01—Abstract
Summary
Summary of the 10-K filed February 10, 2012. Cited figures are marked; the original filing is the authoritative source.
Delta Air Lines, Inc. reported net income of $854 milliona, or $1.01 per diluted share, for 2011, compared with $593 million in 2010.
Total operating revenue rose to $35.1 billionb from $31.8 billion, an increase of $3.4 billion or 11%, driven mainly by higher passenger revenue as fares rose in response to higher fuel prices. Total operating expense increased $3.6 billion, or 12%, to $33.1 billion, led by a $2.9 billion increase in fuel expense, which reached $11.8 billion including contract carriers and represented 36% of total operating expense. Hedging gains of $420 million reduced fuel expense; the average fuel price per gallon was $3.06, versus $2.33 in 2010.
The balance sheet remains constrained. Stockholders' equity was a deficit of $1.4 billionc at year-end 2011, compared with equity of $897 million a year earlier. Total debt and capital leases fell by $1.5 billion to $13.8 billion, and the company ended the year with $5.4 billion of unrestricted liquidity.
Pension and postretirement liabilities on the balance sheet were $14.2 billiond, and the defined benefit plans carried an unfunded obligation of about $11.5 billion, with a funding estimate of roughly $700 million for 2012. The company held a full valuation allowance of $10.7 billion against deferred tax assets and reported $16.8 billion of U.S. federal pretax net operating loss carryforwards.
Management highlighted network and fleet initiatives, including a new LaGuardia hub built on a December 2011 slot exchange with US Airways, a commitment to purchase 100 Boeing 737-900ER aircraft with deliveries from 2013 through 2018, and a $1.2 billion JFK redevelopment project. The filing also disclosed pending litigation, including First Bag Fee antitrust claims, an EU Regulation 261 class action, and a Canadian passenger surcharge antitrust case.
02—Key points
Key Highlights
- Net income of $854 million ($1.01 per diluted share) in 2011, up $261 million from $593 million in 2010.
- Operating revenue rose 11% to $35.1 billion, led by passenger mile yield gains from fare increases tied to higher fuel prices.
- Fuel expense rose $2.9 billion to $11.8 billion, representing 36% of total operating expense; average price per gallon was $3.06 versus $2.33.
- Fuel hedge gains of $420 million reduced 2011 fuel expense.
- Total debt and capital leases were reduced by $1.5 billion to $13.8 billion; unrestricted liquidity was $5.4 billion at year-end.
- Stockholders' deficit of $1.4 billion at December 31, 2011, versus equity of $897 million at year-end 2010, with a $10.7 billion valuation allowance against deferred tax assets.
- Agreement to buy 100 Boeing 737-900ER aircraft (deliveries 2013-2018) and a new LaGuardia hub following the December 2011 US Airways slot transaction.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 10, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $35.12B$31.75B | +10.6% |
| Operating Expenses | $33.14B$29.54B | +12.2% |
| Operating Income | $1.98B$2.22B | −10.9% |
| Net Income | $854.00M$593.00M | +44.0% |
| EPS (Basic) | $1.02$0.71 | +43.7% |
| EPS (Diluted) | $1.01$0.70 | +44.3% |
| Shares Outstanding (Basic) | 838.00M834.00M | +0.5% |
| Shares Outstanding (Diluted) | 844.00M843.00M | +0.1% |
05—Questions
Frequently Asked Questions
Why did Delta's operating income fall in 2011 even though revenue grew?
Operating income was $1.975 billion in 2011, down from $2.217 billion in 2010, because total operating expense rose $3.6 billion (12%) while revenue rose $3.4 billion (11%). The main driver was a $2.9 billion increase in fuel expense, which the filing attributes to higher unhedged fuel prices, partly offset by hedge gains.
How much debt does Delta carry, and how is liquidity positioned?
Total debt and capital leases, including current maturities, were $13.8 billion at December 31, 2011, a $1.5 billion reduction from 2010. Unrestricted liquidity was $5.4 billion, consisting of $3.6 billion in cash and short-term investments and $1.8 billion in undrawn revolving credit facilities. The company stated it was in compliance with all financing covenants at year-end.
Will Delta pay cash income taxes soon?
The filing states that Delta believes it will not pay any cash federal income taxes during the next several years, given $16.8 billion of U.S. federal pretax net operating loss carryforwards that do not begin to expire until 2022. The company carries a full valuation allowance of $10.7 billion against its net deferred tax assets.
What pension obligations could affect future cash needs?
Delta's defined benefit pension plans had an estimated benefit obligation of about $19.3 billion against plan assets of about $7.8 billion at year-end 2011. The company estimated 2012 funding of approximately $700 million. Sensitivity disclosures show that a 0.50% decrease in the discount rate would increase the accrued pension liability by about $1.2 billion.
What fleet and network changes did Delta announce?
Delta agreed with Boeing to purchase 100 B-737-900ER aircraft with deliveries from 2013 through 2018, and it plans to bring 30 to 40 previously owned MD-90 aircraft into service over two to three years. In New York, the December 2011 US Airways transaction gave Delta 132 LaGuardia slot pairs to support a new domestic hub, and the company is spending about $1.2 billion on a JFK redevelopment project completed in stages over five years.
06—Continue