Delta Air Lines annual report 1967

Del,a Air Lines, Inc. ^967 Annual Report
A memorial...to C. E. Woolman
Employees of Delta Air Lines gave their time and skills
to completely recondition this 1925 Huff-Daland duster, which
was then presented to the Smithsonian Institution as a memorial
to C. E. Woolman, founder of Delta Air Lines, Chairman of the
Board and Chief Executive Officer at the time he passed
away last September.
Delta Air Lines, Inc. 1967 Annual Report
HIGHLIGHTS OF THE YEAR
A comparative summary of the major yardsticks for evaluation of
operations for years ended June 30 is shown below. Dollars are ex
pressed in thousands except per share figures.
1967 1966
Per Cent
Change
Operating Revenues $397,836 $318,930 +25%
Operating Expenses $308,737 $253,092 +22
Net Income $ 49,190 $ 34,554 +42
Shares Outstanding at year end. . .
6,375,000 6,375,000 --
Earnings Per Share $7.72 $5.42 +42
Total Stockholder Equity $166,490 $123,675 +35
Stockholder Equity Per Share $26.12 $19.40 +35
Revenue Passengers Carried 9,422,422 7,556,422 +25
Available Seat Miles (000) 9,687,337 8,196,349 +18
Revenue Passenger Miles (000). . . .
6,415,467 4,997,958 +28
Passenger Load Factor 66.23% 60.98% + 9
1
Report to the Stockholders
C. H. Dolson, President
Delta Air Lines, Inc.
Fiscal 1967 was an excellent year for Delta--an excellence measured tangibly
by the new highs in sales and in earnings.
In summary, Delta carried a record 9.4 million passengers over a record
6.4 billion revenue passenger miles. Net earnings were a record $49,190,000
or $7.72 per share including a $2.4 million gain on the disposition of flight
equipment.
These records were achieved despite costly and repeated delays in new
aircraft deliveries. Three 195-passenger Super DC-8's, originally ordered to
service Delta's peak 1966-67 winter traffic to Florida and the Caribbean,
were delivered after the peak had ended. Delayed deliveries of the Super
DC-9's required a continuation of the more costly piston services and a re
lated delay in the stimulating effect of new jet service to many communities.
For the second half of the fiscal year, an equivalent of six jets were not avail
able for use due to the cumulative delivery delays. The impact of these de
lays was reflected in less than planned schedule frequencies and a slower
expansion of jet services to each of the 61 communities Delta is privileged
to serve.
The losses due to delivery delays were partially offset by the extraor
dinary income resulting from the strike last year against five domestic
trunklines. Statistically, the strike effect is estimated at 271 million added
revenue passenger miles, $17 million added revenues, $2.8 million added
expenses, and an added $7.1 million or $1.11 per share in after-tax earnings.
This estimate excludes probable additional benefits carried over to the post
strike period. The demands of this difficult period required a maximum effort
from our entire personnel. It is a tribute to their loyal support that thousands
of air travelers completed their journeys. In recognition of this loyalty and
support, the company paid to all employees a special bonus in the form of
savings bonds valued at more than $1,250,000.
Delay and strike--loss and gain--now mark the history of 1967. Yet
neither deserve major prominence, for the year was a fine one in spite of the
delays and would have been so without the strike.
Far more significant for the future were the long range equipment plans
completed during the past year. Each year, these plans must be expanded to
cover longer time periods, due to the advent of the second generation jet
equipment and the need to carefully plan the source of funds required to
purchase planes costing $20 million to $40 million each. The major commit
ment of the past year was an order for three Boeing 747 jets and an option
for two more. Each of these jets has a design capacity of 490 passengers;
however, Delta will ensure maximum comfort by limiting capacity to 374
passengers. The 747 fleet will enter service along Delta's system during the
fall of 1970.
Well before that time, Delta will take delivery of its present orders for
Super DC-8's and Super DC-9's. Including the twelve jets received during
fiscal 1967 and all current options, the Delta passenger fleet of 1972 will
total 133 jets capable of producing more than 22 billion seat miles annually
or well over double fiscal 1967 production. Delta's total jet program, as
currently planned through 1972, involves an outlay of more than a half
billion dollars. The capital required will be provided from internally gen
erated funds and a $175 million bank loan now being negotiated.
3
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'^\V V
Turning to the corporate organization, we welcome two new members
to the Board of Directors. B. W. Biedenharn is a community leader in his
home of Monroe, Louisiana, and a corporate head or director of various
companies in the South and Southwest. W. T. Beebe, Vice President-Per
sonnel for Delta, is now completing his twentieth year as an airline executive.
At a special meeting of stockholders on June 28, 1967, approval was
voted to change the state of incorporation from Louisiana to Delaware.
This is a technical change only, for efficiency in the legal and tax structures
of the company and in no way involved any move of personnel or property.
You will be asked to vote at the regular annual meeting of stockholders,
scheduled for October 26, 1967, on a stock split proposed by the directors
at their meeting of July 27, 1967. The proposal is for an increase in total
stock authorization from 8 million to 25 million shares and a 3-for-l stock
split. If the proposal is approved, stockholders will receive two additional
shares for each share held. The issue date proposed is December 1,1967 for
stockholders of record on November 6, 1967.
Delta is progressing with three broad programs to maintain and improve
its competitive position. The long range flight equipment program, men
tioned briefly above and described in more detail in a following section, will
ensure the finest in jet service and comfort to those we serve.
A second program is an expansion of Delta's routes, and services along
these routes, to improve our marketing position and ability to serve. A fol
lowing section provides highlights of current major proceedings.
