ATLANTA, Jan. 26 /PRNewswire-FirstCall/ -- Delta Air Lines (NYSE: DAL) today reported financial results for the December quarter and full year 2009. Key points include:
"2009 was a difficult year by any measure and my thanks go out to the Delta people for their hard work through this challenging time," said Richard Anderson, Delta's chief executive officer. "As a result of the strategic pieces we put in place in 2009 and the strong momentum of our merger integration, Delta is now positioned to capitalize on the economic recovery under way and expects to generate positive RASM improvements each month of this year."
Delta's operating revenue on a GAAP basis grew 1% to $6.8 billion in the December 2009 quarter compared to the prior year period as a result of its merger with Northwest. On a combined basis, total operating revenue declined nearly $1 billion, or 12%, and total unit revenue (RASM) declined 5% in the December 2009 quarter compared to the 2008 quarter.
On a combined basis:
Comparisons of revenue-related statistics are as follows:
"Our revenue performance this quarter showed indications of economic recovery with increased corporate travel demand, strong load factors and sequential RASM improvement each month," said Ed Bastian, Delta's president. "With initiatives in place to broaden our network through new alliances, invest $1 billion in our fleet and product and reallocate our global fleet under our single operating certificate, we have built the foundation for further RASM improvement this year."
In the December 2009 quarter, Delta's operating expense on a GAAP basis decreased approximately $1 billion year over year primarily due to lower restructuring and merger-related items. Excluding special items, operating expense decreased $1.2 billion due to lower fuel expense, reduced capacity, productivity improvements and merger benefits in the December 2009 quarter compared to the prior year period on a combined basis. These cost reductions were partially offset by investments in Delta's product, increased employee wages and higher pension expense.
On a combined basis:
"Delta's strong financial foundation and unmatched merger benefits allowed us to keep our full year unit costs contained and grow our unrestricted liquidity to $5.4 billion," said Hank Halter, chief financial officer. "We are well positioned for 2010 with more than 50% of our debt maturities already addressed and plans to keep our non-fuel unit costs flat to 2009."
Fuel Price and Related Hedges
Delta hedged 40% of its fuel consumption for the December 2009 quarter, for an average fuel price(4) of $2.17 per gallon. The table below represents the fuel hedges Delta had in place as of Jan. 22, 2010:
As of Dec. 31, 2009, Delta had $5.4 billion in unrestricted liquidity, including $4.7 billion in cash and short-term investments and $685 million in undrawn revolving credit facilities. Operating cash flow during the December 2009 quarter was negative $75 million, reflecting the pre-tax loss and the seasonal declines in air traffic liability.
During the quarter, the company completed a total of $1.1 billion in financing transactions, including $689 million from the 2009-1 EETC offering to refinance 27 aircraft (of which $347 million remains in escrow), $150 million from the issuance of unsecured municipal bonds and $250 million in new revolving credit facilities. Northwest's $300 million undrawn revolving credit facility terminated on its scheduled maturity date. Debt and capital lease payments for the December 2009 quarter totaled $628 million, which included repaying the original financing for five aircraft in the 2009-1 EETC.
Capital expenditures during the quarter were approximately $175 million, which included $136 million for investments in aircraft, parts and modifications.
In 2009, Delta continued to position itself as the world's No. 1 airline, with an ongoing commitment to employees, customers and communities. Key accomplishments include:
Delta recorded special items totaling a net $200 million credit in the December 2009 quarter, including:
Delta recorded special items totaling $1 billion in charges in the December 2008 quarter, including:
March 2010 Quarter Guidance
Delta's projections for the March 2010 quarter are below.
Included with this press release are Delta's unaudited Consolidated Statements of Operations for the three and twelve months ended Dec. 31, 2009 and 2008; a statistical summary for those periods; selected balance sheet data as of Dec. 31, 2009 and Dec. 31, 2008; and a reconciliation of certain non-GAAP financial measures.
