01—Abstract
Summary
Summary of the 10-K filed February 24, 2010. Cited figures are marked; the original filing is the authoritative source.
Delta Air Lines, Inc. reported a 2009 net loss of $1.2 billiona ($1,237 million, or $1.50 per diluted share) on operating revenue of $28.06 billion, compared with an operating expense of $28.39 billion.
Management attributes the weak results to a sharp decline in airline revenue during the global recession, with passenger revenue down 20% on a combined basis versus 2008, and to $1.4 billionb in fuel hedge losses. The results also include a $407 million charge for merger-related items with Northwest Airlines, an $321 million non-cash income tax benefit and an $83 million non-cash loss on debt extinguishment. Fuel expense declined 40% on a combined basis, which partly offset the revenue decline.
The 2009 results include Northwest for the full year, while 2008 included Northwest only from October 30, so the filing presents a combined 2008 comparison. On that basis, operating revenue fell 18% and capacity fell 6%. The company ended 2009 with $4.7 billionc in cash and short-term investments, $685 million in undrawn revolving credit facilities and $5.4 billion in unrestricted liquidity.
It completed $3.2 billiond of financing transactions during the year, and it expects approximately $2 billion in annual revenue and cost synergies from the Northwest merger by 2012. Total debt at par was $18.07 billion and the pension funding requirement for 2010 is estimated at about $720 million.
The filing also flags material risks, including fuel price volatility, labor representation issues tied to the merger, integration of Northwest operations, and pending antitrust litigation over the first-checked-bag fee. The company does not expect to pay dividends in the foreseeable future.
02—Key points
Key Highlights
- 2009 net loss of $1.2 billion ($1.50 per diluted share) on operating revenue of $28.06 billion, with $1.4 billion in fuel hedge losses.
- Operating revenue fell 18% on a combined basis versus 2008 as system capacity dropped 6% and passenger revenue fell 20%.
- Fuel cost per gallon declined 35% year over year on a combined basis, contributing $5.4 billion in lower fuel expense before mark-to-market adjustments.
- Liquidity of $5.4 billion at year-end 2009, including $4.7 billion in cash, cash equivalents and short-term investments and $685 million in undrawn revolving credit capacity.
- Targeting $2 billion in annual Northwest merger synergies by 2012, with more than $700 million achieved in 2009.
- Total debt at par of $18.07 billion, with $3.2 billion of new financings completed in 2009.
- Total goodwill of $9.79 billion and a $6.9 billion goodwill impairment charge recorded in 2008.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 24, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $28.06B$22.70B | +23.6% |
| Operating Expenses | $28.39B$31.01B | −8.5% |
| Operating Income | -$324.00M-$8.31B | +96.1% |
| Interest Expense | $908.00M$685.00M | +32.6% |
| Net Income | -$1.24B-$8.92B | +86.1% |
| EPS (Basic) | $-1.50$-19.08 | +92.1% |
| EPS (Diluted) | $-1.50$-19.08 | +92.1% |
| Shares Outstanding (Basic) | 827.00M468 | +176709301.7% |
| Shares Outstanding (Diluted) | 827.00M468 | +176709301.7% |
05—Questions
Frequently Asked Questions
Why did Delta report a net loss in 2009?
The filing attributes the loss to weak airline revenue during the global recession, with passenger revenue down sharply from 2008 on a combined basis, plus $1.4 billion in fuel hedge losses, a $407 million merger-related charge and an $83 million non-cash debt extinguishment loss, partly offset by lower fuel costs.
How much liquidity did Delta have at the end of 2009?
Delta reported $5.4 billion in unrestricted liquidity, consisting of cash, cash equivalents, short-term investments and undrawn revolving credit capacity. Cash, cash equivalents and short-term investments totaled $4.7 billion and undrawn revolving facilities totaled $685 million.
What synergies does Delta expect from the Northwest merger?
Delta expects approximately $2 billion in annual revenue and cost synergies by 2012. It achieved more than $700 million in merger synergy benefits in 2009 and targets an additional $600 million in 2010, and expects total cash integration costs of about $500 million over approximately three years.
What are the main risks to Delta's business described in the filing?
Key risks include the price and availability of aircraft fuel, weak demand from the economic recession, a $17.0 billion pension obligation against $7.6 billion of plan assets, collateral obligations on fuel hedges, substantial indebtedness with covenant restrictions, labor representation issues from the Northwest merger, and pending antitrust litigation over the first-checked-bag fee.
Does Delta pay dividends?
No. The filing states that Delta expects to retain future earnings to fund operations and that it does not anticipate paying dividends for the foreseeable future. Its credit facilities also restrict its ability to pay dividends or repurchase common stock.
06—Continue