Probably most important is a continuous emphasis upon the develop
ment of future managerial strength and a flexibility of organization necessary
to meet the demands of growth and technical change. This program is based
on a long standing policy of development and promotion from within. One
of the notable examples was the recent establishment of a long range plan
ning group reporting to the President and responsible for coordinating all
plans developed by the various operating divisions. Delta's success has been
built upon the competence and loyalty of all our employees. This strength
provides a solid foundation for the supersonic age just ahead.
September 18, 1967
President and division heads
of Delta:
Seated:
T. M. Miller
Executive Vice President-
Traffic & Sales
C. H. Dolson
President
Robert Oppenlander
Vice President-
Finance and Treasurer
Standing:
W. T. Beebe
Vice President--Personnel
R. S. Maurer
Vice President-
General Counsel and Secretary
David C. Garrett, Jr.
Vice President--Operations
C. H. Dolson
President
5
Revenues --
Operating revenues of $397,836,000 were an all-time high, and a
25% increase over the previous highs set in the preceding fiscal year.
Delta carried 9,422,422 revenue passengers on its domestic and inter
national routes. This total, too, was an all-time record and a gain of 25%
over passenger totals for 1966... a jump past both the eight and nine-million
marks for the first time. Revenue passenger miles increased 28% to a new
record of 6,415,467,000.
The nine million passengers, and their joint travel of over six billion
revenue passenger miles, produced $362,368,000 in revenue, a 24% gain
over 1966.
The passenger revenue growth was diluted by a 3% decrease in pas
senger mile yield, due to the continuing effect of promotional and other
discounted fares. It is not at all certain that the discounted fares produced a
commensurate increase in Delta revenues; but, the benefits of air travel have
been brought to an ever-increasing market, and young people and service
men have been benefitted particularly.
It is estimated that, exclusive of pre-strike and post-strike effects, the
43-day stoppage of five major trunk lines in July and August added 271
million revenue passenger miles and $17 million in revenues above Delta's
forecast for the same period.
Operating revenues from other sources--mainly freight, express, and
mail --totaled $35,468,000. Freight and express ton miles increased 22% over
1966, reflecting the additional capacity provided by the L-100 airfreighters.
Mail ton miles were up sharply by 70%; and mail revenue reached
$11,000,000 for the year.
Expenses --
Operating expenses were up, with the expanded operations, to a
new high of $308,737,000, or an increase of 22% over 1966. The increase
includes an estimated $2.8 million directly attributable to the strike.
Available ton mile costs increased 2% for the year, reversing a five year
downward trend from the highs of 1961. Revenue ton mile costs declined
6% reflecting the unusually high load factors achieved in 1967. The major
causes for the overall leveling of unit costs are the inefficiencies and expen
sive adjustments resulting from delayed deliveries of new jet aircraft. As
more efficient stretch versions of DC-8's and DC-9's are introduced and the
retirement of piston aircraft is completed, unit costs should resume a down
ward trend from present levels.
Earnings and Dividends --The year showed earnings of $49,190,000, or $7.72
per share and was the twentieth consecutive year to show a Delta profit.
The comparative figure for 1966 was $34,554,000.
Earnings from operations were $46.8 million, equal to $7.34 per
share. Net gain on the disposition of aircraft, and the insurance settle
ment for a plane lost in training, was $2.4 million or 38 cents per share.
In 1966, earnings from operations were $34.0 million or $5.33 per
share; net gain on the disposition of aircraft was $562,000 or 9 cents per
share, for combined earnings of $5.42 per share.
The quarterly dividend rate during fiscal 1967 was 25<f per share; the
$1 total for the year represented a payment of $6,375,000 in dividends.
Delta DC-9's and Super DC-9's are
fast replacing piston-type
planes over the Delta system.
7
Shortly after the end of the fiscal year, the directors voted an increase in the
cash dividend to 30<f per share, for the September 1,1967 quarterly payment.
Flight Equipment --
During fiscal 1967 Delta added to its fleet one standard
DC-8, two Super DC-8's, six standard DC-9's, three Super DC-9's and three
Lockheed L-100 cargo planes; the 15 planes cost $62 million including ad
vance payments.
At year-end Delta had on order, but not delivered, 43 Super DC-9's,
ten Super DC-8's, three Boeing 747's, and one used standard DC-8 under a
lease-purchase arrangement.
Aircraft on option at the year-end were 12 Super DC-9's, six Super
DC-8's, and two Boeing 747's.
Soon after the end of the fiscal year, the options for five of the 12 Super
DC-9's were exercised and a standard DC-9 was added under a short-term
lease agreement.
The present jet fleet will more than double by 1972 when a total of 136
aircraft will be in service assuming all options are exercised. The following
table shows the pattern of deliveries including options:
Fleet Fleet
Total DELIVERIES IN FISCAL YEARS Total
Types of Planes 16/30/67 1968 1969 1970 1971 1972 6/30/72
DC-8 135 Passengers 20 1* 21
DC-8 195 Passengers 2 3 5 g** 18
CV-880 96 Passengers 16 16
DC-9 70 Passengers 14 1* 15
DC-9 89 Passengers 3 19 27 9 58
Boeing 747 374 Passengers --
3 2 5
L-100 Air-Freighter 3 3
Total 58 24 32 17 3 2 136
*Lease and/or purchase.
**One to six of these may be all-cargo DC-8-F.
The provisions of the Federal tax laws which suspended the 7% invest
ment tax credit on October 9,1966, and reinstated it on March 9,1967, make
the credit applicable to all new equipment ordered by Delta during the fiscal
year. This credit is being amortized to income over the life of the assets to
which it applies. In fiscal 1967 $2.2 million of this credit was applied to in
come and the amount still unamortized totaled $12,904,000 at year-end. The
change in the law permitting the investment tax credit to be applied to 50%
of taxes instead of 25% has no effect on Delta's position.
