ATLANTA, Oct. 11, 2017 /PRNewswire/ -- Delta Air
Lines (NYSE: DAL) today reported financial results for the
September quarter 2017. Highlights of those results,
including both GAAP and adjusted metrics, are below and
incorporated here.
Adjusted pre-tax income for the September
2017 quarter was $1.7 billion,
a $182 million decrease from the
September 2016 quarter. Pre-tax
income includes a $120 million
reduction from the operational disruption following Hurricane Irma
that hit the Caribbean,
Florida, Georgia and, specifically, Delta's hub in
Atlanta.
"While we faced a number of challenges this quarter, including
multiple hurricanes and an earthquake in Mexico, I am proud of how Delta people
responded and still delivered an outstanding performance this
quarter," said Ed Bastian, Delta's
chief executive officer. "Having just completed the
busiest summer travel season in our history, we have good momentum,
a determined team and a solid pipeline of initiatives to grow
earnings and margins."
To assist customers and employees in affected regions, Delta
operated nine humanitarian flights, added more than 12,000
additional seats to impacted cities and shipped more than 600,000
pounds of relief supplies. In addition, Delta and the Delta
Air Lines Foundation made $2.75
million in contributions to Red Cross organizations, while
Delta employees contributed $250,000
to the American Red Cross and another $250,000 to the Delta Care Fund that directly
supports fellow employees.
Revenue Environment
Delta's operating revenue of $11.1
billion for the September quarter was up 5.5 percent, or
$577 million versus prior year,
despite a $140 million reduction from
Hurricane Irma.
Passenger revenue increased $328
million, including $160
million from Delta's Branded Fares initiatives.
Passenger unit revenues increased 1.9 percent on 1.6 percent higher
capacity.
Cargo revenue increased 11.5 percent, driven by higher volumes
in freight and mail. Other revenue increased 18.4 percent
primarily due to higher loyalty revenue and third-party refinery
sales.
"Three of four entities reported positive unit revenues, and we
see continued opportunity in business yields. We expect
fourth quarter unit revenues to be up two to four percent with all
entities in positive territory by year end," said Glen Hauenstein, Delta's president. "Our
commercial platform of delivering network efficiency, driving
customer innovation and improving customer choice should allow us
to deliver sustained positive unit revenue, while maintaining our
industry-leading revenue premium."
|
|
|
|
Increase
(Decrease)
|
|
|
|
|
3Q17 versus
3Q16
|
|
|
|
|
Change
|
Unit
|
|
|
Revenue
|
3Q17
($M)
|
|
YoY
|
Revenue
|
Yield
|
Capacity
|
|
Mainline
|
4,897
|
|
6.1
%
|
1.6
%
|
0.1
%
|
4.5
%
|
|
Regional
|
1,475
|
|
1.3
%
|
3.3
%
|
2.5
%
|
(1.9) %
|
Total
Domestic
|
6,372
|
|
5.0
%
|
1.5
%
|
0.0
%
|
3.4
%
|
|
Atlantic
|
1,727
|
|
3.4
%
|
2.4
%
|
(2.2) %
|
0.9
%
|
|
Pacific
|
680
|
|
(10.3) %
|
(3.1) %
|
(0.8) %
|
(7.5) %
|
|
Latin
America
|
620
|
|
8.6
%
|
5.9
%
|
4.4
%
|
2.6
%
|
Total
Passenger
|
9,399
|
|
3.6
%
|
1.9
%
|
0.2
%
|
1.6
%
|
Cargo
Revenue
|
187
|
|
11.5
%
|
|
|
|
Other
Revenue
|
1,474
|
|
18.4
%
|
|
|
|
Total
Revenue
|
11,060
|
|
5.5
%
|
2.7
%
|
|
|
|
See Note A for
reconciliation of total unit revenue (TRASM) change
|
December 2017 Quarter Guidance
For the December quarter, Delta is expecting continued pressure
on margins as its unit revenue momentum catches up to the rise in
fuel prices that began in July.
|
4Q17
Forecast
|
Operating
margin
|
11% - 13%
|
Fuel price, including
taxes and refinery impact
|
$1.82 -
$1.87
|
Compared to
4Q16
|
|
Passenger unit
revenue
|
Up 2% - 4%
|
CASM-Ex, including profit
sharing
|
|
As reported2
|
Down 1% -
flat
|
Normalized3
|
Up 4% - 5%
|
System Capacity
|
Up ~ 2%
|
|
See Note A for information
about reconciliation of projected non-GAAP financial
measures
|
Cost Performance
Adjusted fuel expense4 increased $230 million compared to the same period in 2016
as market fuel prices increased throughout the quarter.
