Delta Air Lines, Inc. 1968 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 expressed in thousands except per share figures. 1968 Operating Revenues . . . . . . . . . . . $431,562 Operating Expenses .. . . . ...... . $363,140 Netlncome .. ..... .. .. . . . .... $ 36,134 Shares Outstanding at year end .. 19,125,000 Earnings Per Share . . . . . . . . . .. . $1.89 Total Stockholder Equity . . . . .. . $194,974 Stockholder Equity Per Share . . .. $10.19 Revenue Passengers Carried ... .. 10,368,831 Available Seat Miles ( 000) . .. . . 11,972,737 Revenue Passenger Miles (000) .. 7,116,095 Passenger Load Factor . .... .... 59.44% * Adjusted to reflect 3-for-1 stock split December 1, 1967 THE COVER Delta's leadership in the industry has been built in large measure upon the unique spirit and morale of its people. The individuals pictured in this report are representative of the more than 16,500 Delta employees whose loyalty and dedication have contributed to Delta's sound growth and continued success. The ticket agent is in the forefront of our sales force at an increasing number of conveniently located ticket offices. Per Cent 1967 Change $397,836 + 8% $308,737 +18 $ 49,190 -27 19,125,000* $2.57* -26 $166,490 +17 $8.71 * +17 9,422,422 +10 9,687,337 +24 6,415,467 +11 66.23% -10 REPORT TO THE STOCKHOLDERS Delta has concluded another successful fiscal year highlighted by continued healthy growth in revenues and traffic. New records established included $431.6 million operating revenues, 10.4 million passengers, 7 .1 billion revenue passenger miles, and 136 million cargo ton miles. And net earnings of $36,134,000 or $1.89 per share were second only to the extraordinary $49,190,000 earned during strike inflated fiscal 1967. The year saw a major improvement in the delivery of additional Super DC-8 and Super DC-9 aircraft and a resulting expansion of our jet fleet by some 40%. The added capacity permitted new or im- proved jet service to the vast majority of the 61 communities Delta serves-and a reduction in piston services to less than 3.5 % of system capacity at year-end. Another direct result of the increased jet fleet was a lowering of the system load factor from the undesirably high level of 66 .2 % in 196 7 caused by equipment delays and competitors' strike to a more reasonable and planned level of 59.4% for the latest year. Elimination of the more costly four engine piston services together with the inherent efficiencies of the larger jet aircraft produced significantly lower unit costs, despite the continued inroads of inflation on labor, fuel, material, and rents. During the year substantial additions were made to the long range equipment plans and, again, it was necessary to expand these plans to cover even longer time periods. After very careful and thorough evaluation of both the Douglas and Lockheed pro- posals, Delta signed an agreement with Lockheed for twenty-four 250-passenger L-1011 trijet aircraft. The contract provides for twelve aircraft to be delivered beginning in late 1971 and a second group of twelve for delivery beginning in 1973. The 2 L-1011 combines the spaciousness and luxury of the "jumbo" jets with the short haul capabilities of smaller jets, permitting Delta to provide service in the short to medium range markets comparable to the luxury afforded longer range markets with the previously announced Boeing 7 4 7 aircraft. The L-1011 is a logical addition to Delta's jet fleet to meet the need for a high capacity aircraft in medium range markets. Total value of the L-1011 order, the largest in Delta's history, is $360 million. Including the two Boeing 7 4 7 options exercised during the year and all previously announced orders and options for Douglas and Boeing aircraft, the Delta passenger fleet of 197 5 will total 151 jets. The annual seat mile capacity of these aircraft will be over two and one- half times the fiscal 1968 capacity and their total value will exceed one billion dollars. Financing will be provided from internally generated funds and a $175 million bank loan agreement concluded during October, 1967. The advent of high capacity aircraft in the early 1970's will alleviate a portion of the growing and serious problems of air traffic congestion and in- adequate airport facilities. At the same time, however, they will aggravate and compound others, including the very difficult one of ground transporta- tion to and from the airports. Even if unlimited funds were available, which they are not, it will take time to unravel and resolve these three major problems. We are confident, however, that the airline industry, in cooperation with the local airport authorities and the regulatory agencies of the government, has the capability to provide the needed solutions. We would point out that these conditions were brought on by the rapid growth of the jet age. And the difficulties of growth in a viable industry are always more pleasant than the opposite problems in a regressing industry. In order to meet the challenge of the exciting years ahead and insure the necessary continuity and flexibility of management, Delta significantly broad- ened its executive ranks during the past year. The five division heads were promoted to Senior Vice President: W. T. Beebe, Administration; David C. Garrett, Jr., Operations; R. S. Maurer, General Counsel and Secretary; T. M. Miller, Marketing; and Robert Oppenlander, Finance and Treasurer. R. L. Griffith was named Vice President- Federal Affairs and ten new Assistant Vice Presidents were named including R. W. Allen, Administration; W. A. Atchison, Computer Services; T. P. Ball, Flight Operations; J. A. Cooper, Economic Research; Shelby D. Dement, Traffic and Sal~s; M. 0. Galloway, Comptroller; Jack S. King, Flight Control; J. W. Meyer, Customer Relations; L. G. Rodefeld, Communications; and Morris