ATLANTA, July 15, 2015 /PRNewswire/ -- Delta Air Lines
(NYSE:DAL) today reported financial results for the June 2015 quarter, including adjusted net
income1 of $1.0 billion or
$1.27 per diluted share, up 22% from
the June quarter of 2014.
"Delta's record results have allowed the company to invest in
its employees through higher wage rates and profit sharing; improve
the experience for our customers through new aircraft and
innovative partnerships with global carriers; and uniquely deliver
value for our shareholders by accelerating our capital returns
while also paying down debt," said Richard
Anderson, Delta's chief executive officer. "We have
more work and opportunity ahead of us on all of these fronts as we
continue to execute on our long-term plan."
Anderson continued, "Our significant fuel savings in the
September quarter should allow us to produce another record quarter
with more than 30% EPS growth, a 19-21% operating margin and
$1.9 billion of operating cash
flow."
Revenue Environment
Delta's operating revenue for the June quarter increased 1%,
despite $160 million in foreign
currency pressures which reduced unit revenues by approximately 2
points. Passenger unit revenues declined 4.6% on a 3.9%
decline in yields.
Delta saw solid progress with several of its revenue
initiatives, including Branded Fares, which increased passenger
revenues by $56 million, and its
enhanced agreement with American Express, which produced an
incremental $60 million in
revenue.
"Our commercial initiatives continue to gain traction in the
marketplace and we will produce summer margins in excess of any
achieved in our history," said Ed
Bastian, Delta's president. "However, unit revenue
growth is an important component of our long-term plan to expand
margins. We continue to project flat system capacity growth
for the fourth quarter of 2015 – a level in line with current
demand expectations, which should put the business on the right
trajectory to stem the erosion in unit revenues by the end of the
year."
|
|
|
|
Increase
(Decrease)
|
|
|
|
|
2Q15 versus
2Q14
|
|
|
|
|
Change
|
Unit
|
|
|
Passenger
Revenue
|
2Q15
($M)
|
|
YoY
|
Revenue
|
Yield
|
Capacity
|
|
Domestic
|
4,713
|
|
4.9 %
|
(1.1) %
|
(1.0) %
|
6.0 %
|
|
Atlantic
|
1,551
|
|
(6.9) %
|
(11.5) %
|
(6.5) %
|
5.1 %
|
|
Pacific
|
722
|
|
(11.8) %
|
(8.5) %
|
(10.6) %
|
(3.7) %
|
|
Latin
America
|
601
|
|
(0.5) %
|
(7.8) %
|
(6.8) %
|
7.9 %
|
|
Total
mainline
|
7,587
|
|
0.1 %
|
(4.4) %
|
(3.4) %
|
4.7 %
|
|
Regional
|
1,552
|
|
(7.8) %
|
(1.6) %
|
(2.8) %
|
(6.4) %
|
|
Consolidated
|
9,139
|
|
(1.4) %
|
(4.6) %
|
(3.9) %
|
3.4 %
|
Cargo
Revenue
|
207
|
|
(10.0) %
|
|
|
|
Other
Revenue
|
1,361
|
|
21.0 %
|
|
|
|
Total
Revenue
|
10,707
|
|
0.8 %
|
|
|
|
Investment Strengthens Partnership and Expands Global
Reach
Strengthening its existing partnership with GOL, Delta recently
agreed to purchase up to $56 million
in preferred shares as part of a larger rights offering by the
Brazilian carrier. In addition to the equity, Delta will
guarantee up to $300 million in
borrowings by GOL under a term loan with third-party lenders.
Delta's guarantee will be secured by GOL's interest in
SMILES, GOL's publicly-traded loyalty program. Delta and GOL
have also agreed to extend their exclusive commercial agreement for
flights between the United States
and Brazil, the largest aviation
market in Latin America. This
transaction is subject to normal closing conditions, including
regulatory approvals.
Cost Performance
Adjusted fuel expense2 declined over $463 million compared to the same period in 2014,
as 39% lower market fuel prices and a $77
million increase in profit at the refinery offset nearly
$600 million in settled hedge
losses. For the remainder of 2015, Delta expects its fuel
expense to be $1.90 – $2.00 per gallon, a significant reduction to the
$2.65 per gallon it realized in the
first six months of the year.