During fiscal 1967 the Federal government through the Federal Aviation
Administration awarded to Boeing and General Electric a contract to pro
duce two prototype supersonic transports. Delta holds three delivery posi
tions for these aircraft and has made an advance deposit of $300,000. An
additional deposit of $300,000 will be made in November, 1967, to continue
holding these positions until Delta can evaluate the prototype aircraft. In
addition, the FAA has requested all carriers holding delivery positions to
advance a million dollars per position as risk money to supplement the
manufacturers' and Federal funds during prototype development. This
Delta cabin service
is a strong selling feature
on all Deltaliner routes.
8
Improved flight line equipment
and methods provide more
efficient servicing of Delta's
expanding fleet.
money will be recovered with interest if sufficient aircraft are sold to pro
vide royalties to the government. Delta believes it must continue participa
tion in this program to maintain its competitive position and has therefore
contracted to advance the requested $3 million in 1968.
As DC-9's have been added to the Delta fleet, DC-7's have been phased
out and sold. The fourteen remaining at year-end will be phased out by
February, 1968. Had DC-9 delivery delays not occurred, all DC-7's would
have been displaced by this time and further significant economies of opera
tion achieved. The 11 DC-6's and 17 CV-440's still in operation are pro
grammed for replacement by early 1969. Piston aircraft will produce only
6.2% of total seat miles in fiscal 1968 and 1.4% in 1969.
Capitalization and Financing--At the end of fiscal 1966 a Revolving Credit
Agreement for $45 million had been arranged with 23 banks to cover the
period through 1970, during which period a quarter of a billion dollars of
flight equipment had been ordered or optioned for delivery. The total
amount in the credit was borrowed as of June 30, 1966.
During the past fiscal year further orders and options for flight equip
ment increased Delta's probable future capital outlays to a half billion
dollars through 1972. It is estimated that internal cash generation from
earnings, depreciation, and deferred taxes will still provide a substantial
portion of this requirement. The balance will be supplied from a bank credit
now being negotiated which will repay and terminate the 1966 Revolving
Credit of $45 million and provide up to $175 million on a revolving basis
through calendar 1969. At that point the outstanding balance will be con
verted to a term loan.
At the time of peak borrowing, at the end of 1969, if the entire $175
million is outstanding, it is estimated that Delta's total long-term debt of
$205 million will be well within acceptable debt-equity ratios for this in
dustry. On June 30, Delta's long-term debt was only 52% of its equity, one
of the lowest ratios in the industry, while many carriers had reached the
150% to 200% range, including convertible subordinated debentures.
Stockholder equity on June 30,1967 had reached $166,490,000 or $26.12
per share, an increase of 35% over June 30, 1966.
Facilities--A comprehensive program is under way to improve Delta's
ground facilities. It is a sustained program, for new needs appear regularly.
Most of the major construction is in the Atlanta area, including:
A $7 million project for Delta gates at the Atlanta terminal. New ultra
modern passenger gates are due for completion in mid-1968; the project will
add 14 jetways for fast and convenient handling of passengers.
A new Computer center. It will have 51,000 square feet of space, cost
$1,375,000 and will permit consolidation of all system-wide data processing
operations, including the Deltamatic Reservations System, Material Inven
tory Control, Revenue Accounting and Cost Distribution. The building is
50% larger than Delta's present facilities for computers.
Training Center, for stewardesses, pilots and technical personnel. Work
is well under way, on a location near the Atlanta Airport, with completion
due in the summer of 1968. The 53,000 square foot facility is designed to
11
house classrooms, conference rooms, technical libraries and will also pro
vide a residence for stewardess trainees.
Maintenance and Overhaul base expansion. This project, needed for
the expanding jet fleet, will add 90% to the size of the general maintenance
and overhaul base in Atlanta. It is also due for completion in mid-1968.
In other cities, Delta is sharing in expansion and improvement of air
port facilities. This, too, is a continuing program as traffic grows. Work has
already started on facilities to handle the Boeing 747's scheduled for de
livery in late 1970.
Reservations offices are also being enlarged in many cities, and branch
ticket offices opened to handle additional traffic.
Passenger Fares --
Revenue per passenger mile continued its downward trend
another 3% from 5.83<f to 5.65<? as the full impact was felt of excursion and
youth fares, introduced late in fiscal 1966. In the 1966 report, the month of
June, a month of heavy student and vacation travel, was used to indicate
the trend in discount fares from 19.2% of total passenger miles in 1964, to
36.6% in June, 1966. In June, 1967 this percentage had increased to 45.5%; in
fact it averaged 35%, almost the June, 1966 level, for the entire fiscal year.
The strike period in July and August of 1966 prevented an accurate
assessment of the effect of youth and excursion fares on yields during this
peak vacation period. The strike presumably camouflaged the full erosion
of yield because the summer period in 1967 is experiencing a further sub
stantial decline from strike levels. This is even true to the extent that some
marketing analysts are beginning to question whether the promotional fares
are developing sufficient new traffic to offset declines in yield.
Present youth and excursion fares were originally scheduled to expire
in December, 1966 and were to be re-evaluated as a part of a comprehensive
fare study by the Civil Aeronautics Board. Because of the strike and other
delays, these fares have now been extended, in the case of Delta and most
Florida carriers, to April 27, 1968. The continued erosion of yield and up
ward pressure on carrier costs which have taken place in the past year will,
hopefully, be carefully evaluated before these fares are continued in their
present form or before any further reductions in jet fares are suggested.
The yield of 5.65<? experienced in fiscal 1967 represented a 15% decrease
from its 1961 jet age peak or more than a $63 million fare reduction for
passengers who flew on Delta in fiscal 1967.