Shipley, Civic Affairs. In addition to the executive promotions, numerous others were made throughout all levels of company management. Each was made in keeping with Delta's long standing policy of development and promotion from within the company. The continued progress and sound growth of Delta depend very heavily upon the loyalty and support of all our 16,500 employees and of you, our stockholders. The outlook for fiscal 1969 is encouraging even in the shadows of continuing inflationary pressures and the full impact of the 10 % surtax. The return to more normal growth patterns reflected in the June quarter operating results strengthens our belief that a reasonable earnings growth can continue to be achieved. The added capacity in the coming year will moderate to a planned 19 % as the recent doubling up of late aircraft deliveries is overcome. Increases in traffic volume should be more closely related to capacity input and the load factor should stabilize. Yields are expected to level and possibly improve if the Civil Aeronautics Board responds positively to the industry needs. A further improvement in unit costs is forecast although at a more modest rate due to the continued and difficult pressures of inflation. In summary, we believe fiscal 1969 will again show solid growth in all areas, further enhancing the strong financial position of Delta and its ability to provide the finest in jet service. C. H. DOLSON, President September 9, 1968 3 Revenues Operating revenues were at a new high of $431,562,000 and continued an uninterrupted growth trend over a span of 33 years. Excluding the estimated strike effect from 1967 results, revenues increased 13 % over the previous year. New records were also established in revenue passengers carried (10,368,831); in revenue passenger miles (7,116,095,000); and in passenger revenues ($396,793,000), the latter a 10% gain over strike inflated 1967. The passenger revenue growth was diluted by a further 1 % decline in passenger mile yield due to the continuing effect of discount fares in the first half of this fiscal year. Beginning in February, however, yields stabilized and remained at the previous year's level for the remainder of the fiscal year. Despite a 14 % increase in cargo ton miles, cargo revenues increased less than 2 % to a total of $32,141,000. Priority mail revenue was down 19% due primarily to a 10% retroactive reduction in mail rates. First class mail revenue increased 13 3 % to $3,327,000 reflecting a further expansion of Post Office Department policy to use air transporta- tion for the longer haul non-priority mail. Expenses Operating expenses increased 18 % over 1967 to a total of $363,140,000 due primarily to the 24% increase in operating capacity. The 1968 total was reduced $4.2 million by the elimination of all engine overhaul reserves. These reserves were originally established to offset expected peakings in jet engine overhaul costs. The continued improvement in jet engine reliability together with the increasing number of engines in service have combined As an airplane is directed into a parking position, a closely coordinated team of ramp employees prepares to unload, service, and reload the plane for an on-time departure. to level overhaul costs. Unit costs, after a temporary leveling in 1967, resumed a downward trend from the highs of 1961 as the delayed deliveries of the more efficient Super DC-8 and DC-9 aircraft were received, permitting substantial retirements of piston aircraft. Available ton mile costs declined 5 % for the year and available seat mile costs were down 4 % -both reaching new all-time lows. Further improvement should be realized in fiscal 1969 as the remaining piston air- craft are replaced and additional Super DC-8's and DC-9's are introduced. The current trend of infla- tionary pressures will dilute the true efficiency gain and hold any improvement to a modest level. Earnings and Dividends Net earnings were $36,134,000, or $1.89 per share, and were the second highest in Delta's history, exceeded only by the $49,190,000 earned in the strike inflated 1967 fiscal year. Earnings from operations were $35,899,000, equal to $1. 8 8 per share after provision for normal taxes and the retroactive 10 % surtax. Net gain on the disposition of aircraft and other property was $235,000 or 1 per share. The overhaul reserve adjustment contributed 11 per share to after-tax earnings. For 1967, earnings from operations were $46,788,000 or $2.44 per share including an esti- mated 50 benefit from the 43-day work stoppage against five major trunk lines in the first two months of that year. The strike benefit was originally estimated at 3 7 per share ( on present shares) but was revised upward the following summer based on a better knowledge of the true impact of the strike on yields. Net gains from the disposition of aircraft and the insurance proceeds from an aircraft lost in training added $2,402,000 for combined earnings of $2.57 per share in 1967. Beginning with the September 1, 1967 quarterly payment, the dividend rate was increased 20% to 10 per share after adjustment for the 3-for-l stock 5 split. Aggregate dividend payments for the year were $7,650,000. Flight Equipment Delta expanded its jet fleet by more than 40 % last fiscal year with the delivery of three Super DC-S's and nineteen Super DC-9's. One standard DC-9 was added on a short-term lease expiring in 1969 and one standard DC-8 was purchased under a lease- purchase agreement. During the fiscal year, options were exercised for future deliveries of one Super DC-8 and seven Super DC-9's, as well as the fourth and fifth Boeing 7 4 7 aircraft. Shortly after the close of the fiscal year, options on an additional four Super DC-9's were exercised. Both Lockheed and McDonnell Douglas presented their specifications for the "Airbus" during the