.1%
|
81.7%
|
0.4 pts
|
|
Fuel gallons consumed
(millions)
|
930
|
918
|
1.3%
|
|
Average price per
fuel gallon, adjusted - see Note A
|
$1.33
|
$2.93
|
(54.6)%
|
|
Number of aircraft in
fleet, end of period
|
931
|
912
|
19
|
|
Full-time equivalent
employees, end of period
|
83,817
|
81,055
|
3.4%
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
Revenue passenger
miles (millions)
|
42,786
|
41,304
|
3.6%
|
|
Available seat miles
(millions)
|
51,710
|
50,171
|
3.1%
|
|
Operating cost per
available seat mile (cents)
|
12.84
|
13.49
|
(4.8)%
|
|
CASM-Ex, including
profit sharing - see Note A (cents)
|
9.93
|
9.32
|
6.5%
|
|
Fuel gallons consumed
(millions)
|
784
|
772
|
1.6%
|
|
Average price per
fuel gallon, adjusted - see Note A
|
$1.36
|
$3.13
|
(56.5)%
|
|
Number of aircraft in
fleet, end of period
|
814
|
786
|
28
|
|
|
|
|
|
|
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
|
|
|
March
31,
|
(in
millions)
|
2016
|
|
2015
|
Cash Flows From
Operating Activities:
|
|
|
|
Net
income
|
$
946
|
|
$
746
|
Depreciation and
amortization
|
486
|
|
470
|
Hedge derivative
contracts
|
145
|
|
(323)
|
Deferred income
taxes
|
475
|
|
435
|
Pension,
postretirement and postemployment payments greater than
expense
|
(760)
|
|
(905)
|
Changes
in:
|
|
|
|
|
Hedge
margin
|
(335)
|
|
542
|
|
Air traffic
liability
|
1,485
|
|
1,570
|
|
Profit
sharing
|
(1,226)
|
|
(620)
|
Other working capital
changes, net
|
(205)
|
|
(279)
|
|
Net cash provided
by operating activities
|
1,011
|
|
1,636
|
|
|
|
|
|
Cash Flows From
Investing Activities:
|
|
|
|
Property and
equipment additions:
|
|
|
|
|
Flight equipment,
including advance payments
|
(764)
|
|
(451)
|
|
Ground property and
equipment, including technology
|
(107)
|
|
(135)
|
Net redemptions
(purchases) of short-term investments
|
265
|
|
(229)
|
Other, net
|
5
|
|
3
|
|
Net cash used in
investing activities
|
(601)
|
|
(812)
|
|
|
|
|
|
Cash Flows From
Financing Activities:
|
|
|
|
Payments on long-term
debt and capital lease obligations
|
(459)
|
|
(301)
|
Repurchases of common
stock
|
(775)
|
|
(425)
|
Cash
dividends
|
(107)
|
|
(75)
|
Fuel card
obligation
|
141
|
|
(32)
|
Proceeds from
short-term obligations
|
68
|
|
-
|
Proceeds from
long-term obligations
|
450
|
|
41
|
Other, net
|
8
|
|
2
|
|
Net cash used in
financing activities
|
(674)
|
|
(790)
|
|
|
|
|
|
Net (Decrease)
Increase in Cash and Cash Equivalents
|
(264)
|
|
34
|
Cash and cash
equivalents at beginning of period
|
1,972
|
|
2,088
|
Cash and cash
equivalents at end of period
|
$
1,708
|
|
$
2,122
|
|
|
|
|
|
|
|
DELTA AIR LINES,
INC.