Delta's adjusted fuel price per gallon for the September quarter
was $1.68, which includes
$0.03 of benefit from the
refinery.
CASM-Ex, including profit sharing increased 4.8 percent for the
September 2017 quarter compared to
the prior year period which includes pressure from Hurricane
Irma-related flight cancellations. Normalized CASM-Ex,
including profit sharing increased 2.6 percent versus the prior
year period, driven by employee wage increases, product
investments, and accelerated depreciation associated with Delta's
narrowbody fleet initiatives.
Non-operating expense declined $35
million for the quarter due to foreign exchange
favorability.
"For the full year we expect non-fuel unit costs to be up
approximately four percent as harmonization of profit sharing
plans, accelerated depreciation of narrowbody aircraft and pressure
from weather-related cancellations have added over a point of
pressure to costs from our previous guidance," said Paul Jacobson, Delta's chief financial
officer. "However with the productivity from our fleet,
maintenance and technology initiatives combined with the
determination of the Delta team, we are confident we can deliver
our long-term two percent cost target for 2018 and
beyond."
Cash Flow, Shareholder Returns, and Adjusted Net
Debt
Delta generated $1.6 billion of
operating cash flow and $471 million
of free cash flow during the quarter. The company used this cash
generation to invest nearly $1
billion into the business for aircraft purchases and
improvements, facilities upgrades and technology, as well as
$175 million to complete its 49%
ownership of Aeromexico.
Adjusted net debt at the end of the quarter was $8.8 billion, up $2.7
billion versus year end as a result of Delta's March quarter
2017 unsecured debt issuance used to accelerate pension funding.
The company's unfunded pension liability has declined by
$3.8 billion at the same time from
$10.6 billion at the end of 2016 to
$6.8 billion at the end of the
September quarter.
For the September quarter, Delta returned $769 million to shareholders, comprised of
$550 million of share repurchases and
$219 million in dividends. The
company completed the 2015 $5 billion
share repurchase authorization during the September quarter and
December quarter purchases will be made under its 2017 $5 billion share repurchase authorization.
"Delta's improved financial position was recognized with an
investment grade credit rating by Standard & Poor's this
quarter – the third agency to grant Delta this status," Jacobson
continued. "With strong cash flows and a systematic approach
to shareholder returns through share buybacks and dividends, we are
committed to maintaining our durable franchise."
September Quarter Results
Special items for the quarter consist primarily of
mark-to-market adjustments on fuel hedges.
|
GAAP
|
Adjusted
|
($ in millions except
per share and unit costs)
|
3Q17
|
3Q16
|
3Q17
|
3Q16
|
Pre-tax
income
|
1,805
|
1,900
|
1,724
|
1,906
|
Net income
|
1,178
|
1,259
|
1,127
|
1,263
|
Diluted earnings per
share
|
1.64
|
1.69
|
1.57
|
1.70
|
Fuel expense
(including regional carriers)
|
1,785
|
1,652
|
1,859
|
1,629
|
Average fuel price
per gallon
|
1.61
|
1.50
|
1.68
|
1.48
|
Consolidated unit
cost (CASM/CASM-Ex)
|
13.14
|
12.33
|
10.05
|
9.58
|
Operating cash
flow
|
1,645
|
1,854
|
1,562
|
1,771
|
Total debt and
capital leases
|
8,808
|
7,565
|
8,848
|
6,403
|
About Delta
Delta Air Lines serves more than 180 million customers each
year. In 2017, Delta was named to Fortune's top 50 Most Admired
Companies in addition to being named the most admired airline for
the sixth time in seven years. Additionally, Delta has ranked No.1
in the Business Travel News Annual Airline survey for an
unprecedented six consecutive years. With an industry-leading
global network, Delta and the Delta Connection carriers offer
service to 311 destinations in 54 countries on six continents.
Headquartered in Atlanta, Delta
employs more than 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 transatlantic 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,
Mexico City, Minneapolis/St. Paul,
New York-JFK and LaGuardia, London-Heathrow, Paris-Charles de
Gaulle, Salt Lake City, Seattle, Seoul, 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, and Facebook.com/delta.