past year. Their proposed 250-passenger, three-engine planes, far from being "airbusses," will be the most luxurious and. appealing to passengers of any airplane ever developed. After an exhaustive examination of both proposals, Delta purchased 24 Lockheed 101 l's. Compared to the Super DC-8, the L-1011 is planned to reduce seat mile cost by 2 % at Delta's normal operating trip length and increase passenger revenue potential by some 32%. The following table shows the pattern of deliveries for all aircraft on order and on option: Type Fleet Fleet Deliveries in Fiscal Years Total Total of Aircraft Seats 6/30/68 1969 1970 1971 1972 1973 1974 1975 6/30/75 DC-8 135 21 DC-8 195 5 5 3 DC-9 70 15 DC-9 89 22 27 9 CV-880 96 16 B-747 375 3 2 L-1011 250 5 6 6 7 L-100 Cargo 3 :sr 32 12 3 7 6 6 7 After return of one leased aircraft in 1969 With the continuing deliveries of DC-9's, the four-engine piston fleet is rapidly being replaced. The remaining DC-7 aircraft were phased out on 6 21 13 14* 58 16 5 24 3 154 February 1, 1968 and the DC-6 phase-out will be completed by September. The two-engine Convair 440 fleet is programmed for retirement by the end of fiscal 1969. These retirements will result in significant economies of operation. Delta holds three delivery positions for the Boeing Supersonic Transport. Advance deposits totaling $600,000 have been made on these aircraft. The Federal Aviation Agency also requested U.S. carriers to advance one million dollars per delivery position as risk money to supplement the manufacturer's and Federal funds during prototype development. This money will be recovered with interest if sufficient aircraft are sold to provide royalties to the government. Delta advanced the requested three million dollars during fiscal 1968. The Internal Revenue Service has classified this advance as research and development costs to be fully deductible for tax purposes in the current year. The Civil Aeronautics Board has prescribed a five year book amortization period for all participating airlines. Although Boeing and the FAA are generally dissatisfied with the relationship of prototype performance to production aircraft performance objectives, it is expected that these difficulties will be resolved and a revised certification date be made available in January, 1969. Operational Equipment and Programs During the past year, a DC-8 and DC-9 simulator was purchased from Link Group-General Precision Systems. With the expanded DC-8 and DC-9 fleet, these simulators will provide capability for perform- ing a significant number of pilot proficiency checks on the ground, minimizing the requirements and costs of removing aircraft from revenue service for The men at the controls-Delta's flight crews -are men of the highest professional stand- ards with years of experience and a back- ground of intensive and continuing training. I pilot training. These simulators are programmed for installation in 1969. A new communications switching system was purchased for instaJlation by September, 1968. This system is capable of handling the expected increase in message traffic ( both passenger and cargo) to be generated by the increasing fleet of Delta aircraft. The cargo capacity of the three Delta airfreighters will soon be increased by 20% under the modifica- tion program announced last fiscal year. The program to "stretch" the L-100 is now under way and should be completed in late December. In addition to the increased capacity, the modification is expected to improve both the operating perform- ance and the reliability of the L-100. As a result of refinement of jet technology and the industry growth, the airlines and the FAA have been seeking to provide better and more realistic methods for responsively relating aircraft operating experi- ence to control of aircraft maintenance requirements. Delta obtained FAA concurrence for both its aircraft and power plant reliability programs and completed the implementation of these programs in fiscal year 1968. These programs are extensions of the "management-by-exception" concept. They focus on those aircraft systems or components which tend to decrease operational reliability, while at the same time allowing Delta greater freedom and responsi- bility in adjusting the maintenance and inspection periods of the highly reliable units and systems. Major benefits are improvement in reliability and safety and increased utility of our flight equipment. Capitalization and Financing In October, 1967 Delta arranged a new bank credit agreement with a group of 25 banks in 1 7 cities on Engineers and skilled technicians are con- stantly seeking new ways to improve the safety, reliability, and performance of Delta's flight equipment. Delta's system providing up to $175 million on a revolving basis through calendar 1969. The balance outstanding at the end of 1969 will be converted to a term loan. This new agreement repaid and terminated the 1966 Revolving Credit of $45 million. A total of $ 9 5 million had been borrowed as of June 30, 1968. With the recently announced orders and options for the Lockheed L-1011 aircraft, Delta's probable future capital outlays will exceed $600 million through 197 5. The new bank loan agreement together with normal internal cash generation from earnings, depreciation, and def erred taxes are currently estimated to be adequate for these pro- jected capital requirements. At June 30, 1968, Delta's long-term debt to equity ratio was only 68 % or roughly one-half the industry average. At the regular annual meeting of stockholders on October 26, 1967, approval was granted ~or an increase in total stock authorized from 8 million to 25 million shares and a 3-for-1 stock split. The issue of two additional shares for each share held increased the total stock outstanding to 19,125,000 shares. Adjusted for this