Personnel --Larger fleets and new flights require more employees to keep all
services up to Delta standards; there were 1,858 additions to the payroll
during the year to bring the year-end total to 14,829 employees.
Employee salaries and related costs totaled $143,698,000 for the year,
up 27% from the previous year's $112,844,000.
An interesting note to the tempo of the times: Delta now permits stew
ardesses to work after marriage. The airline now employs an average of 12
stewardesses for every plane in the fleet--the Super DC-8's require six stew
ardesses per flight segment--and the new rule enables Delta to keep these
highly trained young women longer at their jobs. The rule is becoming gen
eral in the industry.
Speed of ground handling, as
well as total lift of the L-100
Hercules is a key to
Delta's increased cargo sales
during the past year.
12
Air Celebrities: Human-sized
"Early Bird" and "Owly Bird"
originally starred in Delta TV
commercials/ now make frequent
guest appearances on television
and at special public events.
Services--The year included these highlights:
Introduction of the Super DC-8, the world's biggest Jetliner. Its first use
was on the route between New York, Atlanta, Dallas and California; Delta
was the first airline to place this new jet in regularly scheduled transconti
nental service.
Introduction of an all-cargo fleet of Lockheed L-100 Hercules freighters.
Delta was the first to operate these aircraft in scheduled domestic service.
Extension of DC-9 service to six new cities and introduction of Super
DC-9 service on many route segments.
Expansion of night coach flights --"Early Bird" and "Owly Bird" ser
vices--for greater utilization of equipment in off-hours.
Delivery of the first Super DC-8's had been scheduled for the 1966-67
Florida winter season. Chicago-Miami traffic represents a key market for
Delta, but delayed deliveries made it more practical to inaugurate service
with these planes on the Southern Transcontinental route. This equipment
will provide additional services to Florida in the winter season of 1967-68.
The all-cargo service with Lockheed L-100 freighters was quickly ex
tended to 11 cities. There is now a transcontinental service between New
York and Los Angeles-San Francisco, via Charlotte, Atlanta, New Orleans
and Dallas. North-south runs between Miami and Chicago include Mem
phis, Atlanta and Orlando, with flights timed for fast transfer at Atlanta.
The L-100 has a cargo hold almost identical to the size of a standard
rail freight car. Its key advantage is speed of cargo handling. It loads at
waist-high level, needs no high lift fork trucks and has conveyor rollers for
fast transfer of pallets from trailers with similar rollers.
Delivery of additional DC-9's and Super DC-9's permitted extension of
jet service to six additional Delta cities for the first time. But more impor
tant, they permitted increased schedules for a strong traffic demand. Mem
phis, for example, now has 23 DC-9 flights direct to 14 cities, plus its four-
engined jet flights and piston service. Shreveport now has 16 DC-9 flights
direct to 22 cities. The DC-9's are far more than just replacements for piston
plane connecting flights. They have the speed, and short ground time, to
make intermediate cities into terminals with a direct flight pattern all their
own. The DC-9's show their value by having the highest load factor of any
type of Delta passenger plane.
In all, Delta now has jet service to 44 of the 60 airports currently served.
Work of all the jets is shown in revenue passenger mile totals: the piston
miles were down 17% but the system total was up 28%, due to the 38% in
crease in jet production.
The "Early Bird" promotion, concentrated in Atlanta and described in
the 1966 report, has been expanded with an "Owly Bird" counterpart. These
flights are generally in the 11:45 p.m. and 6:30 a.m. time areas, at night
tourist rates. There are now "Early Bird" flights to 17 cities; "Owly Bird"
flights to 24 cities.
Work continues on improved ticketing and check-in services for the
public. Delta stresses tickets by mail; payment can be made by return check
or credit card number. With curbside check-in at most airports, the pas
senger who has a valid ticket can by-pass the counter and go directly from
car to loading gate for the flight.
15
1929--Travelaire 6000: Six passengers, 90 miles per hour. 1970 --Boeing 747: 374 passengers, 625 miles per hour. 1974--Boeing SST: 350 passengers, 1,800 miles per hour.
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Regulatory Matters --
Transpacific Route Investigation: The CAB instituted this investi
gation to examine the pattern of operations by United States air carriers throughout the
Pacific area. Proposals in the proceeding involve air service between the United States
mainland, on the one hand, and Hawaii and other areas of the North and South Pacific.
Delta applications request operating authority between the co-terminal points of At
lanta, Dallas/Fort Worth, Houston, New Orleans, Miami/Fort Lauderdale, San Fran
cisco/Oakland, Los Angeles/Long Beach and San Diego, and the terminal point Manila,
via Hawaii, Tokyo, Osaka, Seoul and Hong Kong. Briefs to the Examiner were filed in
September, 1967, and final decision is about a year away.
United States-Caribbean-South America Investigation: This extremely complex
investigation involves air service needs between the United States, the Caribbean and
South America. Delta seeks improvement of its Caribbean route authority through the
use of Miami as a co-terminal along with New Orleans and Houston for its foreign and
overseas operations, and by adding Nassau. Delta is also seeking authority to operate
non-stop service between West Coast points and cities served by Delta in the Caribbean
area at such time as increasing traffic demands would permit such operations on an
economically feasible basis. Hearings have been held and the matter now stands sub
mitted to a CAB Examiner. Decision is anticipated during 1968.
16 17
Terminal expansion at Atlanta
airport will provide a total of
24 gateways needed to handle
the heaviest traffic on
Delta's entire system.