CASM-Ex3 decreased 0.8% for the June 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. This marks the eighth consecutive quarter of CASM
growth below 2%, in line with the company's long-term goals.
Delta's debt reduction initiative continued to improve the
company's interest expense, producing $46
million in interest savings for the quarter compared to the
same period in 2014.
"Because of the momentum we've built with our cost reduction
initiatives, we expect to post our ninth consecutive quarter of
sub-2% unit cost growth in September," said Paul Jacobson, Delta's chief financial
officer. "Cost efficiency has contributed to the record
results that allowed us to return $1
billion to shareholders in the June quarter while investing
in our employees and customer experience."
Cash Flow, Shareholder Returns, and Adjusted
Net Debt4
Delta generated $2.5 billion of
adjusted operating cash flow and $1.6
billion of free cash flow during the quarter. The
company used this strong cash generation to reinvest nearly
$1 billion back into the business,
primarily for aircraft purchases. The company returned
$1.0 billion to its owners through
$72 million of dividends and
$925 million of share repurchases,
while also strengthening its balance sheet by reducing its adjusted
net debt to $7.1 billion.
September 2015
Quarter Guidance
Following are Delta's projections for the September 2015 quarter:
|
|
3Q15
Forecast
|
Unit Revenue
(compared to 3Q14)
|
|
(4.5%) -
(6.5%)
|
Operating
margin
|
|
19% - 21%
|
Fuel price, including
taxes, settled hedges and refinery impact
|
|
$1.90-$1.95
|
CASM - Ex (compared
to 3Q14)
|
|
Flat
|
System capacity
(compared to 3Q14)
|
|
~3%
|
GAAP Metrics Related to Fuel, Cost Performance and Cash
Flow
Below are GAAP metrics corresponding to the non-GAAP figures
cited above.
($ in millions except
per share and unit costs)
|
|
Change
|
|
2Q15
|
2Q14
|
$
|
%
|
Net income
|
$1,485
|
$801
|
$684
|
85%
|
Diluted earnings per
share
|
1.83
|
0.94
|
0.89
|
95%
|
Fuel expense
(including regional carriers)
|
1,752
|
2,934
|
(1,182)
|
(40%)
|
Consolidated unit
cost (¢)
|
12.88
|
14.63
|
(1.75)
|
(12%)
|
Operating cash
flow
|
2,745
|
2,056
|
689
|
34%
|
Special Items
Special items, net of taxes, in the June
2015 quarter totaled $458
million, including:
- $454 million for mark-to-market
adjustments and settlements on fuel hedges;
- a $16 million charge for fleet
and other items, primarily associated with Delta's domestic fleet
restructuring initiative; and
- $20 million for mark-to-market
adjustments on hedges owned by Virgin Atlantic.
Special items, net of taxes, in the June
2014 quarter totaled $88
million, including:
- a $69 million charge for debt
extinguishment associated with Delta's debt reduction initiative;
and
- a $20 million charge associated
with Delta's domestic fleet restructuring.
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 334 destinations in 64 countries on six
continents. Headquartered in Atlanta, Delta employs nearly 80,000 employees
worldwide and operates a mainline fleet of more than 700 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 settling 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 $346
million and $193 million for the June
2015 and June 2014 quarters, respectively and $639
million and $377 million for the six months ended June 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 $134 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
July 15, 2015, and which we have no
current intention to update.