Delta Air Lines, the world's No. 1 airline, serves more than 160 million passengers each year. With its unsurpassed global network, Delta and the Delta Connection carriers offer service to 368 destinations in 66 countries on six continents. Delta employs more than 70,000 employees worldwide and operates a mainline fleet of nearly 800 aircraft. A founding member of the SkyTeam global alliance, Delta participates in the industry's leading trans-Atlantic joint venture with Air France KLM. Including its worldwide alliance partners, Delta offers customers more than 16,000 daily flights, with hubs in Amsterdam, Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Paris-Charles de Gaulle, Salt Lake City and Tokyo-Narita. The airline's service includes the SkyMiles frequent flier program, the world's largest airline loyalty program; the award-winning BusinessElite service; and more than 50 Delta Sky Clubs in airports worldwide. Customers can check in for flights, print boarding passes, check bags and flight status at delta.com.
(1) Note A to the attached Consolidated Statements of Operations provides a reconciliation of non-GAAP financial measures used in this release and provides the reasons management uses those measures.
(2) Delta's financial results under generally accepted accounting principles (GAAP) include the results of Northwest Airlines for the periods following the completion of the merger, which occurred on Oct. 29, 2008. Unless otherwise indicated, Delta presents financial results on a GAAP basis, which reflects both Delta and Northwest financial results for the December 2009 quarter. Under GAAP, Delta does not include in its financial results the results of Northwest prior to the completion of the merger. This impacts the comparability of Delta's financial statements under GAAP for the December 2009 and 2008 quarters. In this press release, Delta presents its financial results for the December 2008 quarter under GAAP as well as on a "combined basis". "Combined basis" means the company combines the financial results of Delta and Northwest as if the merger had occurred prior to the beginning of the applicable period. Delta's financial results on a combined basis for the December 2008 quarter include the financial results of Northwest for the period Oct. 1, 2008 through Dec. 31, 2008. Delta believes presenting this financial information on a combined basis provides a more meaningful basis for comparing Delta's year-over-year financial performance than the GAAP financial information.
(3) Delta excludes from consolidated unit cost ancillary businesses which are not related to the generation of a seat mile, including aircraft maintenance and staffing services which Delta provides to third parties, Delta's dedicated freighter operations and Delta's vacation wholesale operations (MLT). Similarly, Delta excludes from passenger unit revenues, and includes in other revenue, revenues Delta received for providing aircraft maintenance and staffing services to third parties, freighter operations and MLT. Management believes these classifications provide a more consistent and comparable reflection of Delta's consolidated operations.
(4) Delta's December 2009 quarter average fuel price of $2.17 per gallon reflects the consolidated cost per gallon for mainline and regional operations, including contract carrier operations, net of fuel hedge impact.
Statements in this news 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 effects of the global recession; the effects of the global financial crisis; the impact of posting collateral in connection with our fuel hedge contracts; the impact that our indebtedness will have on our financial and operating activities and our ability to incur additional debt; the restrictions that financial covenants in our financing agreements will have on our financial and business operations; labor issues; the ability to realize the anticipated benefits of our merger with Northwest; the integration of the Delta and Northwest workforces; interruptions or disruptions in service at one of our hub airports; our increasing dependence on technology in its operations; our ability to retain management and key employees; the ability of our credit card processors to take significant holdbacks in certain circumstances; the effects of terrorist attacks; and competitive conditions in the airline industry.
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 Quarterly Report on Form 10-Q for the period ended September 30, 2009. Caution should be taken not to place undue reliance on our forward-looking statements, which represent our views only as of January 26, 2010, and which we have no current intention to update.
Operating Expense Reclassifications
Delta reclassified certain prior period operating expense amounts to conform to our current period presentation. These reclassifications do not impact total operating expense, net income, or other key financial metrics in any period. We reclassified travel and incidental expenses, primarily crew meals and lodging expenses, from salaries and related costs to other operating expenses. This reclassification more closely aligns the statements of operations to that of the airline industry. We also reclassified expenses associated with the cost incurred to provide services to third-party connection carriers.
Note A: The following tables show reconciliations of non-GAAP financial measures. The reasons Delta uses these measures are described below.