Reopened Pacific Northwest-Southwest Service Investigation: This
proceeding, involving the need for single-carrier service between the Pacific
Northwest and the Southwest areas of the country was decided in part by
award of long-haul routes to other applicants, but has been reopened to
determine the need for service in the intermediate areas. Delta is vigorously
prosecuting that portion of its application which relates to services between
the Company's present system (and, in particular, New Orleans, Houston,
and Dallas/Fort Worth) and the cities of San Antonio, Oklahoma City,
Denver and Salt Lake City. Exhibits on this phase of the investigation were
filed in August, 1967, and hearings are now in progress.
Gulf States-Midwest Points Service Investigation: The CAB instituted
this investigation to determine whether new and revised route authority is
required in the Dallas-Detroit, Dallas-Kansas City, Dallas-St. Louis, Chi-
cago-San Antonio, Detroit-San Antonio, Chicago-Nashville, Chicago-New
Orleans, Chicago-Memphis, St. Louis-Houston, and New Orleans-Memphis
markets. Delta is seeking new authority in the first six markets listed, and is
seeking the addition of new intermediate cities in some of the other four
markets. In the latter respect, service can be proposed to Cleveland, Co
lumbus, Dayton, Indianapolis, Louisville, Huntsville and other points under
the issues of this proceeding. Applications by other carriers for unnecessary
trunkline duplication of the existing services of Delta and local service
carriers in certain of these markets will be resisted. Direct Exhibits were
filed September 5, 1967, and decision is over a year away.
New York-Florida Renewal Case: During 1967 the CAB denied Delta's
application for direct authority between Boston and New York, in the
northeast, and Tampa and Miami in Florida, via various routings and in
termediate points, and its request to eliminate a restriction which prohibits
the carriage of traffic on through-plane service between the northeast and
Florida via Atlanta.
Twin Cities-California Service Investigation: In this proceeding hear
ings have recently been completed before a Hearing Examiner on issues
involving non-stop service between Minneapolis/St. Paul, on the one hand,
and Los Angeles and San Francisco, on the other. A brief summarizing the
Company's application was recently filed with the Hearing Examiner. It is
possible that final decision in this proceeding will be arrived at during the
calendar year 1968.
Other Matters: During the year, Delta also has participated in numerous
local service proceedings, primarily for the purpose of protecting its traffic
from erosion through the grant of uneconomic operating authority to local
service carriers.
Also in 1967 the CAB indicated its intention to move forward with
numerous investigations which will involve your company. The most promi
nent of these are the Bermuda Service Investigation, the Southern Tier
Competitive Nonstop Investigation, Omaha Service Investigation, Dallas/
Fort Worth-Phoenix Nonstop Case, and the Albuquerque Service Case.
Thus during 1967 a large number of new proceedings were inaugurated
by the Civil Aeronautics Board, which hold promise both for expansion of
Delta's route system and for CAB consideration of additional operating
authorizations in areas already served by the Company.
19
DELTA AIR LINES, INC.
BALANCE SHEETS June 30,1967 and 1966
ASSETS 1967
CURRENT ASSETS:
Cash $ 7,888,000
Short-term cash investments, at cost 32,830,000
Accounts receivable 24,920,000
Maintenance and operating supplies, at average cost 3,435,000
Prepaid expenses, etc 1,958,000
Total current assets 71,031,000
PROPERTY AND EQUIPMENT:
Flight
Equipment
Other
Property and
Equipment
Cost--
1967 $383,268,000 $50,178,000 433,446,000
1966 317,109,000 44,042,000
Reserves for depreciation--
1967 156,529,000 20,306,000 176,835,000
1966 140,469,000 16,506,000
256,611,000
Advance payments for new flight equipment 41,780,000
298,391,000
$369,422,000
1966
$ 23,072,000
37,341,000
23,154,000
2,556,000
1,527,000
87,650,000
361,151,000
156,975,000
204,176,000
22,524,000
226,700,000
$314,350,000
20
DELTA AIR LINES, INC
LIABILITIES AND STOCKHOLDER EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt
Accounts payable and accrued liabilities
Tickets outstanding subject to refund or use
Air travel plan deposits
Accrued income taxes
Total current liabilities
LONG-TERM DEBT (Note 1)
DEFERRED CREDITS:
Deferred Federal income taxes
Unamortized investment credit (Note 3)
STOCKHOLDER EQUITY:
Common stock, par value $3.00 per share (Note 5) --
Authorized 8,000,000 shares
Outstanding 6,375,000 shares
Capital surplus
Retained earnings (of which $47,787,000 is restricted as
to the payment of cash dividends under terms of
credit agreements)
PURCHASE COMMITMENTS (Note 2)
The accompanying notes are an integral part of these balance sheets.
1967 1966
$ 3,448,000
25,647,000
6,554,000
1,670,000
13,046,000
50,365,000
$ 1,891,000
26,413,000
5,108,000
1,683,000
12,685,000
47,780,000
86,296,000 88,352,000
53,367,000
12,904,000
66,271,000
44,891,000
9,652,000
54,543,000
19,125,000
22,450,000
19,125,000
22,450,000
124,915,000
166,490,000
82,100,000
123,675,000
$369,422,000 $314,350,000
21
DELTA AIR LINES, INC.
STATEMENTS OF INCOME for the years ended June 30,1967 and 1966
1967
OPERATING REVENUES:
Passenger $362,368,000
Cargo 31,638,000
Other 3,830,000
Total operating revenues 397,836,000
OPERATING EXPENSES:
Flying operations 81,175,000
Maintenance 60,781,000
Aircraft and traffic servicing 57,099,000
Promotion and sales 39,067,000
Depreciation 30,847,000
Passenger service 31,326,000
General and administrative 8,442,000
Total operating expenses 308,737,000
Income from operations before income taxes 89,099,000
OTHER EXPENSE (INCOME):
Interest expense (less capitalized interest on advances for
flight equipment--$1,712,000 in 1967 and $1,288,000
in 1966) 3,453,000
Other--net (2,812,000)
Total other expense 641,000
INCOME BEFORE INCOME TAXES 88,458,000
PROVISION FOR INCOME TAXES 41,670,000
NET INCOME, before gain on disposition of aircraft 46,788,000
GAIN ON DISPOSITION OF AIRCRAFT, less taxes 2,402,000
NET INCOME $ 49,190,000
PER COMMON SHARE:
Before gain on disposition of aircraft $7.34
Gain on disposition of aircraft, less taxes ,38
Net income $7.72
The accompanying notes are an integral part of these statements.
