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Delta Air Lines Annual Report, Year Ended Dec 31, 2002

Filing Date
Filed March 27, 2003
Period End
December 31, 2002
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 March 27, 2003. Cited figures are marked; the original filing is the authoritative source.

Delta Air Lines, Inc. reported a 2002 consolidated net loss of $1.3 billiona ($10.44 diluted loss per share), compared with a net loss of $1.2 billion ($9.99 per share) in 2001.

Operating revenues fell 4% to $13.3 billionb, while operating expenses decreased 6% to $14.6 billion, leaving an operating loss of $1.3 billion. Management said it does not expect significant revenue improvement in 2003 and expects a net loss for 2003, with the March 2003 quarter loss expected to exceed the March 2002 quarter loss. Shareowners' equity fell to $893 million from $3.8 billion, largely due to a $1.6 billion non-cash pension-related charge to equity, and the net debt-to-capital ratio rose to 94% from 80%.

Liquidity and credit conditions are a central concern. Delta borrowed $2.6 billionc in 2002, held $1.9 billion of cash at February 28, 2003, and carried negative working capital of $2.6 billion. Its senior unsecured long-term debt was rated Ba3 by Moody's and BB- by Standard & Poor's, with negative outlooks.

The filing notes approximately $700 milliond of current debt maturities in 2003, a $500 million secured credit facility expiring August 2003, and a $250 million receivables securitization expiring March 31, 2003, which Delta is seeking to renew or refinance. Management cautioned there is no assurance such financing will be available.

Cost and strategic initiatives include a target of reducing non-fuel unit costs by 15% by the end of 2005, up to 8,000 additional job reductions, deferral of 31 aircraft deliveries with no scheduled mainline deliveries in 2003 or 2004, and the planned April 2003 launch of the low-fare carrier Song. The marketing alliance with Continental and Northwest awaits DOT review and international partner consents, with implementation expected during 2003.

02—Key points

Key Highlights

  1. 2002 net loss of $1.3 billion ($10.44 diluted EPS), versus a $1.2 billion net loss ($9.99 per share) in 2001
  2. Operating revenues of $13.3 billion, down 4% from $13.9 billion in 2001; operating expenses of $14.6 billion, down 6%
  3. Shareowners' equity fell to $893 million from $3.8 billion, driven by a $1.6 billion non-cash pension charge to equity; net debt-to-capital rose to 94% from 80%
  4. Borrowed $2.6 billion in 2002; cash and equivalents of $1.9 billion at February 28, 2003; negative working capital of $2.6 billion at year end
  5. Senior unsecured debt rated Ba3 (Moody's) and BB- (S&P), both with negative outlooks; ratings have raised financing costs and limited unsecured debt issuance
  6. Cost reduction goal of 15% lower non-fuel unit costs by end of 2005, with up to 8,000 additional job reductions and 31 aircraft deliveries deferred
  7. Expects a net loss for 2003 and does not expect significant revenue improvement; 2003 pension, interest and fuel expenses expected to rise $600 million to $800 million

03—Questions

Frequently Asked Questions

  1. Will Delta return to profitability in 2003?

    No. The filing states that Delta expects to report a net loss for 2003 and that its March 2003 quarter net loss will be greater than the March 2002 quarter net loss. Management also does not expect significant improvement in revenues in 2003.

  2. Can Delta meet its near-term debt and financing needs?

    Management expects to meet obligations through cash, investments, internally generated funds and new secured financings, but says access to financing cannot be assured. About $700 million of 2003 debt maturities and capital lease obligations are due, including $301 million under a Reimbursement Agreement terminating June 8, 2003, and $250 million under a receivables securitization expiring March 31, 2003. Delta is seeking to renew or refinance these facilities.

  3. What is the status of the Continental and Northwest marketing alliance?

    The DOJ decided not to challenge the alliance in January 2003. The DOT was reviewing proposed conditions and was to decide within 30 days of March 3, 2003, and the carriers expect to complete DOT review and obtain international partner consents to begin implementation during 2003.

  4. What happened to Delta's equity and leverage in 2002?

    Shareowners' equity dropped to $893 million at December 31, 2002, from $3.8 billion a year earlier, mainly due to a $1.6 billion non-cash charge to equity related to pension plans and the 2002 net loss. The net debt-to-capital ratio, including implied debt from operating leases, increased to 94% from 80%.

  5. What is Delta's plan to lower costs?

    Delta targets reducing non-fuel unit costs by 15% by the end of 2005. Initiatives include up to 8,000 additional job reductions, about $350 million in annual savings from 2002 workforce programs, a cash balance pension plan expected to save about $600 million over five years, and deferral of 31 mainline aircraft with no scheduled mainline deliveries in 2003 or 2004.

04—Continue

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