split, stockholder equity was $10.19 per share or $194,974,000, up 17% over June 30, 1967. Facilities Delta continued its program to expand and improve ground facilities. In Atlanta, the second of the ultra modern rotundas will soon be occupied. These rotundas add 12 new J etway parking positions and upper level passenger lounges for faster, more convenient passenger handling. Major terminal additions or expansions are planned in nearly half the cities we serve, including four new airports and related facilities already under construction at Jacksonville, Dallas/ Ft. Worth, Kansas City, and Houston. Since several of these projects are of a long-term nature, interim reworks will be required in a number of cases to accommodate the Boeing 7 4 7's 9 and Lockheed 1011 's scheduled for delivery be- ginning in late 1970 and late 1971 respectively. The Chicago maintenance hangar expansion is planned for completion later this year and a new hangar is under construction in Houston. During the past year, Delta occupied the expanded facilities at its general maintenance and overhaul base in Atlanta. A new 51,000 square foot Computer Center, specifically designed to house the latest generation of large computers, was also completed and occupied. The Training Center for stewardesses, pilots, and ground personnel should be completed later this year. In addition, customer servicing facilities (reser- vation offices, ticket offices, etc.) are being enlarged in many cities to cope with the additional traffic produced by Delta's growth and fleet acquisitions. Passenger Fares Revenue per passenger mile slowed its downward trend, dropping 1 % from 5.65 to 5.58 as com- pared to a reduction of 3 % in fiscal 19 6 7 and 4 % in fiscal 1966. Effective February 1, 1968, the Civil Aeronautics Board approved a simplified fare structure under which fares for trips of 750 miles or under were increased and those over 7 5 0 miles were decreased to the next even dollar amount. Since Delta's average passenger length of haul is less than 700 miles, this rounding resulted in slightly more revenue and served to stabilize yields and offset further increases in the percentage of travel under discount fares. This percentage increased to 40% in 1968 from 35 % in fiscal 1967. Shortly after the close of the fiscal year, the Civil Aeronautics Board also approved a revised Family Plan fare which will further stabilize yields. These actions indicate a recognition by the CAB that the industry can no longer withstand further yield erosion in the face of a continued upward pressure on carrier costs-particularly in view of substantial existing commitments for new aircraft and ground handling facilities. Fiscal 1969 should reflect a reasonably stable yield for the first year since the jet age began. 10 Personnel Delta is particularly proud of and grateful for the spirit of dedication and loyalty of its employees and the contribution each has made to.the sound growth and continued success of your company. The various employees pictured in this report are representative of the many skills and talents required to provide the best possible service to our customers and to operate and service the finest in jet equipment. The "Delta Family" grew to a total of more than 16,500 at year end, of which one in four had ten or more years service with Delta. Total salaries and related employee benefit costs were $168 million for the year or roughly 39 cents out of every revenue dollar. Delta maintains a complete employee training program with a curriculum as varied as the many skills required to operate the airline. An extensive and demanding program of initial and recurrent training insures the highest possible standards for our flight personnel. Ground personnel receive initial and recurrent training in both technical and non-technical subjects to help them meet the needs of a constantly changing technological and industrial environment. Additionally, all employees are offered a broad range of self-help training programs designed to improve their ability to progress and participate fully in the opportunities afforded by the sound growth of your company. During recent months, Delta has participated fully with the National Alliance of Businessmen in a program designed to help meet the challenge of mi- nority unemployment. Substantial numbers of both "hard-core" and "poor-youth" personnel are currently employed in the major cities along our route system. Delta chose to underwrite the full cost of the A customer's first contact with Delta is through the voice of the reservations agent who has been trained to offer the vital personal touch. program, including the recruitment, motivation, training and assignment of these people to mean- ingful and productive work, without governmental subsidy support. Services Continued delivery of the 89-passenger DC-9-32 aircraft has contributed more jet service to Delta cities than ever before. During the year, jet serv- ices were inaugurated in Asheville, Lexington, Toledo and Columbus, Georgia. On July 1, 1968, DC-9 service was initiated in Meridian and Monroe leaving only nine cities on the system without jet services. This enhanced jet flexibility has enabled Delta to utilize the larger DC-9-32 aircraft on traditionally heavier density routes and to continue replacement of piston aircraft. At year-end, piston aircraft provided less than 3.5% of our system available seat miles. There was an overall upgrading of service through- out the entire system. Notable examples of this upgrading include an increase from five to seven Atlanta-San Francisco round trips, from ten to twelve Atlanta-Los Angeles round trips, and the first daytime service to Las Vegas. The "Early Bird" schedule pattern and service program, started two years ago, has continued to expand and, with the newer "Owly Bird" services, provide