1966
$291,350,000
24,039,000
3,541,000
318,930,000
67,093,000
53,626,000
43,563,000
30,286,000
26,280,000
24,569,000
7,675,000
253,092,000
65,838,000
2,435,000
(759,000)
1,676,000
64,162,000
30,170,000
33,992,000
562,000
$ 34,554,000
$5.33
.09
$5.42
22
DELTA AIR LINES, INC
STATEMENTS OF RETAINED EARNINGS for the years ended June 30,1967 and 1966
BALANCE AT BEGINNING OF YEAR
Net income
Deduct:
Cash dividends
Transfer to common stock in connection with a 2-for-l
stock split on December 13, 1965
BALANCE AT END OF YEAR
1967 1966
$ 82,100,000 $ 63,165,000
49,190,000 34,554,000
131,290,000 97,719,000
6,375,000 6,056,000
9,563,000
$124,915,000 $ 82,100,000
ears ended June 30,1967 and 1966
1967 1966
$ 49,190,000 $ 34,554,000
30,847,000 26,280,000
8,476,000 4,166,000
3,252,000 2,826,000
2,989,000 1,108,000
94,754,000 68,934,000
1,482,000 1,269,000
--
45,000,000
96,236,000 115,203,000
98,901,000 71,677,000
1,641,000 1,404,000
4,985,000 5,143,000
105,527,000 78,224,000
3,538,000 9,366,000
6,375,000 6,056,000
115,440,000 93,646,000
$ (19,204,000) $ 21,557,000
$ 20,666,000 $ 39,870,000
FUNDS PROVIDED BY:
Net income
Add non-cash expenses--
Depreciation
Deferred Federal income taxes
Investment credit--net
Other
Total from operations
Financing under--
Installment purchase agreements
Bank credit agreement
FUNDS USED FOR:
Flight equipment additions, including advances
Deltamatic Reservations System
Other property and equipment additions
Reduction of long-term debt
Cash dividends
The accompanying notes are an integral part of these statements.
23
DELTA AIR LINES, INC.
NOTES TO FINANCIAL STATEMENTS June 30,1967
1. LONG-TERM DEBT:
The Company's long-term debt of $89.7 million (in
cluding current maturities) consists of the following:
(a) $45 million due banks under a revolving credit
agreement terminating during 1970. Interest on
outstanding borrowings during the revolving
credit period is at the prime rate through June 30,
1967, and xk% above the prime rate thereafter,
(b) $35 million due insurance companies under 6%
unsecured notes repayable in installments from
April 1968 to October 1974 ($1.25 million pay
able in fiscal 1968), and
(c) $9.7 million due the manufacturer of the Delta-
matic Reservations System repayable in quar
terly installments (including 472% interest) of
$646,000.
2. FLIGHT EQUIPMENT PURCHASE
COMMITMENTS:
The Company has outstanding purchase commit
ments for the acquisition of ten Douglas DC-8 fan-
jet aircraft, forty-eight Douglas DC-9 twin-jet air
craft and three Boeing 747 fanjet aircraft which will
require the expenditure of approximately $297
million subsequent to June 30, 1967.
3. INVESTMENT CREDIT:
The investment credit, all of which has been utilized
to reduce the Company's Federal income taxes pay
able, is being amortized to income over the life of
the related properties. Such amortization was $2.2
million in 1967 and $1.6 million in 1966.
4. PENSION PLANS:
The Company has pension plans covering substan
tially all of its employees. Effective August 1966, all
pension plans were made non contributory. The
total pension expense amounted to $7.8 million in
1967 and $5.6 million in 1966. All prior service costs
under these plans are fully funded, and it is the
Company's policy to fund each year's accrued
pension cost.
5. COMMON STOCK:
On July 27, 1967, the Board of Directors proposed,
subject to stockholder approval, (1) an increase in
the authorized shares of common stock from 8
million shares to 25 million shares, and (2) a 3-for-l
stock split on December 1, 1967 to stockholders of
record on November 6, 1967.
REVENUE PASSENGERS CARRIED
(In Millions)
REVENUE PASSENGER MILES
(In Billions)
10
Jet
Piston
500
450
400
350
300
250
200
150
100
50
OPERATING REVENUES & EXPENSES
(In Millions of Dollars)
Operating Revenues
Operating Expenses
58 59 60 61 62 63 64 65 66 67 58 59 60 61 62 63 64 65 66 67 58 59 60 61 62 63 64 65 66 67
24
DELTA AIR LINES, INC.
AUDITORS' REPORT
Arthur Andersen & Co.
Atlanta, Georgia
To the Stockholders and Board of Directors,
Delta Air Lines, Inc.:
We have examined the balance sheet of Delta Air Lines, Inc. (a Delaware corporation) as of June
30,1967, and the related statements of income, retained earnings and source and disposition of funds
for the year then ended. Our examination was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and such other auditing pro
cedures as we considered necessary in the circumstances. We have previously examined and reported
on the financial statements for the preceding year.