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)
|
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 $387 million and $247 million for the
September 2017 and September 2016 quarters, and $975 million and
$845 million for the nine months ended September 30, 2017 and 2016,
respectively. Management believes this methodology provides a more
consistent and comparable reflection of Delta's airline
operations.
|
|
|
(3)
|
Normalized CASM-Ex,
including profit sharing: Delta's new pilot contract was ratified
on December 1, 2016 and was retroactive to January 1, 2016. As a
result, Delta recognized $380 million in retroactive wages and
other benefits in the December 2016 quarter. On a normalized basis,
approximately $140 million of this amount related to the September
2016 quarter. We believe that adjusting this period allows
investors to better understand and analyze the company's core
operational performance on a year-over-year basis.
|
|
|
(4)
|
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.
|
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
effects of terrorist attacks or geopolitical conflict; the cost of
aircraft fuel; the impact of fuel hedging activity including
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 performance of
our significant investments in airlines in other parts of the
world; the possible effects of accidents involving our aircraft;
the restrictions that financial covenants in our financing
agreements could have on our financial and business operations;
labor issues; interruptions or disruptions in service at one of our
hub, gateway, or key airports; breaches or security lapses in our
information technology systems; disruptions in 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; uncertainty in economic conditions and regulatory
environment in the United Kingdom
leading up to and following the exit of the United Kingdom from the European Union; 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, 2016.
Caution should be taken not to place undue reliance on our
forward-looking statements, which represent our views only as of
Oct. 11, 2017, and which we have no
current intention to update.
DELTA AIR LINES,
INC.
|
Consolidated
Statements of Operations
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
Nine Months
Ended
|
|
|
|
|
|
September
30,
|
|
|
|
September
30,
|
|
|
(in millions, except
per share data)
|
2017
|
2016
|
$
Change
|
%
Change
|
|
2017
|
2016
|
$
Change
|
%
Change
|
Operating
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Passenger:
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$
7,924
|
$
7,615
|
$
309
|
4%
|
|
$
22,027
|
$
21,530
|
$
497
|
2%
|
|
|
Regional
carriers
|
1,475
|
1,456
|
19
|
1%
|
|
4,291
|
4,273
|
18
|
-%
|
|
|
Total passenger
revenue
|
9,399
|
9,071
|
328
|
4%
|
|
26,318
|
25,803
|
515
|
2%
|
|
Cargo
|
187
|
167
|
20
|
12%
|
|
530
|
494
|
36
|
7%
|
|
Other
|
1,474
|
1,245
|
229
|
18%
|
|
4,151
|
3,884
|
267
|
7%
|
|
|
Total operating
revenue
|
11,060
|
10,483
|
577
|
6%
|
|
30,999
|
30,181
|
818
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expense:
|
|
|
|
|
|
|
|
|
|
|
Salaries and related
costs
|
2,715
|
2,463
|
252
|
10%
|
|
7,804
|
7,165
|
639
|
9%
|
|
Aircraft fuel and
related taxes
|
1,519
|
1,422
|
97
|
7%
|
|
4,207
|
3,877
|
330
|
9%
|
|
Regional carriers
expense
|
|
|
|
|
|
|
|
|
|
|
|
Fuel
|
266
|
230
|
36
|
16%
|
|
747
|
616
|
131
|
21%
|
|
|
Other
|
890
|
889
|
1
|
-%
|
|
2,600
|
2,605
|
(5)
|
-%
|
|
Depreciation and
amortization
|
574
|
474
|
100
|
21%
|
|
1,649
|
1,430
|
219
|
15%
|
|
Contracted
services
|
561
|
520
|
41
|
8%
|
|
1,627
|
1,480
|
147
|
10%
|
|
Aircraft maintenance
materials and outside repairs
|
503
|
462
|
41
|
9%
|
|
1,496
