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Delta Air Lines Annual Report, Year Ended Dec 31, 2007

Filing Date
Filed February 15, 2008
Period End
December 31, 2007
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 February 15, 2008. Cited figures are marked; the original filing is the authoritative source.

Delta Air Lines, Inc. filed its 2007 Form 10-K on February 15, 2008, the first annual report after emerging from Chapter 11 bankruptcy on April 30, 2007.

Because of fresh start reporting, the company presents a Successor period (eight months ended December 31, 2007) and a Predecessor period (four months ended April 30, 2007), and management discusses them on a combined basis. Combined 2007 results show net income of $1.6 billiona, including a $1.2 billion net gain from reorganization items, and operating income of $1.1 billion on operating revenue of $19.2 billion, up 9% from 2006. Passenger revenue rose 9% on a 3% rise in capacity, and fuel averaged $2.21 per gallon with 38% of consumption hedged.

The balance sheet at December 31, 2007 shows total assets of $32.4 billionb, including $12.1 billion of goodwill, and shareowners' equity of $10.1 billion, compared with a deficit of $13.6 billion a year earlier. Cash and cash equivalents were $2.6 billion, long-term debt and capital leases were $8.0 billion, and the company held $9.1 billion of federal and state net operating loss carryforwards. Operating cash flow was $1.4 billion for the combined year, after $875 million of bankruptcy-related payments to ALPA and the PBGC, and capital expenditures exceeded $1.0 billion.

Risks the filing emphasizes include high and volatile fuel costs, substantial indebtedness and exit financing covenants, labor issues (about 17%c of employees are unionized), and NOL usage limits tied to future ownership changes. The company also notes that the Air France joint venture begins in April 2008 and that its board has a special committee reviewing strategic options, including potential consolidation transactions.

02—Key points

Key Highlights

  1. Emerged from Chapter 11 on April 30, 2007; fresh start reporting makes Successor (May 1 to December 31, 2007) and Predecessor periods not directly comparable.
  2. Combined 2007 operating revenue of $19.2 billion, up 9% from $17.5 billion in 2006; operating income of $1.1 billion versus $58 million in 2006.
  3. Combined 2007 net income of $1.6 billion, including a $1.2 billion reorganization gain driven by a $2.1 billion emergence gain.
  4. Shareowners' equity of $10.1 billion at December 31, 2007, compared with a deficit of $13.6 billion at December 31, 2006; total assets of $32.4 billion.
  5. Goodwill of $12.1 billion recorded from fresh start accounting, which carries impairment risk if fuel costs, competition or market capitalization trends deteriorate.
  6. Aircraft fuel averaged $2.21 per gallon in 2007 (26% of operating expenses), with 38% of consumption hedged; fuel remains the largest cost item.
  7. Exit Facilities of up to $2.5 billion carry financial covenants, and the company had $9.1 billion of federal and state NOL carryforwards subject to ownership-change limits.

03—Questions

Frequently Asked Questions

  1. Why are the 2007 results presented as a combined Predecessor and Successor total?

    The company adopted fresh start reporting on April 30, 2007, making the post-emergence Successor entity non-comparable with the pre-emergence Predecessor. Management combined the four months ended April 30, 2007 (Predecessor) with the eight months ended December 31, 2007 (Successor) to provide a more meaningful view of 2007 performance against 2006.

  2. What drove the 2007 net income, and how much came from operations?

    Combined net income was $1.6 billion, which included a $1.2 billion net gain from reorganization items, primarily a $2.1 billion gain from emerging from bankruptcy. Operating income was $1.1 billion, a clear improvement from $58 million in 2006.

  3. What is the company's exposure to fuel prices?

    Aircraft fuel and related taxes were $4.7 billion in 2007, or 26% of operating expenses. The average price was $2.21 per gallon after $51 million of hedge gains, and 38% of 2007 consumption was hedged. The filing states that fuel purchase contracts do not provide material protection against price increases.

  4. What are the main financing and liquidity considerations?

    At December 31, 2007, cash and short-term investments totaled $2.8 billion and long-term debt and capital leases were $8.0 billion. The company has a $2.5 billion exit financing facility with financial covenants, including minimum unrestricted cash of $750 million for the first-lien facilities. Operating cash flow was $1.4 billion for the combined year after $875 million of bankruptcy-related payments.

  5. What strategic developments does the filing disclose?

    The company entered a transatlantic joint venture agreement with Air France, with implementation scheduled for April 2008. Its board established a special committee in late 2007 to review strategic options, including potential consolidation transactions. The filing also reports planned expansion, including Atlanta to Shanghai service effective March 30, 2008.

04—Continue

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