DELTA AIR LINES,
INC.
|
Consolidated
Statements of Operations
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
|
|
Six Months
Ended
June 30,
|
|
|
(in millions, except
per share data)
|
2015
|
2014
|
$
Change
|
%
Change
|
|
2015
|
2014
|
$
Change
|
%
Change
|
Operating
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Passenger:
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$ 7,587
|
$ 7,582
|
$
5
|
-%
|
|
$ 14,136
|
$ 13,806
|
$ 330
|
2%
|
|
|
Regional
carriers
|
1,552
|
1,684
|
(132)
|
(8)%
|
|
2,926
|
3,137
|
(211)
|
(7)%
|
|
|
Total passenger
revenue
|
9,139
|
9,266
|
(127)
|
(1)%
|
|
17,062
|
16,943
|
119
|
1%
|
|
Cargo
|
207
|
230
|
(23)
|
(10)%
|
|
424
|
447
|
(23)
|
(5)%
|
|
Other
|
1,361
|
1,125
|
236
|
21%
|
|
2,609
|
2,147
|
462
|
22%
|
|
|
Total operating
revenue
|
10,707
|
10,621
|
86
|
1%
|
|
20,095
|
19,537
|
558
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expense:
|
|
|
|
|
|
|
|
|
|
|
Salaries and related
costs
|
2,195
|
2,046
|
149
|
7%
|
|
4,287
|
4,015
|
272
|
7%
|
|
Aircraft fuel and
related taxes
|
1,457
|
2,434
|
(977)
|
(40)%
|
|
3,292
|
4,660
|
(1,368)
|
(29)%
|
|
Regional carrier
expense
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
295
|
500
|
(205)
|
(41)%
|
|
559
|
973
|
(414)
|
(43)%
|
|
|
Other
|
802
|
861
|
(59)
|
(7)%
|
|
1,591
|
1,707
|
(116)
|
(7)%
|
|
Aircraft maintenance
materials and outside repairs
|
499
|
466
|
33
|
7%
|
|
951
|
914
|
37
|
4%
|
|
Depreciation and
amortization
|
448
|
451
|
(3)
|
(1)%
|
|
918
|
893
|
25
|
3%
|
|
Contracted
services
|
457
|
440
|
17
|
4%
|
|
898
|
867
|
31
|
4%
|
|
Passenger commissions
and other selling expenses
|
421
|
440
|
(19)
|
(4)%
|
|
807
|
813
|
(6)
|
(1)%
|
|
Landing fees and
other rents
|
388
|
355
|
33
|
9%
|
|
761
|
696
|
65
|
9%
|
|
Profit
sharing
|
411
|
340
|
71
|
21%
|
|
547
|
439
|
108
|
25%
|
|
Passenger
service
|
227
|
215
|
12
|
6%
|
|
417
|
388
|
29
|
7%
|
|
Aircraft
rent
|
60
|
56
|
4
|
7%
|
|
120
|
107
|
13
|
12%
|
|
Restructuring and
other items
|
25
|
30
|
(5)
|
(17)%
|
|
35
|
79
|
(44)
|
(56)%
|
|
Other
|
548
|
408
|
140
|
34%
|
|
1,040
|
787
|
253
|
32%
|
|
|
Total operating
expense
|
8,233
|
9,042
|
(809)
|
(9)%
|
|
16,223
|
17,338
|
(1,115)
|
(6)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
2,474
|
1,579
|
895
|
57%
|
|
3,872
|
2,199
|
1,673
|
76%
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Expense)
Income:
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(127)
|
(173)
|
46
|
(27)%
|
|
(258)
|
(359)
|
101
|
(28)%
|
|
Miscellaneous,
net
|
19
|
(108)
|
127
|
NM
|
|
(62)
|
(207)
|
145
|
(70)%
|
|
|
Total other expense,
net
|
(108)
|
(281)
|
173
|
(62)%
|
|
(320)
|
(566)
|
246
|
(43)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before
Income Taxes
|
2,366
|
1,298
|
1,068
|
82%
|
|
3,552
|
1,633
|
1,919
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax
Provision
|
(881)
|
(497)
|
(384)
|
77%
|
|
(1,321)
|
(619)
|
(702)
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
$ 1,485
|
$ 801
|
$ 684
|
85%
|
|
$ 2,231
|
$ 1,014
|
$ 1,217
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
$ 1.85
|
$ 0.95
|
|
|
|
$ 2.75
|
$ 1.20
|
|
|
Diluted Earnings
Per Share
|
$ 1.83
|
$ 0.94
|
|
|
|
$ 2.72
|
$ 1.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Weighted
Average Shares Outstanding
|
803
|
841
|
|
|
|
811
|
843
|
|
|
Diluted Weighted
Average Shares Outstanding
|
811
|
850
|
|
|
|
819
|
852
|
|
|
DELTA AIR LINES,
INC.
