Delta Air Lines Reports First Quarter Results

Delta Air Lines (NYSE:DAL) today reported a net loss of $354 million and a loss per share of $2.90 for the March 2002 quarter versus a net loss of $122 million and loss per share of $1.02 in the March 2001 quarter, excluding unusual items. Including unusual items, the March 2002 quarter net loss and loss per share were $397 million and $3.25, respectively, versus a net loss of $133 million and loss per share of $1.11 in the March 2001 quarter. The results are in line with previous announcements concerning first quarter expectations.

“We continue to notice signs of gradual recovery,” said Leo F. Mullin, Delta’s chairman and chief executive officer. “We are focused on our recovery efforts and creating a more promising year in 2002. In the first three months of this year, we saw our customers and revenue returning, though revenues are recovering at a slower pace. There is still a long road ahead of us, but Delta has the financial and operational strength to emerge from these tough times as a winner.”

March 2002 quarter operating revenues declined 19.3 percent from the March 2001 quarter. Excluding unusual items, operating expenses for the March 2002 quarter decreased 11.6 percent, unit costs decreased 1.2 percent and unit costs on a fuel price neutralized basis increased 1.7 percent. Load factor for the quarter was 68.9 percent, on a 10.6 percent reduction in capacity, compared to 67.0 percent for the same period a year ago. Delta ended the quarter with a completion factor of 98.3 percent versus 96.1 percent during the same period last year.

“Delta’s recovery is on track and we are making progress,” said M. Michele Burns, executive vice president and chief financial officer. “In fact, in the month of March, Delta had positive cash flow from operations and we recorded an operating profit. Our financial strategy remains consistent and focused on capacity discipline, cost containment and cash preservation.”

In the March quarter, Delta filed its 2001 tax return eight months early on February 6, 2002 and received a $160 million refund the following day. Subsequently, Congress passed the economic stimulus package, extending the net operating loss carry back period to five years. Delta again expedited the filing of its refund claim and received an incremental tax refund of $300 million on March 22, 2002. Delta ended the March 2002 quarter with total liquidity of $3.1 billion comprised of a $1.5 billion cash balance and an additional near term liquidity position of $1.6 billion.


In a continuous effort to manage costs and preserve liquidity, Delta announced on March 14, 2002 that “base” commissions will no longer be paid to travel agents for tickets sold in the United States (including Puerto Rico and the U.S. Virgin Islands) and Canada, effective immediately. While Delta is eliminating published base commissions, individually negotiated incentive commissions will continue to be paid to select agents. Delta expects the restructuring to reduce passenger commission expenses by approximately $100 - $150 million in 2002.

Delta’s fuel hedging program saved $21 million, pretax for the quarter. Moreover, Delta has hedged 57 percent of its expected jet fuel requirements in the June 2002 quarter at an average price of $0.58 per gallon.

In the March 2002 quarter, Delta recorded $43 million of unusual costs, net of taxes. Of this amount, $25 million, net of tax, represents the temporary carrying cost of grounded aircraft and surplus pilots, as well as re-qualification training and relocation costs resulting from the capacity reductions implemented in November 2001. As discussed in the December 2001 quarter, Delta expects to record a total of $82 million, net of tax, for these costs during 2002. Also during the March 2002 quarter, Delta recorded an $18 million expense, net of tax, for non-cash, fair value adjustments of certain equity rights in other companies, primarily, and fuel derivative instruments to comply with Statement of Financial Accounting Standard (SFAS) 133. In the March 2001 quarter, Delta recognized an $11 million, non-cash expense, net of tax, related to SFAS 133.

Delta is encouraged by its transatlantic, leisure and regional jet market performance. However, weakness in high-yield business travel will continue to affect the pace of Delta’s recovery.

As previously announced on January 18, 2002, Delta and its European SkyTeam partners, Air France, Alitalia and CSA Czech Airlines received final approval from the U.S. Department of Transportation for antitrust immunity. The grant of antitrust immunity enables Delta and its European partners to offer a more integrated route network, and develop common sales, marketing and discount programs for customers.

In continued support of our SkyTeam Alliance, Delta inaugurated nonstop service between Atlanta and Milan-Malpensa on April 1, 2002 and began a second nonstop flight between New York John F. Kennedy International (JFK) and Paris on March 15, 2002. Delta also announced plans to reinstate codesharing on Korean Air flights, beginning May 1, 2002.

Delta Express, Delta’s low-fare airline, announced expansion of flights from New York to Florida this spring in response to improved leisure demand for travel to Florida. Beginning June 1, 2002, two new flights will be added from JFK to Ft. Lauderdale for a new total of six round-trip flights daily. Delta Express also will add one new flight from JFK to both Orlando and Tampa, for a new total of four round-trip flights daily to Orlando and three round-trip flights daily to Tampa. Delta Express has now returned to 64% of its pre-September 11 capacity.

Delta continued to leverage its industry-leading regional jet program to provide superior network feed and flexibility. Delta’s connection carriers remain an essential piece of its plan to grow Atlanta, strengthen its presence on the East Coast and feed transatlantic and Latin America gateways.

In March 2002, Delta announced plans to expedite the passenger check-in process by enhancing its self-service check-in kiosks. E-ticketed customers will be able to use kiosks to check-in, check baggage, print boarding cards, select or change seats, request to standby for upgrades, change flights and initiate multi-party check-in. Delta also plans to install 300 additional kiosks throughout its domestic operation during 2002, more than tripling the number of kiosks available to Delta customers. This will make Delta an industry leader in kiosk check-in technology. Delta is pleased that the average security and check-in wait times, in many of its largest markets, are approaching pre-September 11 levels. As a result, Delta reduced the recommended airport arrival time for passengers on domestic flights from two hours to at least one hour prior to flight departure to reduce the amount of time customers must spend in the airport. Also, to help reduce the “hassle factor” Delta is now offering customers the convenience of checking-in and printing boarding passes from their personal computer or Web-enabled personal digital assistant.

Delta will host a webcast to discuss its quarterly earnings today, April 16, at 10:00 a.m. Eastern Daylight Time. The webcast is available via the Internet at Delta Air Lines, the world’s second largest carrier in terms of passengers carried and the leading U.S. airline across the Atlantic, offers 5,581 flights each day to 410 destinations in 72 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, visit Delta at