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Delta Air Lines Annual Report, Year Ended Jun 30, 1998

Filing Date
Filed September 28, 1998
Period End
June 30, 1998
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 28, 1998. Cited figures are marked; the original filing is the authoritative source.

Delta Air Lines, Inc. reported its strongest fiscal-year performance ever for the year ended June 30, 1998, with operating income of $1.7 billiona ($1,693 million) and net income of $1.0 billion ($1,001 million, or $13.28 basic and $12.68 diluted income per common share).

Operating revenues rose 4% to $14.1 billionb, driven by a 3% increase in revenue passenger miles on 2% capacity growth, while operating expenses rose 3% to $12.4 billion. Aircraft fuel expense fell 12% as the average price per gallon declined 15% to 56.54 cents. Other expense narrowed to $45 million, mainly from lower interest expense.

Financial position strengthened over the year. Cash and short-term investments totaled $1.6 billionc at June 30, 1998, versus $1.2 billion a year earlier. Operating cash flow was $2.9 billion, and the company repurchased $354 million of common stock.

Long-term debt including current maturities fell to $1.9 billiond from $2.1 billion, and shareowners' equity rose to $4.0 billion from $3.0 billion. The company had negative working capital of $1.2 billion, which it describes as normal. Capital spending was substantial, with $1.8 billion invested in flight equipment and $531 million in ground property, and firm aircraft orders totaled $6.9 billion as of August 14, 1998.

The filing also flags risks. Management highlights ongoing low-fare competition, a proposed DOT enforcement policy on hub-airport capacity responses, pending pilot pay-rate negotiations for new aircraft types, and Year 2000 remediation with estimated costs of $160 million to $175 million.

Delta announced a two-for-one common stock split subject to shareowner approval and a $750 million repurchase authorization. Its alliance with United Air Lines is proceeding on reciprocal frequent flyer benefits, but code-sharing was discontinued after the pilot union withdrew its approval.

02—Key points

Key Highlights

  1. Record fiscal 1998 results: operating income of $1,693 million (up from $1,531 million) and net income of $1,001 million (up from $854 million).
  2. Operating revenues increased 4% to $14,138 million, with passenger revenue at $12,976 million, which is 92% of operating revenues.
  3. Aircraft fuel expense fell 12% to $1,507 million as the average price per gallon declined 15% to 56.54 cents.
  4. Operating cash flow of $2,916 million, with $1.8 billion in flight equipment additions and $531 million in ground property investment.
  5. Shareowners' equity rose to $4,023 million from $3,007 million, and long-term debt including current maturities declined to $1.6 billion on the balance sheet, with total debt and capital leases described as $1.9 billion.
  6. Board approved a two-for-one common stock split subject to shareowner vote, plus a new repurchase authorization of up to $750 million through December 31, 1999.
  7. Firm aircraft orders valued at $6.9 billion, and the company will retire its remaining L-1011 fleet by August 2001 and its B-727 fleet by June 2005.

03—Questions

Frequently Asked Questions

  1. How profitable was Delta in fiscal 1998?

    Delta reported net income of $1,001 million, or $13.28 basic and $12.68 diluted income per common share, compared with $854 million ($11.39 basic and $11.03 diluted) in fiscal 1997. The filing describes these as the strongest financial results ever reported by Delta for a fiscal year.

  2. What is the outlook for fares and competition?

    Delta expects low-fare competition to continue in both domestic and international markets. If fare reductions are not offset by traffic growth or improved traffic mix, the filing states that operating results will be adversely affected. Domestic passenger mile yield rose 1%, while international yield fell 3%.

  3. How is Delta managing its fuel costs?

    Delta uses fuel swap and option contracts to manage price risk. At June 30, 1998, it had hedge agreements covering 2.1 billion gallons of projected fiscal 1999 fuel requirements. The filing estimates that a one-cent change in the average annual price per gallon would affect fuel expense by approximately $27 million.

  4. What are the main risks flagged in the filing?

    The filing cites a proposed DOT enforcement policy that could limit responses to new entrants at hub airports, pending pay-rate negotiations with the pilots' union for new aircraft types, the risk of Year 2000 system failures with estimated remediation costs of $160 million to $175 million, and discontinued code-sharing with United after the Delta pilot union withdrew its approval.

04—Continue

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