|
Statistical
Summary
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
|
Six Months
Ended
June 30,
|
|
|
2015
|
2014
|
Change
|
|
2015
|
2014
|
Change
|
Consolidated:
|
|
|
|
|
|
|
|
Revenue passenger
miles (millions)
|
54,755
|
53,341
|
3%
|
|
100,976
|
97,942
|
3%
|
Available seat miles
(millions)
|
63,937
|
61,817
|
3%
|
|
120,534
|
115,721
|
4%
|
Passenger mile yield
(cents)
|
16.69
|
17.37
|
(4)%
|
|
16.90
|
17.30
|
(2)%
|
Passenger revenue per
available seat mile (cents)
|
14.29
|
14.99
|
(5)%
|
|
14.16
|
14.64
|
(3)%
|
Operating cost per
available seat mile (cents)
|
12.88
|
14.63
|
(12)%
|
|
13.46
|
14.98
|
(10)%
|
CASM-Ex - see Note A
(cents)
|
8.91
|
8.98
|
(1)%
|
|
9.25
|
9.35
|
(1)%
|
Passenger load
factor
|
85.6%
|
86.3%
|
(0.7) pt
|
|
83.8%
|
84.6%
|
(0.8) pt
|
Fuel gallons consumed
(millions)
|
1,029
|
1,001
|
3%
|
|
1,947
|
1,882
|
3%
|
Average price per
fuel gallon, adjusted - see Note A
|
$ 2.40
|
$ 2.93
|
(18)%
|
|
$ 2.65
|
$ 2.98
|
(11)%
|
Number of aircraft in
fleet, end of period
|
916
|
922
|
(6)
|
|
|
|
|
Full-time equivalent
employees, end of period
|
83,247
|
80,723
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
|
Revenue passenger
miles (millions)
|
49,304
|
47,596
|
4%
|
|
90,608
|
87,163
|
4%
|
Available seat miles
(millions)
|
57,341
|
54,773
|
5%
|
|
107,512
|
102,134
|
5%
|
Operating cost per
available seat mile (cents)
|
12.32
|
13.73
|
(10)%
|
|
12.86
|
14.01
|
(8)%
|
CASM-Ex - see Note A
(cents)
|
8.50
|
8.36
|
2%
|
|
8.76
|
8.70
|
1%
|
Fuel gallons consumed
(millions)
|
878
|
839
|
5%
|
|
1,650
|
1,568
|
5%
|
Average price per
fuel gallon, adjusted - see Note A
|
$ 2.47
|
$ 2.90
|
(15)%
|
|
$ 2.78
|
$ 2.95
|
(6)%
|
Number of aircraft in
fleet, end of period
|
800
|
760
|
40
|
|
|
|
|
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
June 30,
|
(in
millions)
|
2015
|
|
2014
|
Cash Flows From
Operating Activities:
|
|
|
|
Net Income
|
$ 1,485
|
|
$ 801
|
Depreciation and
amortization
|
448
|
|
451
|
Hedge derivative
contracts
|
(556)
|
|
16
|
Deferred income
taxes
|
868
|
|
491
|
Pension,
postretirement and postemployment expense less than
payments
|
(245)
|
|
(260)
|
Changes
in:
|
|
|
|
Hedge margin
|
249
|
|
(4)
|
Air traffic
liability
|
173
|
|
160
|
Profit sharing
|
411
|
|
340
|
Other, net
|
(88)
|
|
61
|
Net Cash Provided by Operating Activities
|
2,745
|
|
2,056
|
|
|
|
|
Cash Flows From
Investing Activities:
|
|
|
|
Property and
equipment additions:
|
|
|
|
Flight equipment, including
advance payments
|
(726)
|
|
(343)
|
Ground property and
equipment, including technology
|
(193)
|
|
(175)
|
Net (purchases)
redemptions of short-term investments
|
(50)
|
|
242
|
Other, net
|
14
|
|
(3)
|
Net cash used in investing activities
|
(955)
|
|
(279)
|
|
|
|
|
Cash Flows From
Financing Activities:
|
|
|
|
Payments on long-term
debt and capital lease obligations
|
(333)
|
|
(1,065)
|
Repurchase of common
stock
|
(925)
|
|
(225)
|
Cash
dividends
|
(72)
|
|
(50)
|
Fuel card
obligation
|
(320)
|
|
-
|
Proceeds from
long-term obligations
|
-
|
|
214
|
Other, net
|
31
|
|
12
|
Net cash used in financing activities
|
(1,619)
|
|
(1,114)
|
|
|
|
|
Net Increase in
Cash and Cash Equivalents
|
171
|
|
663
|
Cash and cash
equivalents at beginning of period
|
2,122
|
|
2,699
|
Cash and cash
equivalents at end of period
|
$2,293
|
|
$ 3,362
|
|
|
DELTA AIR LINES,
INC.