Delta passengers with early morning and late evening bargain flights to business and commercial centers across the system. New advertising and promotional programs for the "Early Bird" and "Owly Bird" services were inaugu- rated in Dallas, Los Angeles artd San Francisco to introduce the pattern in those cities. The "Early Bird" and late night "Owly Bird" concepts are now thoroughly ingrained in the business schedules of the major communities served. The machinist and his machine-represent- ative of the many varied skills and the large investment in complex tooling and equip- ment required to maintain our jet fleet. The 195-passenger DC-8-61 aircraft were utilized in the Midwest to Florida and Southern Transconti- nental schedules complex for the first time this year. Four of the Super DC-8 jets provided service to Florida and California bound vacationers and answered the need for increased capacity. The de- livery of additional aircraft in the months ahead will add even greater potential to Delta's strong leadership in these dense travel markets. Increased cargo service has been proportionate to our overall service increase and new equipment has played a vital role in this expanded and improved area of Delta. The Lockheed L-100 modification program, which increases payload capacity by 698 cubic feet, will further improve our ability to meet the , needs of our cargo customers. The L-100 has continued its outstanding per- formance as an all-cargo aircraft and now transports approximately 25 % of Delta's total cargo. In- creased DC-9 and Super DC-8 services have also contributed significantly to the cargo program. Faster, more frequent jet cargo service is now pro- vided by new DC-9 equipment and Delta's Super DC-8's have doubled the cargo carrying capacity on regular DC-8 routes. A program of reserved air freight space has been finalized and is planned for implementation in the months ahead ... an additional enhancement of Delta's "full-line" cargo program. The DELTAMATIC Reservation System has played an increasingly greater role in supporting various customer and marketing services. The computer system's dramatic capability has contributed im- measurably to timetable and quick reference schedule production. A computerized tele-ticketing program was introduced and will be expanded as need demands. The computer system now provides valu- able information to our Customer Relations Department and amplifies Delta's ability to give prompt and personal handling to correspondence from our customers. DELTAMATIC also pin-points present sources of revenue and market potential, 13 affording our sales personnel the opportunity of servicing present customers and soliciting new ones in a more direct and knowledgeable manner. These computer innovations, and more, are a by-product of the DEL TAMA TIC reservation system that is second to none in the world, underscoring Delta's leadership in the industry and highlighting the increased efficiency obtained through technological improvements. Shortly after the close of the fiscal year, the DELTAMATIC system was converted to the latest generation of computer hardware. The new IBM 360 system has a total capacity equal to five times that of the system it replaces. When fully operable, the new system will provide adequate capacity for the forecast traffic volumes through 197 5. Regulatory Matters Transpacific Route Investigation: Seventeen carriers are seeking new routes between the U.S. Mainland and points in the Pacific as far west as India, including Hawaii and both Oriental and South Pacific countries. Delta's applications request operating authority between the coterminal points of Atlanta, Dallas/Ft. Worth, Houston, New Orleans, Miami/Ft. Lauderdale, San Francisco/Oakland/San Jose, Los Angeles/Long Beach and San Diego, and the terminal point Manila, via Hawaii, Tokyo, Osaka, Seoul and Hong Kong. An Examiner's recommended decision last April did not favor grant of Delta's application. The case has now been presented to the full five-man Civil Aeronautics Board, however, and Delta is continuing to prosecute its application vig- orously. The international aspects of the case will be submitted to the President for final approval, which is expected during late 1968. United States-Caribbean-South American Investi- gation: This investigation involves air service needs between the United States and points throughout the Caribbean and South America. Delta seeks im- provement of its existing Caribbean route authority through use of Miami as a coterminal, along with New Orleans and Houston, for its operations in the 14 1 Domestic and Caribbean Routes of DELTA A IR LINES 1 9 6 8 15 Caribbean, and by adding Nassau. Delta is also seek- ing authority to operate nonstop service between West Coast points and Delta's Caribbean cities. An Examiner's decision recommended grant of the latter part of Delta's application. This case has now been presented to the full CAB and final decision, which also must be approved by the President before public release, is expected at any time. United States-Europe: Delta is an applicant in two proceedings involving air service between the United States and points in Europe. The first proceeding is known as the Miami-London Route Investigation, and will result in the authorization of one or more U.S. Flag carriers to operate between those two cities. The second proceeding involves service between Boston, Hartford, Philadelphia, Baltimore and Washington in this country, and points in smaller European countries such as Norway, Sweden, Denmark, Finland, the Netherlands, Belgium, Switzerland.and Austria. These proceedings are in preliminary stages and decision is not expected for eighteen months to two years. Gulf States-Midwest Points Service Investigation: This proceeding involves north-south air service in