Delta Air Lines Posts 2002 Loss

16th Jan 2003

Delta Air Lines (NYSE:DAL) today reported results for the quarter ending December 31, 2002 and other significant news. The key points are, Delta:—Reports a fourth quarter net loss of $363 million, or $2.98 loss per common share. Full year 2002 net loss is $1.3 billion, or $10.44 loss per share.—Excluding unusual items, reports a fourth quarter net loss of $230 million, or $1.90 loss per common share. On the same basis, full year 2002 net loss is $958 million, or $7.89 loss per share.—Ends quarter with cash and short-term liquidity of $2.6 billion, consisting of $2.0 billion in unrestricted cash, $134 million in restricted cash and $500 million in short-term liquidity.—Delta maintained sound liquidity and strong operations despite industry turmoil.

Delta Air Lines reported a net loss of $363 million and a loss per share of $2.98 for the December 2002 quarter. This is compared to a net loss of $734 million and loss per share of $5.98 for the December 2001 quarter. Excluding unusual items, the December 2002 quarter net loss and loss per share were $230 million and $1.90, respectively, compared to a net loss of $486 million and loss per share of $3.97 in the December 2001 quarter. For the full year 2002, Delta reported a net loss of $1.3 billion and loss per share of $10.44. Excluding unusual items, Delta reported a net loss of $958 million and loss per share of $7.89 for calendar year 2002. Note 2 to the attached consolidated statements of operations shows a reconciliation of the net loss excluding unusual items to the reported net loss.

Financial Performance:
“During the past year, Delta, like all airlines, continued to feel the serious financial blows from the post-9/11 industry turmoil and the slumping economy. While we have experienced unsustainable losses, the hard work and tough decisions of Delta’s management and people have allowed the company to remain fundamentally sound,” said Leo F. Mullin, Delta chairman and chief executive officer. “Although pressures and changes within our industry are certain to continue, Delta will make the difficult but necessary moves to position our company as an industry leader when we emerge from these uncertain times.”

Year-over-year comparisons of both financial and operational performance continue to be significantly impacted by the 9/11 terrorist attacks. Fourth quarter operating revenues increased 15.5 percent, and passenger unit revenues increased 12.2 percent, compared to the December 2001 quarter.

Operating expenses for the December 2002 quarter decreased 7.9 percent. Excluding unusual items, operating expenses for the quarter increased 1.8 percent, primarily as a result of higher pension expenses and fuel costs. Unit costs decreased 1.5 percent and unit costs on a fuel price neutralized basis decreased 3.9 percent, excluding unusual items.


Delta had positive cash flow from operations for the December 2002 quarter of $177 million. Even after funding non-fleet capital expenditures, Delta’s cash flow remained slightly positive for the quarter.

The load factor for the quarter was 71.2 percent on 3.3 percent additional capacity, compared to 63.6 percent for the same period a year ago.

“Delta outperformed analyst expectations in the December quarter through our disciplined approach to the entire operating environment,” said M. Michele Burns, executive vice president and chief financial officer. “The steps we took to optimize our network and implement cost savings initiatives led to improved cost and revenue performance in each month of the quarter.”

In the December 2002 quarter, Delta’s fuel hedging program reduced costs by $40 million, pretax. Delta hedged 54 percent of its jet fuel requirements in the December 2002 quarter at an average price of $0.68 per gallon. Delta’s total fuel price for the period was $0.76 per gallon. For the March 2003 quarter, Delta has hedged 63 percent of its expected jet fuel requirements at an average price of $0.77 per gallon. For the June 2003 quarter, Delta has hedged 65 percent of its expected jet fuel requirements at an average price of $0.75 per gallon and for the full year 2003, Delta has hedged 50 percent of its expected jet fuel requirements at an average price of $0.75 per gallon.

Delta continued to adjust capacity during the fourth quarter. Compared to the December 2001 quarter, system capacity for the December 2002 quarter was up 3.3 percent and mainline capacity was up 1.4 percent. Compared to the December 2000 quarter, system capacity was down 8.4 percent and mainline capacity was down 11.2 percent. Delta’s system capacity for the full-year 2003 is expected to be down 1.0 to 2.0 percent with mainline capacity down 4.0 to 5.0 percent as compared to 2002.

Delta preserved its financial flexibility throughout 2002. With the current uncertainty in the geo-political environment and two carriers in bankruptcy, Delta maintained sound liquidity through a series of strategic initiatives. At December 31, 2002, Delta had cash and short-term liquidity totaling $2.6 billion, of which $2.0 billion is unrestricted cash and cash equivalents, $134 million is restricted cash and $500 million is short-term liquidity available under an existing credit agreement. Delta also has unencumbered aircraft with an estimated value of approximately $4.6 billion of which $1.8 billion is eligible under Section 1110 of the U.S. Bankruptcy Code. These aircraft are available for use in potential financing transactions.

“Delta continues to focus on maintaining financial headroom in the face of an uncertain environment,” said M. Michele Burns. “Throughout the year, we have been strategic in managing the portfolio within our balance sheet, in particular the proportion of cash to liquidity that we carry. By managing this portfolio, we have been able to minimize carrying costs by leveraging our deep pool of aircraft collateral and low short-term interest rates.”

Delta expects to meet its obligations as they become due through available cash and cash equivalents, investments, internally generated funds, borrowings and new financing transactions.

During the December 2002 quarter, Delta recorded a non-cash charge to equity related to its pension plans totaling approximately $1.6 billion, net of tax. This charge exceeded previously announced estimates of $700-800 million, net of tax, as a result of the reduction in both interest rates and the value of pension plan assets since the original estimate.



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