|
|
|
Consolidated
Balance Sheets
|
|
|
(Unaudited)
|
|
|
|
June
30,
|
|
December
31,
|
(in
millions)
|
2015
|
|
2014
|
|
|
ASSETS
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$ 2,293
|
|
$ 2,088
|
|
Short-term
investments
|
1,494
|
|
1,217
|
|
Accounts receivable,
net
|
1,966
|
|
2,297
|
|
Hedge margin
receivable
|
134
|
|
925
|
|
Fuel
inventory
|
553
|
|
534
|
|
Expendable parts and
supplies inventories, net
|
328
|
|
318
|
|
Hedge derivatives
asset
|
966
|
|
1,078
|
|
Deferred income
taxes, net
|
2,892
|
|
3,275
|
|
Prepaid expenses and
other
|
815
|
|
733
|
|
|
Total current
assets
|
11,441
|
|
12,465
|
|
|
|
|
|
|
Property and
Equipment, Net:
|
|
|
|
|
Property and
equipment, net
|
22,480
|
|
21,929
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
Goodwill
|
9,794
|
|
9,794
|
|
Identifiable
intangibles, net
|
4,594
|
|
4,603
|
|
Deferred income
taxes, net
|
3,374
|
|
4,320
|
|
Other noncurrent
assets
|
1,098
|
|
1,010
|
|
|
Total other
assets
|
18,860
|
|
19,727
|
Total
assets
|
$ 52,781
|
|
$ 54,121
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Current
Liabilities:
|
|
|
|
|
Current maturities of
long-term debt and capital leases
|
$ 1,659
|
|
$ 1,216
|
|
Air traffic
liability
|
6,039
|
|
4,296
|
|
Accounts
payable
|
2,803
|
|
2,622
|
|
Accrued salaries and
related benefits
|
2,112
|
|
2,266
|
|
Hedge derivatives
liability
|
1,440
|
|
2,772
|
|
Frequent flyer
deferred revenue
|
1,561
|
|
1,580
|
|
Other accrued
liabilities
|
1,468
|
|
2,127
|
|
|
Total current
liabilities
|
17,082
|
|
16,879
|
|
|
|
|
|
|
Noncurrent
Liabilities:
|
|
|
|
|
Long-term debt and
capital leases
|
7,598
|
|
8,561
|
|
Pension,
postretirement and related benefits
|
13,869
|
|
15,138
|
|
Frequent flyer
deferred revenue
|
2,347
|
|
2,602
|
|
Other noncurrent
liabilities
|
2,322
|
|
2,128
|
|
|
Total noncurrent
liabilities
|
26,136
|
|
28,429
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
Common
stock
|
—
|
|
—
|
|
Additional paid-in
capital
|
11,681
|
|
12,981
|
|
Retained
earnings
|
5,540
|
|
3,456
|
|
Accumulated other
comprehensive loss
|
(7,288)
|
|
(7,311)
|
|
Treasury
stock
|
(370)
|
|
(313)
|
|
|
Total stockholders'
equity
|
9,563
|
|
8,813
|
Total liabilities and
stockholders' equity
|
$ 52,781
|
|
$ 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. Delta adjusts 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 settling 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
the company's 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 operational performance in the periods
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 financial performance
in the period shown.