In our opinion, the financial statements referred to above present fairly the financial position of
Delta Air Lines, Inc. as of June 30, 1967, and the results of its operations and the source and dispo
sition of funds for the year then ended, in conformity with generally accepted accounting principles
applied on a basis consistent with that of the preceding year.
Atlanta, Georgia,
August 11, 1967.
FLIGHT EQUIPMENT
(In Millions of Dollars)
500
450 --
Cost
--
()et aircraft)
Net Book Value
Depreciation
EARNINGS PER SHARE*
(In Dollars)
10
9 gm Earnings trom
Operations
58 59 60 61 62 63 64 65 66 67
STOCKHOLDER EQUITY PER SHARE*
(In Dollars)
1
--if
--ill
j,
1111
111+
111 11
11 11 1J
58 59 60 61 62 63 64 65 66 67
*Adjusted to reflect all stock splits through June 30,1967
25
10 YEARS OF DELTA AIR LINES GROWTH Years Ended June 30
(Dollars expressed in thousands except per share figures)
Operating revenues
Passenger
Mail
Freight
Express
All other
Total operating revenues
Operating expenses
Operating income
Non-operating expense --net
Net income before taxes
Taxes on income
Net income before gain on disposition of aircraft. . .
Gain on disposition of aircraft, less taxes
Net income
Per share of stock outstanding at year end*
Before gain on disposition of aircraft. . .
Gain on disposition of aircraft, less taxes
Net income
Dividends paid
Dividends paid per share*
Total assets
Stockholder equity
Stockholder equity per share*
Shares of common stock outstanding at year end*. .
Revenue passengers carried
Revenue plane miles (000)
Available seat miles (000)
Revenue passenger miles (000)
Passenger load factor
Available ton miles (000)
Revenue ton miles (000)
Passenger revenue per passenger mile
Operating expenses per available seat mile
Operating expenses per available ton mile
1967
$362,368
11,044
16,840
3,754
3,830
$397,836
308,737
$ 89,099
641
$ 88,458
41,670
$ 46,788
2,402
$ 49,190
$7.34
.38
$7.72
$ 6,375
$1.00
$369,422
$166,490
$26.12
6,375,000
9,422,422
100,270
9,687,337
6,415,467
66.23%
1,304,889
735,898
5.659
3.169
23.669
1966
$291,350
6,926
13,902
3,211
3,541
$318,930
253,092
$ 65,838
1,676
$ 64,162
30,170
$ 33,992
562
$ 34,554
$5.33
.09
$5.42
$ 6,056
$0.95
$314,350
$123,675
$19.40
6,375,000
7,556,422
84,835
8,196,349
4,997,958
60.98%
1,090,282
569,625
5.839
3.069
23.219
1965
$234,036
5,176
11,616
2,828
3,804
$257,460
213,131
$ 44,329
1,875
$ 42,454
20,051
$ 22,403
602
$ 23,005
$3.52
.09
$3.61
$ 4,845
$0.76
$231,274
$ 95,177
$14.93
6,375,000
5,964,269
73,664
6,793,654
3,855,012
56.74%
907,014
442,239
6.079
3.129
23.509
26
'Adjusted to reflect all stock splits through June 30,1967
1964 1963 1962 1961 1960 1959 1958
$205,346 $191,355 $155,994 $134,946 $109,672 $ 94,062 $ 80,217
4,299 4,483 3,414 2,579 2,140 2,152 1,796
8,869 8,305 5,814 4,070 4,250 3,879 2,955
2,396 2,280 1,669 1,408 1,362 1,206 953
3,762 3,650 2,886 3,129 2,767 2,506 2,252
$224,672 $210,073 $169,777 $146,132 $120,191 $103,805 $ 88,173
189,871 177,622 154,671 134,431 113,460 94,420 85,631
$ 34,801 $ 32,451 $ 15,106 $ 11,701 $ 6,731 $ 9,385 $ 2,542
2,584 3,155 2,862 2,733 1,313 554 600
$ 32,217 $ 29,296 $ 12,244 $ 8,968 $ 5,418 $ 8,831 $ 1,942
16,523 15,472 6,579 4,842 2,735 4,769 1,010
$ 15,694 $ 13,824 $ 5,665 $ 4,126 $ 2,683 $ 4,062 $ 932
--
1,320 526 156 --
131
$ 15,694 $ 13,824 $ 6,985 $ 4,652 $ 2,839 $ 4,062 $ 1,063
$2.46 $2.17 $0.89 $0.74 $0.48 $0.73 $0.17
-- --
.21 .09 .03 --
.02
$2.46 $2.17 $1.10 $0.83 $0.51 $0.73 $0.19
$ 3,570 $ 2,550 $ 1,520 $ 1,346 $ 1,346 $ 673 $ 1,010
$0.56 $0.40 $0.26 $0.24 $0.24 $0.12 $0.18
$194,241 $181,433 $158,088 $134,938 $121,890 $ 95,427 $ 80,941
$ 77,017 $ 64,893 $ 53,619 $ 41,056 $ 38,902 $ 37,410 $ 34,020
$12.08 $10.18 $8.41 $7.32 $6.93 $6.67 $6.07
6,375,000 6,375,000 6,375,000 5,611,172 5,611,168 5,611,108 5,610,226
5,233,548 4,606,367 3,768,707 3,569,778 3,241,511 2,988,241 2,728,220
65,815 61,242 55,713 49,455 49,405 46,022 44,972
5,582,349 4,953,787 4,123,318 3,389,547 3,027,450 2,622,740 2,479,428
3,353,842 3,004,157 2,393,991 2,034,047 1,757,208 1,554,630 1,408,857
60.08% 60.64% 58.06% 60.01% 58.04% 59.28% 56.82%
740,852 648,185 542,232 442,251 387,552 324,018 301,105
378,465 342,661 269,044 223,592 195,373 174,936 156,332
6.129 6.379 6.529 6.639 6.249 6.059 5.699
3.389 3.569 3.749 3.959 3.749 3.589 3.439
25.639 27.409 28.529 30.409 29.289 29.149 28.449
27
DELTA'S STORY TO THE PUBLIC
To board approximately one million passengers
per month, Delta advertising must reach a poten
tial of many millions on a high frequency basis.