the mid-United States, including competitive service in markets now served by Delta. The primary markets under consideration are Dallas/Ft. Worth-Kansas City, Dallas/Ft. Worth-St. Louis, Chicago-San Antonio, Detroit-San Antonio, Chicago-Nashville, Chicago-New Orleans, Chicago-Memphis, St. Louis- Houston and New Orleans-Memphis, via various intermediate points. Delta is seeking new authority in the first ,six markets listed, and also seeks the addition of new intermediate cities in some of the other four markets. On August 1, the CAB Hearing Examiner recommended new direct authority for Delta between Dallas/Ft. Worth and Detroit, with a permissible intermediate stop on any such flight at Louisville, Indianapolis, Cincinnati or Cleveland, and also additional operating authority between Chicago and New Orleans, with a permissible intermediate 16 stop at Cincinnati, Little Rock, Huntsville or Birmingham. The Examiner also recommended competitive services (generally by only one carrier) in many of the markets already served by Delta. Proposals which could result in unnecessary duplica- tion of existing services will continue to be resisted. A final decision by the CAB probably will be forth- coming sometime in 196 9. Reopened Pacific Northwest-Southwest Service Investigation: Delta is seeking authority between its present system (in particular, New Orleans, Houston and Dallas/Ft. Worth) and the cities of Denver and Salt Lake City. An Examiner's initial decision did not recommend grant of Delta's application, but the Company has vigorously presented its case to the full five-man CAB. Decision is expected at any time. Southern Tier Cases: In four separate, but over- lapping, cases the CAB is considering the need for competitive air services in a number of markets across the southern tier of states, from Florida and Georgia in the East to California in the West. In the Dallas/Ft. Worth-Phoenix Case, Delta is a leading applicant. The case has now been submitted to the Examiner for decision. Grant of Delta's , application would enable it to operate between Phoenix and Dallas/Ft. Worth, as well as cities east thereof such as Atlanta, New Orleans and Orlando. The Service to Albuquerque Case involves air service between that New Mexico city and the cities of Dallas/Ft. Worth, Las Vegas, San Francisco/ Oakland, Los Angeles/Long Beach and Chicago. Delta is an applicant for authority in each of these markets except Albuquerque-Chicago. Grant of Delta's application would permit it to serve the local market and also such markets as Albuquerque- Material Services personnel control and supply the more than 100,000 inventory items required to support daily operations of the airline. Atlanta, New Orleans, Orlando and Charlotte (via Dallas/Ft. Worth), and to serve Albuquerque as an intermediate point on Delta's southern transconti- nental services. The third case involves nonstop service between Los Angeles and Memphis, Huntsville and Bir- mingham. Delta already holds authority between Birmingham and Los Angeles and is resisting the certification of another carrier in that market. Delta is seeking nonstop authority to compete with American in the much larger Memphis-Los Angeles market, and is also seeking authority to connect Huntsville and Los Angeles, thereby meeting one of the country's major, unfulfilled National Defense needs for one-carrier air transportation. The largest of these cases is the Southern Tier Competitive Nonstop Service Investigation. The CAB is here considering the possible need for competitive services in a number of the markets in which service was established for the first time in 19 61 in the Southern Transcontinental Service Case, at which time Delta was extended to the West Coast. The markets at issue include a number served by National Airlines, such as Miami-Los Angeles, Miami-San Francisco and Houston-San Francisco, and a number served by Delta, such as Atlanta- Dallas/Ft. Worth, Atlanta-Los Angeles and Atlanta- San Francisco. Delta has taken the position that it is premature to authorize competitive service in such of those markets as were first certificated for single- carrier service as recently as 1961, including both those served by Delta and those served by National. Delta has also presented a strong case, however, to show that it is the carrier which could best serve such markets as Miami-Los Angeles if the CAB does The growing use of computers to provide ex- panding information services to all departments offers new challenges and opportunities in pro- gramming, operations, and systems design. in fact certificate competitive service. Another part of the case includes Texas-Florida markets, for which Delta is an applicant. Briefs have been filed with the Examiners in all of these cases and final CAB decisions are expected in 1969. Twin Cities-California Investigation: This proceed- ing involves nonstop service between Minneapolis/ St. Paul, on the one hand, and Los Angeles and San Francisco, on the other hand. The Hearing Examiner's initial decision did not recommend grant of Delta's application, but the proceeding has now been reviewed by the CAB and is awaiting its decision in the near future. Other Matters: Delta is also involved in a number of other route proceedings before the CAB, including the Bermuda Service Investigation and the Service to Omaha and Des Moines Case, in both of which Delta is an applicant, and a number of local services proceedings in which Delta's primary role is to protect its traffic from erosion through the grant of uneconomic authority to the smaller carriers. The CAB has also instituted a number of additional cases in which final procedural steps have not yet been established, but in which Delta will be an active participant, including the Additional Service to Augusta and Columbia Case (Augusta/Columbia- Washington-New York), the North Carolina Points Service Investigation ( Charlotte/Raleigh-Durham/ Greensboro-High Point-Winston-Salem to Chicago, Miami and New York), and the Houston-Cleveland Service Investigation. The fiscal year has seen unusually heavy activity in CAB route proceedings, with a number of new proceedings added to the many which were instituted during 1967. These CAB cases hold promise for expansion of Delta's domestic and international route authority, but also involve CAB consideration of additional operating authorization for other carriers in areas already served by Delta. 