Loss on extinguishment of
debt. Because of the variability in loss on extinguishment of
debt, the adjustment for this item is helpful to investors to
analyze the company's recurring core operational performance in the
period 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 operational performance in the periods
shown.
|
Three Months
Ended
|
|
Net
Income
|
|
June 30,
2015
|
|
Per Diluted
Share
|
|
Pre-Tax
|
|
Income
|
|
Net
|
|
Three Months
Ended
|
(in millions, except
per share data)
|
Income
|
|
Tax
|
|
Income
|
|
June 30,
2015
|
GAAP
|
$ 2,366
|
|
$ (881)
|
|
$ 1,485
|
|
$
1.83
|
Adjusted
for:
|
|
|
|
|
|
|
|
MTM adjustments and
settlements
|
(720)
|
|
266
|
|
(454)
|
|
|
Restructuring and
other
|
25
|
|
(9)
|
|
16
|
|
|
Virgin Atlantic MTM
adjustments
|
(31)
|
|
11
|
|
(20)
|
|
|
Total
adjustments
|
(726)
|
|
268
|
|
(458)
|
|
(0.56)
|
Non-GAAP
|
$ 1,640
|
|
$ (613)
|
|
$ 1,027
|
|
$
1.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Net
Income
|
|
June 30,
2014
|
|
Per Diluted
Share
|
|
Pre-Tax
|
|
Income
|
|
Net
|
|
Three Months
Ended
|
(in millions, except
per share data)
|
Income
|
|
Tax
|
|
Income
|
|
June 30,
2014
|
GAAP
|
$ 1,298
|
|
$ (497)
|
|
$ 801
|
|
$
0.94
|
Adjusted
for:
|
|
|
|
|
|
|
|
MTM adjustments and
settlements
|
(1)
|
|
-
|
|
(1)
|
|
|
Restructuring and
other
|
30
|
|
(10)
|
|
20
|
|
|
Loss on
extinguishment of debt
|
111
|
|
(42)
|
|
69
|
|
|
Total
adjustments
|
140
|
|
(52)
|
|
88
|
|
0.10
|
Non-GAAP
|
$ 1,438
|
|
$ (549)
|
|
$ 889
|
|
$
1.04
|
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 settling 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 the company's costs in the periods
shown.
Consolidated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Price Per
Gallon
|
|
|
|
|
Three Months
Ended
|
|
|
Three Months
Ended
|
|
|
|
|
June
30,
|
|
|
June
30,
|
(in millions, except
per gallon data)
|
|
|
2015
|
2014
|
|
|
2015
|
2014
|
Fuel purchase
cost
|
|
|
$
1,968
|
$ 3,046
|
|
|
$
1.91
|
$ 3.04
|
Airline segment fuel
hedge gains
|
|
|
(126)
|
(99)
|
|
|
(0.12)
|
(0.10)
|
Refinery segment
impact
|
|
|
(90)
|
(13)
|
|
|
(0.09)
|
(0.01)
|
Total fuel
expense
|
|
|
$
1,752
|
$ 2,934
|
|
|
$
1.70
|
$ 2.93
|
MTM adjustments and
settlements
|
|
|
720
|
1
|
|
|
0.70
|
-
|
Total fuel expense,
adjusted
|
|
|
$
2,472
|
$ 2,935
|
|
|
$
2.40
|
$ 2.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Price Per
Gallon
|
|
|
|
|
Six Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
June
30,
|
|
|
June
30,
|
(in millions, except
per gallon data)
|
|
|
2015
|
2014
|
|
|
2015
|
2014
|
Fuel purchase
cost
|
|
|
$
3,686
|
$ 5,777
|
|
|
$
1.89
|
$ 3.07
|
Airline segment fuel
hedge losses (gains)
|
|
|
341
|
(172)
|
|
|
0.18
|
(0.09)
|
Refinery segment
impact
|
|
|
(176)
|
28
|
|
|
(0.09)
|
0.01
|
Total fuel
expense
|
|
|
$
3,851
|
$ 5,633
|
|
|
$
1.98
|
$ 2.99
|
MTM adjustments and
settlements
|
|
|