|
1,357
|
139
|
10%
|
|
Passenger commissions
and other selling expenses
|
482
|
466
|
16
|
3%
|
|
1,344
|
1,291
|
53
|
4%
|
|
Landing fees and
other rents
|
400
|
399
|
1
|
-%
|
|
1,144
|
1,123
|
21
|
2%
|
|
Passenger
service
|
315
|
264
|
51
|
19%
|
|
806
|
674
|
132
|
20%
|
|
Profit
sharing
|
314
|
326
|
(12)
|
(4)%
|
|
803
|
922
|
(119)
|
(13)%
|
|
Aircraft
rent
|
89
|
72
|
17
|
24%
|
|
259
|
204
|
55
|
27%
|
|
Other
|
593
|
527
|
66
|
13%
|
|
1,593
|
1,505
|
88
|
6%
|
|
|
Total operating
expense
|
9,221
|
8,514
|
707
|
8%
|
|
26,079
|
24,249
|
1,830
|
8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
1,839
|
1,969
|
(130)
|
(7)%
|
|
4,920
|
5,932
|
(1,012)
|
(17)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Operating
Expense:
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(100)
|
(95)
|
(5)
|
5%
|
|
(297)
|
(295)
|
(2)
|
1%
|
|
Miscellaneous,
net
|
66
|
26
|
40
|
NM
|
|
(12)
|
47
|
(59)
|
NM
|
|
|
Total non-operating
expense, net
|
(34)
|
(69)
|
35
|
(51)%
|
|
(309)
|
(248)
|
(61)
|
25%
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before
Income Taxes
|
1,805
|
1,900
|
(95)
|
(5)%
|
|
4,611
|
5,684
|
(1,073)
|
(19)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax
Provision
|
(627)
|
(641)
|
14
|
(2)%
|
|
(1,606)
|
(1,933)
|
327
|
(17)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
$
1,178
|
$
1,259
|
$
(81)
|
(6)%
|
|
$
3,005
|
$
3,751
|
$
(746)
|
(20)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
$
1.64
|
$
1.70
|
|
|
|
$
4.15
|
$
4.95
|
|
|
Diluted Earnings
Per Share
|
$
1.64
|
$
1.69
|
|
|
|
$
4.13
|
$
4.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Weighted
Average Shares Outstanding
|
716
|
740
|
|
|
|
724
|
758
|
|
|
Diluted Weighted
Average Shares Outstanding
|
719
|
744
|
|
|
|
727
|
762
|
|
|
DELTA AIR LINES,
INC.
|
Statistical
Summary
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
2017
|
2016
|
Change
|
|
2017
|
2016
|
Change
|
Consolidated:
|
|
|
|
|
|
|
|
Revenue passenger
miles (millions)
|
61,006
|
58,973
|
3.4%
|
|
166,533
|
163,113
|
2.1%
|
Available seat miles
(millions)
|
70,167
|
69,028
|
1.6%
|
|
194,265
|
193,152
|
0.6%
|
Passenger mile yield
(cents)
|
15.41
|
15.38
|
0.2%
|
|
15.80
|
15.82
|
(0.1%)
|
Passenger revenue per
available seat mile (cents)
|
13.40
|
13.14
|
1.9%
|
|
13.55
|
13.36
|
1.4%
|
Total revenue per
available seat mile (cents)
|
15.76
|
15.19
|
3.8%
|
|
15.96
|
15.63
|
2.1%
|
TRASM, excluding
refinery- see Note A (cents)
|
15.58
|
15.17
|
2.7%
|
|
15.82
|
15.55
|
1.7%
|
Operating cost per
available seat mile (cents)
|
13.14
|
12.33
|
6.6%
|
|
13.42
|
12.55
|
6.9%
|
CASM-Ex, including
profit sharing - see Note A (cents)
|
10.05
|
9.58
|
4.8%
|
|
10.37
|
9.79
|
5.9%
|
Passenger load
factor
|
86.9%
|
85.4%
|
1.5 pts
|
|
85.7%
|
84.4%
|
1.3 pts
|
Fuel gallons consumed
(millions)
|
1,108
|
1,099
|
0.9%
|
|
3,073
|
3,075
|
(0.1%)
|
Average price per
fuel gallon
|
$
1.61
|
$
1.50
|
7.3%
|
|
$
1.61
|
$
1.46
|
10.3%
|
Average price per
fuel gallon, adjusted - see Note A
|
$
1.68
|
$
1.48
|
13.2%
|
|
$
1.68
|
$
1.60
|
4.8%
|
Number of aircraft in
fleet, end of period
|
996
|
960
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
|
Revenue passenger
miles (millions)
|
55,575
|
53,479
|
3.9%
|
|
150,784
|
147,113
|
2.5%
|
Available seat miles
(millions)
|
63,504
|
62,232
|
2.0%
|
|
174,605
|
173,115
|
0.9%
|
Operating cost per
available seat mile (cents)
|
12.61
|
11.79
|
7.0%
|
|
12.92
|
12.04
|
7.3%
|
CASM-Ex, including
profit sharing - see Note A (cents)
|
9.68
|
9.17
|
5.6%
|
|
10.02
|
9.38
|
6.9%
|
Fuel gallons consumed
(millions)
|
953
|
940
|
1.3%
|
|
2,618
|
2,618
|
-%
|
Average price per
fuel gallon
|
$
1.59
|
$
1.50
|
6.0%
|
|
$
1.60
|
$
1.48
|
8.1%
|