|
|
|
Consolidated
Balance Sheets
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
(in
millions)
|
2016
|
|
2015
|
|
|
ASSETS
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
1,708
|
|
$
1,972
|
|
Short-term
investments
|
1,206
|
|
1,465
|
|
Accounts receivable,
net
|
2,179
|
|
2,020
|
|
Hedge margin
receivable
|
454
|
|
119
|
|
Fuel
inventory
|
367
|
|
379
|
|
Expendable parts and
supplies inventories, net
|
326
|
|
318
|
|
Hedge derivatives
asset
|
2,179
|
|
1,987
|
|
Prepaid expenses and
other
|
887
|
|
796
|
|
|
Total current
assets
|
9,306
|
|
9,056
|
|
|
|
|
|
|
Property and
Equipment, Net:
|
|
|
|
|
Property and
equipment, net
|
23,422
|
|
23,039
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
Goodwill
|
9,794
|
|
9,794
|
|
Identifiable
intangibles, net
|
4,856
|
|
4,861
|
|
Deferred income
taxes, net
|
4,489
|
|
4,956
|
|
Other noncurrent
assets
|
1,475
|
|
1,428
|
|
|
Total other
assets
|
20,614
|
|
21,039
|
Total
assets
|
$
53,342
|
|
$
53,134
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Current
Liabilities:
|
|
|
|
|
Current maturities of
long-term debt and capital leases
|
$
1,531
|
|
$
1,563
|
|
Air traffic
liability
|
5,988
|
|
4,503
|
|
Accounts
payable
|
2,732
|
|
2,743
|
|
Accrued salaries and
related benefits
|
1,903
|
|
3,195
|
|
Hedge derivatives
liability
|
2,630
|
|
2,581
|
|
Frequent flyer
deferred revenue
|
1,605
|
|
1,635
|
|
Other accrued
liabilities
|
1,719
|
|
1,306
|
|
|
Total current
liabilities
|
18,108
|
|
17,526
|
|
|
|
|
|
|
Noncurrent
Liabilities:
|
|
|
|
|
Long-term debt and
capital leases
|
6,920
|
|
6,766
|
|
Pension,
postretirement and related benefits
|
12,695
|
|
13,855
|
|
Frequent flyer
deferred revenue
|
2,276
|
|
2,246
|
|
Other noncurrent
liabilities
|
2,091
|
|
1,891
|
|
|
Total noncurrent
liabilities
|
23,982
|
|
24,758
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
Common
stock
|
—
|
|
—
|
|
Additional paid-in
capital
|
10,339
|
|
10,875
|
|
Retained
earnings
|
8,462
|
|
7,623
|
|
Accumulated other
comprehensive loss
|
(7,279)
|
|
(7,275)
|
|
Treasury
stock
|
(270)
|
|
(373)
|
|
|
Total stockholders'
equity
|
11,252
|
|
10,850
|
Total liabilities and
stockholders' equity
|
$
53,342
|
|
$
53,134
|
|
|
|
|
|
|
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 non-operating 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 periods shown.
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
|
|
Three Months
Ended
|
|
|
|
March 31,
2016
|
|
March 31,
2016
|
|
|
|
Pre-Tax
|
|
Income
|
|
Net
|
|
Net
Income
|
|
(in millions, except
per share data)
|
Income
|
|
Tax
|
|
Income
|
|
Per Diluted
Share
|
|
GAAP
|
$
1,434
|
|
$
(488)
|
|
$
946
|
|
$
1.21
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
MTM adjustments and
settlements
|
155
|
|
(57)
|
|
98
|
|
|
|
Virgin Atlantic MTM
adjustments
|
(29)
|
|
11
|
|
(18)
|
|
|
|
Total
adjustments
|
126
|
|
(46)
|
|
80
|
|
0.11
|
|
Non-GAAP
|
$
1,560
|
|
$
(534)
|
|
$ 1,026
|
|
$
1.32
|
|
Year-over-year
change
|
$
966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
|
|
March 31,
2015
|
|
March 31,
2015
|
|
|
|
Pre-Tax
|
|
Income
|
|
Net
|
|
Net
Income
|
|
(in millions, except
per share data)
|
Income
|
|
Tax
|
|
Income
|
|
Per Diluted
Share
|
|
GAAP
|
$
1,186
|
|
$
(440)
|
|
$
746
|
|
$
0.90
|
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
MTM adjustments and
settlements
|
(589)
|
|
217
|
|
(372)
|
|
|
|
Restructuring and
other
|
10
|
|
(4)
|
|
6
|
|
|
|
Virgin Atlantic MTM
adjustments
|
(13)
|
|
5
|
|
(8)
|
|
|
|
Total
adjustments
|
(592)
|
|
218
|
|
(374)
|
|
(0.45)
|
|
Non-GAAP
|
$
594
|
|
$
(222)
|
|
$
372
|
|
$
0.45
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
March
31,
|
|
|
March
31,
|
(in millions, except
per gallon data)
|
|
|
2016
|
2015
|
|
|
2016
|
2015
|
Fuel purchase
cost
|
|
|
$
1,093
|
$
1,718
|
|
|
$
1.18
|
$
1.87
|
Airline segment fuel