1,309
|
(33)
|
|
|
0.67
|
(0.01)
|
Total fuel expense,
adjusted
|
|
|
$
5,160
|
$ 5,600
|
|
|
$
2.65
|
$ 2.98
|
|
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
|
2015
|
2014
|
|
|
2015
|
2014
|
Mainline average
price per gallon
|
|
|
$
1.65
|
$
2.90
|
|
|
$
1.99
|
$ 2.97
|
MTM adjustments and
settlements
|
|
|
|
0.82
|
-
|
|
|
0.79
|
(0.02)
|
Mainline average
price per gallon, adjusted
|
|
|
$
2.47
|
$
2.90
|
|
|
$
2.78
|
$ 2.95
|
|
|
|
|
|
|
|
|
|
|
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 operational
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
|
|
Six Months
Ended
|
|
|
|
|
June 30,
2015
|
|
June 30,
2014
|
|
June 30,
2015
|
|
June 30,
2014
|
CASM
(cents)
|
12.88
|
|
14.63
|
|
13.46
|
|
14.98
|
Adjusted
for:
|
|
|
|
|
|
|
|
Aircraft fuel and
related taxes
|
(2.74)
|
|
(4.75)
|
|
(3.19)
|
|
(4.87)
|
Profit
sharing
|
(0.64)
|
|
(0.55)
|
|
(0.45)
|
|
(0.38)
|
Restructuring and
other
|
(0.04)
|
|
(0.05)
|
|
(0.03)
|
|
(0.07)
|
Other
expenses
|
(0.55)
|
|
(0.30)
|
|
(0.54)
|
|
(0.31)
|
CASM-Ex
|
8.91
|
|
8.98
|
|
9.25
|
|
9.35
|
Year-over-year
change
|
-0.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
CASM-Ex:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
|
June 30,
2015
|
|
June 30,
2014
|
|
June 30,
2015
|
|
June 30,
2014
|
Mainline CASM
(cents)
|
12.32
|
|
13.73
|
|
12.86
|
|
14.01
|
Adjusted
for:
|
|
|
|
|
|
|
|
Aircraft fuel and
related taxes
|
(2.54)
|
|
(4.44)
|
|
(3.06)
|
|
(4.55)
|
Profit
Sharing
|
(0.72)
|
|
(0.62)
|
|
(0.51)
|
|
(0.43)
|
Restructuring and
other
|
-
|
|
(0.01)
|
|
-
|
|
(0.01)
|
Other
expenses
|
(0.56)
|
|
(0.30)
|
|
(0.53)
|
|
(0.32)
|
Mainline
CASM-Ex
|
8.50
|
|
8.36
|
|
8.76
|
|
8.70
|
Operating Cash Flow, adjusted. Delta presents
adjusted operating cash flow because management believes adjusting
for hedge margin 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)
|
|
June 30,
2015
|
|
Net cash provided by
operating activities (GAAP)
|
|
$
2.7
|
|
Adjustments:
|
|
|
|
Hedge
margin
|
|
|
(0.2)
|
|
Net cash provided by
operating activities, adjusted
|
|
$
2.5
|
|
Free Cash Flow. Delta presents 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. This
metric 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)
|
June 30,
2015
|
Net cash provided by
operating activities
|
$
2.7
|
Net cash used in
investing activities
|
(1.0)
|
Adjustments:
|
|
Net purchases of short-term
investments and other
|
0.1
|
Hedge margin
|
|
(0.2)
|
Total free cash
flow
|
$
1.6
|
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)
|
June 30,
2015
|
Debt and capital
lease obligations
|
$
9.3
|
Plus: 7x last twelve
months' aircraft rent
|
1.7
|
Adjusted total
debt
|
11.0
|
Less: cash, cash
equivalents and short-term investments
|
(3.8)
|
Less: hedge margin
receivable
|
(0.1)
|
Adjusted net
debt
|
$
7.1
|
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SOURCE Delta Air Lines