Average price per
fuel gallon, adjusted - see Note A
|
$
1.66
|
$
1.48
|
12.2%
|
|
$
1.68
|
$
1.64
|
2.4%
|
Number of aircraft in
fleet, end of period
|
857
|
830
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: except for
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
|
|
|
September
30,
|
(in
millions)
|
2017
|
|
2016
|
Cash Flows From
Operating Activities:
|
|
|
|
Net
income
|
$
1,178
|
|
$
1,259
|
Depreciation and
amortization
|
574
|
|
474
|
Deferred income
taxes
|
622
|
|
625
|
Changes in air
traffic liability
|
(837)
|
|
(813)
|
Other working capital
changes, net
|
108
|
|
309
|
|
Net cash provided
by operating activities
|
1,645
|
|
1,854
|
|
|
|
|
|
Cash Flows From
Investing Activities:
|
|
|
|
Property and
equipment additions:
|
|
|
|
|
Flight equipment,
including advance payments
|
(614)
|
|
(505)
|
|
Ground property and
equipment, including technology
|
(328)
|
|
(175)
|
Purchase of equity
investments
|
(173)
|
|
-
|
Net purchases of
short-term investments
|
(213)
|
|
(229)
|
Other, net
|
6
|
|
22
|
|
Net cash used in
investing activities
|
(1,322)
|
|
(887)
|
|
|
|
|
|
Cash Flows From
Financing Activities:
|
|
|
|
Payments on long-term
debt and capital lease obligations
|
(255)
|
|
(254)
|
Repurchases of common
stock
|
(550)
|
|
(500)
|
Cash
dividends
|
(219)
|
|
(150)
|
Other, net
|
(62)
|
|
(87)
|
|
Net cash used in
financing activities
|
(1,086)
|
|
(991)
|
|
|
|
|
|
Net Decrease in
Cash and Cash Equivalents
|
(763)
|
|
(24)
|
Cash and cash
equivalents at beginning of period
|
2,241
|
|
1,662
|
Cash and cash
equivalents at end of period
|
$
1,478
|
|
$
1,638
|
|
|
|
|
|
|
|
DELTA AIR LINES,
INC.
|
|
|
Consolidated
Balance Sheets
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
(in
millions)
|
2017
|
|
2016
|
|
|
ASSETS
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
1,478
|
|
$
2,762
|
|
Short-term
investments
|
960
|
|
487
|
|
Accounts receivable,
net
|
2,399
|
|
2,064
|
|
Fuel
inventory
|
720
|
|
519
|
|
Expendable parts and
supplies inventories, net
|
416
|
|
372
|
|
Prepaid expenses and
other
|
1,110
|
|
1,247
|
|
|
Total current
assets
|
7,083
|
|
7,451
|
|
|
|
|
|
|
Property and
Equipment, Net:
|
|
|
|
|
Property and
equipment, net
|
25,900
|
|
24,375
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
Goodwill
|
9,794
|
|
9,794
|
|
Identifiable
intangibles, net
|
4,851
|
|
4,844
|
|
Deferred income
taxes, net
|
1,422
|
|
3,064
|
|
Other noncurrent
assets
|
2,878
|
|
1,733
|
|
|
Total other
assets
|
18,945
|
|
19,435
|
Total
assets
|
$
51,928
|
|
$
51,261
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Current
Liabilities:
|
|
|
|
|
Current maturities of
long-term debt and capital leases
|
$
1,224
|
|
$
1,131
|
|
Air traffic
liability
|
5,528
|
|
4,626
|
|
Accounts
payable
|
3,059
|
|
2,572
|
|
Accrued salaries and
related benefits
|
2,683
|
|
2,924
|
|
Frequent flyer
deferred revenue
|
1,759
|
|
1,648
|
|
Other accrued
liabilities
|
2,243
|
|
2,338
|
|
|
Total current
liabilities
|
16,496
|
|
15,239
|
|
|
|
|
|
|
Noncurrent
Liabilities:
|
|
|
|
|
Long-term debt and
capital leases
|
7,584
|
|
6,201
|
|
Pension,
postretirement and related benefits
|
9,565
|
|
13,378
|
|
Frequent flyer
deferred revenue
|
2,281
|
|
2,278
|
|
Other noncurrent
liabilities
|
2,001
|
|
1,878
|
|
|
Total noncurrent
liabilities
|
21,431
|
|
23,735
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
14,001
|
|
12,287
|
Total liabilities and
stockholders' equity
|
$
51,928
|
|
$
51,261
|
|
|
|
|
|
|
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. The company does not
reconcile forward looking non-GAAP financial measures because MTM
adjustments and settlements will not be known until the end of the
period and could be significant.
