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Delta Air Lines Annual Report, Year Ended Jun 30, 1994

Filing Date
Filed September 27, 1994
Period End
June 30, 1994
Security
DAL
In the record · 2016–202610-K1210-Q338-K210

DAL filed 12 annual reports (10-K), 33 quarterly reports (10-Q) and 210 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Oct ’17Oct ’17
  2. Material agreement8-K · Oct ’19Oct ’19
  3. Material agreement8-K · Nov ’21Nov ’21
  4. Leadership change8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed September 27, 1994. Cited figures are marked; the original filing is the authoritative source.

Delta Air Lines, Inc. reported a fiscal 1994 (year ended June 30, 1994) net loss of $409 milliona, or $10.32 per common share after preferred dividends, on operating revenues of $12.36 billion and an operating loss of $447 million.

Excluding restructuring charges of $526 millionb and the cumulative effect of accounting changes, the company reported an operating income of $79 million and a net loss of $77 million ($3.73 per share). Results were hurt by discount fares, the growing presence of low-cost, low-fare carriers (about 57% of domestic revenue passenger miles were in markets they also served), and weak European economies. Passenger mile yield fell 1% and operating expense per available seat mile rose 2% to 9.72 cents.

Management launched "Leadership 7.5," a three-year plan targeting roughly $2 billionc in annual operating cost reductions by the June 1997 quarter, with planned workforce reductions of 12,000 to 15,000 jobs and unit cost goals of 8.6, 8.0 and 7.5 cents. The plan is contingent on significant concessions, with the company seeking $320 to $340 million in annual productivity and wage savings from the pilots' union (ALPA) in negotiations expected to begin in November 1994. Delta also deferred delivery of 37 aircraft, cutting planned capital spending by about $1 billion through fiscal 1996, and announced plans to phase out its Airbus A310 fleet.

Balance sheet items include cash and short-term investments of $1.7 billiond, long-term debt and capital leases of $3.5 billion, stockholders' equity of $1.5 billion, and negative working capital of $313 million, which the filing describes as normal for Delta. The filing also details substantial pending litigation tied to Delta's participation in Pan Am's reorganization, including a claim for at least $2.5 billion in damages, which management believes is not likely to have a material adverse effect.

02—Key points

Key Highlights

  1. Fiscal 1994 net loss of $409 million ($10.32 per share); operating loss of $447 million on revenues of $12.36 billion.
  2. Excluding $526 million in restructuring charges, operating income was $79 million and the net loss was $77 million ($3.73 per share).
  3. Leadership 7.5 targets about $2 billion in annual cost savings by June 1997, including 12,000 to 15,000 job reductions.
  4. Passenger mile yield declined 1% as low-cost, low-fare carriers expanded; about 57% of domestic revenue passenger miles were in markets they also served.
  5. Deferred 37 aircraft orders, reducing planned aircraft capital spending by about $1 billion through fiscal 1996.
  6. Pan Am litigation seeks at least $2.5 billion in compensatory damages; the DIP loan of $115 million plus $30 million interest is outstanding, and management does not expect a material adverse outcome.
  7. Cash and short-term investments of $1.7 billion against long-term debt and capital leases of $3.5 billion; stockholders' equity fell to $1.5 billion from $1.9 billion.

03—Questions

Frequently Asked Questions

  1. Why did Delta report a loss in fiscal 1994?

    The loss reflected $526 million in pretax restructuring charges, weaker domestic passenger yields from discount fares and low-cost carrier competition, and weak economies in several international regions, particularly Europe. Excluding restructuring charges, the company reported a smaller net loss of $77 million.

  2. What is Leadership 7.5?

    Leadership 7.5 is a three-year plan announced April 28, 1994, to reduce annual operating expenses by about $2 billion by the end of the June 1997 quarter. It includes workforce reductions of 12,000 to 15,000 jobs, interim unit cost goals of 8.6 cents by June 1995 and 8.0 cents by June 1996, and a 7.5-cent goal by June 1997. The company acknowledges the goals are aggressive and that no assurance can be given they will be achieved.

  3. What labor issues could affect the plan?

    Delta is seeking $320 million to $340 million in annual productivity improvements and wage and benefit reductions from the Air Line Pilots Association, which represents its pilots. Contract negotiations are expected to begin in November 1994, and the pilots' contract becomes amendable January 1, 1995. Delta states that ALPA's support is critical to Leadership 7.5.

  4. How much debt and liquidity does Delta have?

    At June 30, 1994, cash and short-term investments totaled $1.7 billion and long-term debt and capital leases totaled $3.5 billion. Stockholders' equity was $1.5 billion, and working capital was negative $313 million, which the company describes as normal. At August 12, 1994, $866 million of credit was available under its bank credit agreements, subject to conditions.

  5. What is the main legal exposure disclosed?

    The largest exposure is litigation from Pan Am and its creditors over Delta's participation in Pan Am's proposed reorganization. The complaint seeks at least $2.5 billion in compensatory damages plus punitive damages, and former Pan Am employees seek at least $1.1 billion. The trial on liability ended June 10, 1994, and the court has not issued a decision. Management believes the resolution is not likely to have a material adverse effect.

04—Continue

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