Because each market is different, with its own
patterns of flights, fares and departure times, Delta,
for the most part, uses a retail selling approach,
tailoring the advertising in each city to specific
items instead of a general message to all markets.
The major part of the advertising budget goes
into newspapers... a powerful retail selling me
dium. Delta uses more than 140 papers in on-line
cities regularly and expands the schedules into
connecting cities on a seasonal basis.
Radio is another strong local medium; Delta
uses more than 100 stations in 30 major markets.
The saturation technique of scheduling commer
cials is used and Delta will broadcast as many
as 2,800 commercials in the 30 markets during a
normal week. Television is used mainly on a local
basis, again in the retail specifics.
Magazines, the only national medium currently
used by Delta, offer a highly selective means of
reaching frequent users of air travel. About 9% of
the budget is used in this field.
Outdoor bulletins and 24-sheet posters are
used in areas of heavy traffic. This utilizes about
6% of the budget.
"How come everyone's
so nice to us Daddy;
do they all know you?"
Here\ thrift at both ends
ofthe day;the choice Ls yours
.-and so is the saving!
28
No wonder most people
jet Delta toFlorida...
No wonder most people
jet Delta toFlorida...
Delta's got the
best service by far!
DELTA
Abo Jet Delta to Atlanta, Houston New Orleans, Memphis, St. Louis, Cincinnati, Birmingham, Louisville, Coitanbu, S.C., Jackson, Shreveport.
Delta's got the most
non-stop Jets!
Also Jet Delta to Atlanta, Houston, New Orleans, Memphis, St. Louis, Cincinnati, Birmingham, Louisville, Columbia, S. C., Jackson, Shreveport.
29
riCMUO PISSfMWS
CHfCP Hfftf
BOARD OF DIRECTORS
R. W. FREEMAN, Chairman of the Finance Committee,
New Orleans, Louisiana
W. T. BEEBE, Atlanta, Georgia
B. W. BIEDENHARN, Monroe, Louisiana
R. W. COURTS, Atlanta, Georgia
C. H. DOLSON, Atlanta, Georgia
EMERY FLINN, Miami, Florida
EDWARD H. GERRY, New York, New York
CHARLES H. KELLSTADT, Miami, Florida
JOHN R. LONGMIRE, St. Louis, Missouri
R. S. MAURER, Atlanta, Georgia
T. M. MILLER, Atlanta, Georgia
WINSHIP NUNNALLY, Atlanta, Georgia
CARLETON PUTNAM, Washington, D.C.
GEORGE M. SNELLINGS, JR., Monroe, Louisiana
OFFICERS
C. H. DOLSON
President
T. M. MILLER
Executive Vice President--Traffic and Sales
W. T. BEEBE DAVID C. GARRETT, JR. ROBERT L. GRIFFITH
Vice President--Personnel Vice President --
Operations Vice President
R. S. MAURER
Vice President-
General Counsel and Secretary
ROBERT OPPENLANDER PAUL W. PATE
Vice President--Finance and Treasurer Vice President--Properties
CHARLES P. KNECHT R. H. WHARTON
Assistant Vice President--Sales Assistant Vice President --
Personnel
C. B. WILDER
Assistant Vice President--
Operations-Technical
CATHERINE FITZGERALD
Assistant Treasurer
J. R. HOWELL
Assistant Treasurer
HUGH H. SAXON
Assistant Treasurer
TRANSFER AGENTS: The Citizens & Southern National Bank, Atlanta, Georgia
and The First National City Bank, New York City
REGISTRARS: Trust Company of Georgia, Atlanta, Georgia
and Morgan Guaranty Trust Company of New York, New York City
COMMON STOCK: Listed on the New York Stock Exchange
AUDITORS: Arthur Andersen & Co.
ANNUAL MEETING: October 26, 1967, Monroe, Louisiana
31
32
New dimensions of Delta service:
six stewardesses serve passengers
on Super DC-8 flights.
Mi
DELTA DC-8'S
COME IN A
NEW SIZE
New dimensions of Delta service:
six stewardesses serve passengers
on Super DC-8 flights.
32
THE WORLD S BIGGEST JETLINER
This is the Delta Super DC-8...world's biggest jet
liner. It can carry all the passengers shown here... 195
in all. There is a crew of nine: six stewardesses, cap
tain, first officer and second officer. The standard
DC-8 carries 135 passengers.
The Super DC-8 extends a record length of 187
feet, or 37 feet more than the standard DC-8. It is 142
feet between wing tips; the tail rises 43 feet. Fully
loaded, it weighs 325,000 pounds.
To lift this load and push it along at a sustained
speed of almost 600 miles an hour, the Super DC-8
has more power than any other jetliner of today...a
total of 72,000 pounds of jet thrust. The fuel tanks can
hold 23,393 gallons.
Of all the units of transportation in use today, the
Super DC-8 can carry the most persons the most miles
in any given measure of time, more than any train...
more than even the largest of ocean liners.
Delta has 18 of these new jets ordered or optioned.
The first of the Super DC-8's are now on the southern
transcontinental route between New York and Cali
fornia and also between Chicago and Miami.
DELTA AIR LINES, INC., GENERAL OFFICES, ATLANTA AIRPORT, ATLANTA, GEORGIA 30320