Pre-Tax Income, adjusted and Net Income, adjusted. We
adjust for the following items to determine pre-tax income,
adjusted and net income, adjusted, for the reasons described
below:
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. Adjusting
for these items allows investors to understand and analyze our core
financial performance in the periods 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 understand and analyze the company's core financial performance
in the periods shown.
Income tax. We included the
income tax effect of adjustments when presenting net income,
adjusted. We believe that presenting the income tax effect of
adjustments allows investors to understand and analyze the
company's core financial performance in the periods shown.
|
Three Months
Ended
|
|
Three Months
Ended
|
|
September 30,
2017
|
|
September 30,
2017
|
|
Pre-Tax
|
|
Income
|
|
Net
|
|
Net
Income
|
(in millions, except
per share data)
|
Income
|
|
Tax
|
|
Income
|
|
Per Diluted
Share
|
GAAP
|
$
1,805
|
|
$
(627)
|
|
$
1,178
|
|
$
1.64
|
Adjusted
for:
|
|
|
|
|
|
|
|
MTM adjustments and
settlements
|
(74)
|
|
27
|
|
(47)
|
|
|
Virgin Atlantic MTM
adjustments
|
(7)
|
|
3
|
|
(4)
|
|
|
Total
adjustments
|
(81)
|
|
30
|
|
(51)
|
|
(0.07)
|
Non-GAAP
|
$
1,724
|
|
$
(597)
|
|
$
1,127
|
|
$
1.57
|
Year-over-year
change
|
$
(182)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
September 30,
2016
|
|
September 30,
2016
|
|
Pre-Tax
|
|
Income
|
|
Net
|
|
Net
Income
|
(in millions, except
per share data)
|
Income
|
|
Tax
|
|
Income
|
|
Per Diluted
Share
|
GAAP
|
$
1,900
|
|
$
(641)
|
|
$
1,259
|
|
$
1.69
|
Adjusted
for:
|
|
|
|
|
|
|
|
MTM adjustments and
settlements
|
23
|
|
(8)
|
|
15
|
|
|
Virgin Atlantic MTM
adjustments
|
(17)
|
|
6
|
|
(11)
|
|
|
Total
adjustments
|
6
|
|
(2)
|
|
4
|
|
0.01
|
Non-GAAP
|
$
1,906
|
|
$
(643)
|
|
$
1,263
|
|
$
1.70
|
Total Revenue Per Available Seat Mile "TRASM", excluding
refinery. We adjust TRASM for refinery sales to third parties
to determine TRASM, adjusted because these revenues are not related
to our airline segment. TRASM, excluding refinery therefore
provides a more meaningful comparison of revenue from our airline
operations to the rest of the airline industry.