hedge losses
|
|
|
273
|
467
|
|
|
0.29
|
0.51
|
Refinery segment
impact
|
|
|
28
|
(86)
|
|
|
0.03
|
(0.09)
|
Total fuel
expense
|
|
|
$
1,394
|
$
2,099
|
|
|
$
1.50
|
$
2.29
|
MTM adjustments and
settlements
|
|
|
(155)
|
589
|
|
|
(0.17)
|
0.64
|
Total fuel expense,
adjusted
|
|
|
$
1,239
|
$
2,688
|
|
|
$
1.33
|
$
2.93
|
Change
year-over-year
|
|
|
(1,449)
|
|
|
|
(55%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
|
|
March
31,
|
|
|
|
|
|
|
|
2016
|
2015
|
|
|
|
|
Mainline average
price per gallon
|
|
|
$
1.56
|
$
2.37
|
|
|
|
|
MTM adjustments and
settlements
|
|
|
(0.20)
|
0.76
|
|
|
|
|
Mainline average
price per gallon, adjusted
|
|
|
$
1.36
|
$
3.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Fuel Unit Cost or Cost per Available Seat Mile, Including
Profit Sharing ("CASM-Ex, including profit sharing"). We adjust
CASM for the following items to determine CASM-Ex, including profit
sharing, for the reasons described below:
Aircraft fuel and related taxes. The volatility in fuel
prices impacts the comparability of year-over-year 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 year-over-year
financial performance.
Restructuring and other. Because of the variability in
restructuring and other, the adjustment for this item is helpful to
investors to analyze our recurring core performance in the period
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
|
|
|
|
|
March 31,
2016
|
|
March 31,
2015
|
CASM
(cents)
|
|
|
13.26
|
|
14.12
|
Adjusted
for:
|
|
|
|
|
|
Aircraft fuel and
related taxes
|
|
(2.40)
|
|
(3.71)
|
Restructuring and
other
|
|
-
|
|
(0.02)
|
Other
expenses
|
|
(0.53)
|
|
(0.51)
|
CASM-Ex
|
10.33
|
|
9.88
|
Year-over-year
change
|
|
|
4.5 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
CASM-Ex:
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
March 31,
2016
|
|
March 31,
2015
|
Mainline CASM
(cents)
|
|
|
12.84
|
|
13.49
|
Adjusted
for:
|
|
|
|
|
|
Aircraft fuel and
related taxes
|
|
(2.36)
|
|
(3.66)
|
Other
expenses
|
|
(0.55)
|
|
(0.51)
|
Mainline
CASM-Ex
|
9.93
|
|
9.32
|
|
|
|
|
|
|
|
Operating Cash Flow. We adjusted operating 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. We
adjust 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)
|
|
|
March 31,
2016
|
Net cash provided by
operating activities
|
|
|
$
1.01
|
Adjustments:
|
|
|
|
Hedge margin and
other
|
|
|
0.34
|
Net cash provided by
operating activities, adjusted
|
|
|
$
1.35
|
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
2016 quarter, we entered into transactions to further defer
settlement of a portion of our hedge portfolio until 2017. These
deferral transactions, excluding market movements from the date of
inception, will settle and provide approximately $300 million in cash receipts during the second
half of 2016 and require approximately $300
million in cash payments in 2017. 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. 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
millions)
|
|
|
March 31,
2016
|
Net cash provided by
operating activities
|
|
|
$
1,011
|
Net cash used in
investing activities
|
|
|
(601)
|
Adjustments:
|
|
|
|
Hedge
deferral
|
|
|
11
|
Hedge
margin
|
|
|
335
|
Net redemptions of
short-term investments and other
|
|
|
(259)
|
Total free cash
flow
|
|
|
$
497
|
|
|
|
|
|
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)
|
|
March 31,
2016
|
Debt and capital
lease obligations
|
|
$
8.5
|
|
Plus: unamortized
discount, net and debt issuance costs
|
|
$
0.1
|
|
Adjusted debt and
capital lease obligations
|
|
|
$
8.6
|
Plus: 7x last twelve
months' aircraft rent
|
|
|
$
1.8
|
Adjusted total
debt
|
|
|
$
10.4
|
Less: cash, cash
equivalents and short-term investments
|
|
|
$
(2.9)
|
Less: hedge margin
receivable
|
|
|
$
(0.5)
|
Adjusted net
debt
|
|
|
$
7.0
|
|
|
|
|
|
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SOURCE Delta Air Lines