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
|
|
|
September 30,
2017
|
|
September 30,
2016
|
|
Change
|
TRASM
(cents)
|
15.76
|
|
15.19
|
|
3.8%
|
Adjusted
for:
|
|
|
|
|
|
Third party refinery
sales
|
(0.18)
|
|
(0.02)
|
|
|
TRASM, excluding
refinery
|
15.58
|
|
15.17
|
|
2.7%
|
|
|
|
|
|
|
|
|
Nine Months
Ended
|
|
Nine Months
Ended
|
|
|
|
|
September 30,
2017
|
|
September 30,
2016
|
|
|
TRASM
(cents)
|
15.96
|
|
15.63
|
|
|
Adjusted
for:
|
|
|
|
|
|
Third party refinery
sales
|
(0.14)
|
|
(0.08)
|
|
|
TRASM, excluding
refinery
|
15.82
|
|
15.55
|
|
|
|
|
|
|
|
|
|
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 airline segment
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 understand and analyze our core
operational performance in the periods shown.
Consolidated:
|
|
|
|
|
|
|
|
|
|
|
|
Average Price Per
Gallon
|
|
|
|
Three Months
Ended
|
|
|
Three Months
Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
(in millions, except
per gallon data)
|
|
2017
|
2016
|
|
|
2017
|
2016
|
Fuel purchase
cost
|
|
$
1,822
|
$
1,585
|
|
|
$
1.64
|
$
1.44
|
Airline segment fuel
hedge impact
|
|
-
|
22
|
|
|
-
|
0.02
|
Refinery segment
impact
|
|
(37)
|
45
|
|
|
(0.03)
|
0.04
|
Total fuel
expense
|
|
$
1,785
|
$
1,652
|
|
|
$
1.61
|
$
1.50
|
MTM adjustments and
settlements
|
|
74
|
(23)
|
|
|
0.07
|
(0.02)
|
Total fuel expense,
adjusted
|
|
$
1,859
|
$
1,629
|
|
|
$
1.68
|
$
1.48
|
Year-over-year
change
|
|
$
230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
(in millions, except
per gallon data)
|
|
2017
|
2016
|
|
|
2017
|
2016
|
Fuel purchase
cost
|
|
$
5,029
|
$
4,118
|
|
|
$
1.64
|
$
1.34
|
Airline segment fuel
hedge impact
|
|
12
|
292
|
|
|
-
|
0.09
|
Refinery segment
impact
|
|
(87)
|
83
|
|
|
(0.03)
|
0.03
|
Total fuel
expense
|
|
$
4,954
|
$
4,493
|
|
|
$
1.61
|
$
1.46
|
MTM adjustments and
settlements
|
|
210
|
439
|
|
|
0.07
|
0.14
|
Total fuel expense,
adjusted
|
|
$
5,164
|
$
4,932
|
|
|
$
1.68
|
$
1.60
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2017
|
2016
|
|
|
2017
|
2016
|
Mainline average
price per gallon
|
|
$
1.59
|
$
1.50
|
|
|
$
1.60
|
$
1.48
|
MTM adjustments and
settlements
|
|
0.07
|
(0.02)
|
|
|
0.08
|
0.16
|
Mainline average
price per gallon, adjusted
|
|
$
1.66
|
$
1.48
|
|
|
$
1.68
|
$
1.64
|
|
|
|
|
|
|
|
|
|
Non-Fuel Unit Cost or Cost per Available Seat Mile, Including
Profit Sharing ("CASM-Ex"). 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 understand and analyze our non-fuel costs and
year-over-year financial performance.
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.
Pilot contract impact,
normalized. Delta's new pilot contract was ratified on
December 1, 2016 and was retroactive
to January 1, 2016. As a result,
Delta recognized $380 million in
retroactive wages and other benefits in the December 2016 quarter. On a normalized basis,
approximately $140 million of this
amount related to the September 2016
quarter.
Consolidated
CASM-Ex:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
September 30,
2017
|
|
September 30,
2016
|
Change
|
|
September 30,
2017
|
|
September 30,
2016
|
CASM
(cents)
|
|
|
13.14
|
|
12.33
|
|
|
13.42
|
|
12.55
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related
taxes
|
|
|
(2.54)
|
|
(2.39)
|
|
|
(2.55)
|
|
(2.33)
|
Other expenses
|
|
(0.55)
|
|
(0.36)
|
|
|
(0.50)
|
|
(0.43)
|
CASM-Ex
|
10.05
|
|
9.58
|
4.8%
|
|
10.37
|
|
9.79
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
|
|
Pilot contract impact,
normalized
|
|
—
|
|
0.21
|
|
|
|
|
|
CASM-Ex, adjusted for
pilot contract impact, normalized
|
10.05
|
|
9.79
|
2.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
CASM-Ex:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
September 30,
2017
|
|
September 30,
2016
|
|
|
September 30,
2017
|
|
September 30,
2016
|
Mainline CASM
(cents)
|
|
|
12.61
|
|
11.79
|
|
|
12.92
|
|
12.04
|
Adjusted
for:
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel and related
taxes
|
|
(2.38)
|
|
(2.27)
|
|
|
(2.40)
|
|
(2.23)
|
Other expenses
|
|
(0.55)
|
|
(0.35)
|
|
|
(0.50)
|
|
(0.43)
|
Mainline
CASM-Ex
|
9.68
|
|
9.17
|
|
|
10.02
|
|
9.38
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Cash Flow, adjusted. 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 capital expenditures, debt service or
general corporate initiatives. Adjustments include:
Hedge deferrals, including
early settlements. During the March
2015 quarter, we effectively deferred settlement of a
portion of our fuel hedge portfolio by entering into transactions
that, excluding market movements from the date of inception, would
provide approximately $300 million in
cash receipts during the second half of 2015 and require
approximately $300 million in cash
payments in 2016. During the March
2016 quarter, we further deferred settlement of a portion of
our hedge portfolio until 2017 by entering into transactions that,
excluding market movements from the date of inception, would
provide approximately $300 million in
cash receipts during the second half of 2016 and require
approximately $300 million in cash
payments in 2017. Additionally, during the June 2016 quarter, we early terminated certain of
our outstanding deferral transactions and made cash payments of
$170 million, including normal
settlements. Operating cash flow is adjusted to include the impact
of these deferral transactions in order to allow investors to
understand the net impact of hedging activities in the periods
shown.
Hedge margin and other.
Operating 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 understand and analyze the
company's core operational performance in the periods shown.
|
|
|
Three Months
Ended
|
|
Three Months
Ended
|
(in
millions)
|
|
September 30,
2017
|
|
September 30,
2016
|
Net cash provided by
operating activities (GAAP)
|
|
$
1,645
|
|
$
1,854
|
Adjustments:
|
|
|
|
|
Hedge deferrals, including
early settlements
|
|
(83)
|
|
(76)
|
Hedge margin and
other
|
|
—
|
|
(7)
|
Net cash provided by
operating activities, adjusted
|
|
$
1,562
|
|
$
1,771
|
|
|
|
|
|
|
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 deferred
settlement of a portion of our hedge portfolio until 2017 by
entering into transactions that, excluding market movements from
the date of inception, would provide approximately $300 million in cash receipts during the second
half of 2016 and require approximately $300
million in cash payments in 2017. Free cash flow is adjusted
to include the impact of these deferral transactions in order to
allow investors to understand the net impact of hedging activities
in the period shown.
|
|
|
|
|
|
Three Months
Ended
|
(in
millions)
|
|
|
|
|
September 30,
2017
|
Net cash provided by
operating activities
|
|
|
|
|
$
1,645
|
Net cash used in
investing activities
|
|
|
|
|
(1,322)
|
Adjustments:
|
|
|
|
|
|
Hedge deferrals
|
|
|
|
|
(83)
|
Net purchases of short-term
investments and other
|
|
|
|
|
231
|
Total free cash
flow
|
|
|
|
|
$
471
|
|
|
|
|
|
|
|
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 represents the continued progress we have made on our
debt initiatives.
(in
millions)
|
|
September 30,
2017
|
|
December 31,
2016
|
Debt and capital
lease obligations
|
|
$
8,808
|
|
|
$
7,332
|
|
Plus: unamortized
discount, net and debt issuance costs
|
|
97
|
|
|
104
|
|
Adjusted debt and
capital lease obligations
|
|
|
$
8,905
|
|
|
$
7,436
|
Plus: 7x last twelve
months' aircraft rent
|
|
|
2,381
|
|
|
1,995
|
Adjusted total
debt
|
|
|
11,286
|
|
|
9,431
|
Less: cash, cash
equivalents and short-term investments
|
|
|
(2,438)
|
|
|
(3,249)
|
Less: hedge margin
receivable
|
|
|
—
|
|
|
(38)
|
Adjusted net
debt
|
|
|
$
8,848
|
|
|
$
6,144
|
|
|
|
|
|
|
|
|
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SOURCE Delta Air Lines