19 BALANCE SHEETS June 30, 1968 and 1967 ASSETS CURRENT ASSETS: Cash ....... . ... . ................. . .... . ... . . Short-term cash investments, at cost ................ . Accounts and notes receivable . . . . . . . . . . . . . . . . . . . . . . Maintenance and operating supplies, at average cost Prepaid expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets .. ... . ......... . . . PROPERTY AND EQUIPMENT: Cost- 1968 ..... . ...... . . . 1967 ........... . .. . Accumulated depreciation- 1968 .............. . 1967 . .... . ........ . Flight Equipment Other Property and Equipment $465,450,000 $61,919,000 383,268,000 50,178,000 153,601,000 156,529,000 24,690,000 20,306,000 Advance payments for new flight equipment . . . . . $ 1968 17,972,000 16,019,000 36,010,000 4,330,000 1,214,000 75,545,000 527,369,000 178,291,000 349,078,000 40,848,000 389,926,000 DELTA AIR LINES, INC. $ 1967 7,888,000 32,830,000 24,920,000 3,435,000 1,958,000 71,031,000 433,446,000 176,835,000 256,611,000 41,780,000 298,391,000 ADVANCE FOR SST DEVELOPMENT, being amortized 2,778,000 $468,249,000 $369,422,000 20 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 tax credit (Note 3) . ... . . . . .. . STOCKHOLDER EQUITY: Common stock, par value $3.00 per share (Note 6)- Authorized 25,000,000 shares Outstanding 19,125,000 . .. .. . ... . ... . ... . Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings (of which $41,718,000 is restricted as to the payment of cash dividends under terms of credit agreements) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . COMMITMENTS (Note 2) The accompanying notes are an integral part of these balance sheets. $ 1968 7,794,000 33,713,000 7,352,000 1,695,000 855,000 51,409,000 132,436,000 70,773,000 18,657,000 89,430,000 57,375,000 22,450,000 115,149,000 194,974,000 $ DELTA AIR LINES, INC. 1967 3,448,000 25,647,000 6,554,000 1,670,000 13,046,000 50,365,000 86,296,000 53,367,000 12,904,000 66,271,000 19,125,000 22,450,000 124,915,000 166,490,000 $468,249,000 $369,422,000 21 STATEMENTS OF INCOME for the years ended June 30, 1968 and 1967 DELTA AIR LINES, INC. 22 1968 1967 OPERATING REVENUES: Passenger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $396,793,000 $362,368,000 Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,141,000 31,638,000 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,628,000 3,830,000 Total operating revenues . . . . . . . . . . . . . . . . . . . . . . . . 431,562,000 397,836,000 OPERATING EXPENSES: Flying operations . . . . . . . . . . . . . . . . . . . . . . . . . . Maintenance (Note 5) ............ .. ...... . . . Aircraft and traffic servicing . . . . . . . . . . . . . . . . . . . . . . . Promotion and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization (straight-line method) . . .. Passenger service ...................... .. ... . General and administrative . . . . . . . . . . . . . . . . . . . . . . . . Total operating expenses ...... . ................ . Income from operations before income taxes ........ . OTHER EXPENSE (INCOME): Interest expense (less capitalized interest on advances for flight equipment-$1,763,000 in 1968 and $1,712,000 in 1967) .................................... . Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total other expense ......... .. ............ . INCOME BEFORE INCOME TAXES ............. . PROVISION FOR INCOME TAXES (Note 3) .... NET INCOME, before gain on disposition of aircraft GAIN ON DISPOSITION OF AIRCRAFT, less taxes .. NET INCOME .. .. .... ... ........ ... . ......... . . . PER COMMON SHARE: Before gain on disposition of aircraft . . . . . . . . . Gain on disposition of aircraft, less taxes . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The accompanying notes are an integral part of these statements. 95,409,000 64,992,000 68,719,000 45,416,000 40,568,000 38,940,000 9,096,000 363,140,000 68,422,000 5,198,000 (2,162,000) 3,036,000 65,386,000 29,487,000 35,899,000 235,000 $ 36,134,000 $1.88 .01 $1.89 $ 81,175,000 60,781,000 57,099,000 39,067,000 30,847,000 31,326,000 8,442,000 308,737,000 89,099,000 3,453,000 (2,812,000) 641,000 88,458,000 41,670,000 46,788,000 2,402,000 49,190,000 $2.44 .13 $2.57 - - STATEMENTS OF RETAINED EARNINGS for the years ended June 30, 1968 and 1967 DELTA AIR LINES, INC. 1968 1967 BALANCE AT BEGINNING OF YEAR . . . . . . . . . . . . . . $124,915,000 $ 82,100,000 Net inconie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,134,000 49,190,000 161,049,000 131,290,000 Deduct: Cash dividends 7,650,000 6,375,000 Transfer to common stock in connection with a 3-for-1 stock split on December 1, 1967 . . . . . . . . . . . . . . . . . . 38,250,000 BALANCE AT END OF YEAR ..................... $115,149,000 $124,915,000 STATEMENTS OF SOURCE AND DISPOSITION OF FUNDS for the years ended June 30, 1968 and 1967 FUNDS PROVIDED BY: Net income .... .... .... ... . ... ................ . Add non-cash expenses- Depreciation and amortization . . . . . . . . . . . . . . . . . . . . Deferred Federal income taxes . .. ... . . ... ... ... . . Investment tax credit, net . . . . . . . . . . . . . . . . . . . . . . . . Engine overhaul reserves, etc. . . .. . . . . . .. . ...... . Total from operations . . . . . . . . . . . . . . . . . . . . . . . . Additional financing under- Installment purchase agreements . . . . . . . . . . . . . . . . . . Bank credit agreement . . . . . . . . . . . . . . . . . . . . . . . . . . FUNDS USED FOR: Flight equipment additions, including advances .. . .. . . . . Other property and equipment additions . . . . . . . . . . . . . . Advance for SST development . . . . . . . . . . . . . . . . . . . . . . Reduction of long-term debt ...................... . Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INCREASE (DECREASE) IN WORKING CAPITAL WORKING CAPITAL AT END OF YEAR The accompanying notes are an integral part of these statements. 1968 $ 36,134,000 40,568,000 17,406,000 5,753,000 (5,003,000) 94,858,000 6,786,000 50,000,000 151,644,000 114,520,000 12,358,000 3,000,000 129,878,000 10,646,000 7,650,000 148,174,000 $ 3,470,000 1967 $ 49,190,000 30,847,000 8,476,000 3,252,000 2,989,000 94,754,000 1,482,000 96,236,000 98,901,000 6,626,000 105,527,000 3,538,000 6,375,000 115,440,000 $ (19,204,000) $ 24,136,000 $ 20,666,000 23 NOTES TO FINANCIAL STATEMENTS June 30, 1968 1. LONG-TERM DEBT: At June 30, 1968, the Company's long-term debt of $140.2 million (including current maturities) consisted of the fol- lowing: (a) $95 million due banks under a credit agreement which provides for borrowings up to $175 million on a revolv- ing basis to December 31, 1969, at which time the out- standing balance will be converted to a 5-year term loan. Loans under the agreement are unsec1ued and carry an interest rate of % above the prime rate, (b) $33.7 million due insurance companies under 6% un- secured notes repayable in installments to October, 1974 ( $2.5 million payable in fiscal 1969), ( c) $ 8. 7 million due the manufacturer of the Deltamatic Reservation System repayable in quarterly installments (including 4 % interest) of $704,000, and ( d) $2.8 million due in fiscal 1969 under a conditional sales contract covering the purchase of a Douglas DC-8 jet aircraft. 2. COMMITMENTS: The Company has outstanding purchase commitments for the acquisition of eight Douglas DC-8 jet aircraft, thirty-five Douglas DC-9 jet aircraft, five Boeing 747 jet aircraft and twenty-four Lockheed L-1011 aircraft which will require an expenditure of approximately $609 million during the fiscal years 1969 through 1975. The Company leases certain airport facilities, ticket offices, etc., under long-term agreements. Minimum annual rentals are approximately $4,700,000 under such leases expiring after June 30, 1971. AUDITORS' REPORT DELTA AIR LINES, INC. 3. PROVISION FOR INCOME TAXES: The provision for income taxes for 1968 and 1967 consists of the following: Current income taxes Deferred Federal income taxes Investment tax credit Less-Amortization of investment tax credit over life of related equipment . .. 1968 $ 6,328,000 17,406,000 8,882,000 32,616,000 3,129,000 $29,487,000 1967 $29,942,000 8,476,000 5,474,000 43,892,000 2,222,000 $41,670,000 All available investment tax credits have been utilized to re- duce the Company's Federal income taxes payable. 4. PENSION PLANS: The Company has noncontributory pension plans covering substantially all of its employees. The total pension expense amounted to $5 .8 million in 1968. All prior service costs under the plans are fully funded, and it is the Company's policy to fund each year's accrued pension cost. 5. ENGINE OVERHAUL RESERVES: As a result of significant improvements in the engine over- haul and maintenance programs on its expanded jet fleet, the Company discontinued the practice of providing engine overhaul reserves. Accordingly, reserves of $4.2 million were eliminated. This change in practice had the effect of increasing 1968 net income by $2.1 million or 11 per common share. 6. STOCK OPTIONS: In October, 1967, the Company's stockholders approved a qualified stock option plan for an aggregate of 100,000 shares of common stock, under which options for 50,000 shares have been granted at a price of $31.125 per share. None of the options were exercisable at June 30, 1968. ARTHUR ANDERSEN & Co. 24 To the Stockholders and Board of Directors of Delta Air Lines, Inc.: ATLANTA, GEORGIA We have examined the balance sheet of Delta Air Lines, Inc. (a Delaware corporation) as of June 30, 1968, and the related statements of income, retained earnings and source and disposition of funds for the year then ended. Our examina- tion was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures 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, 1968, and the results of its operations and the source and disposition of funds for the year then ended, in conformity with generally accepted accounting principles which were applied, other than for the elimination of engine overhaul reserves as explained in Note 5 to the financial statements, on a basis consistent with that of the preceding year. Atlanta, Georgia, August 14, 1968. A craftsmanship produced by years of experience goes into the overhaul of the engines that power Delta's big jets. REVENUE PASSENGERS CARRIED (In Millions) REVENUE PASSENGER MILES (In Billions ) 12 - - - - - - - - - - - 11 ~ - - - - - - - - -- 10 ----------- 10 - - - - - - - - -----1- 9 - - - - - - - -----1~--- 8 - - - - - - - -----1~--- 7 - - - - - - ---1~~-- 6 - ~ - - - - - - - , ,~ ~ ~ - - 5 - - - - ---ta-la---1~~-- 4 --------11---.-.a------1a------1~--- 3 -=---t--111-11-------.-ta------la------l~-- 2 --~1---111-11 ......... ---.-.a------1a------1~-- 0 _.__.__.__~~~L...aL...a.__.L_ 9 - -Jet 8 - - Piston 5 4 3 0 - -- 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 o ' o ' o o ' I o o o o o o , o o , o , , o o o o I o , o . o o o o All other ... ..... ' . . .... .... ' .......... . ...... . .. ... .. Total operating revenues . . : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . .. . ' . ..... ' .. ' ...... ' .. .. .... .. ...... ' .. Operating income ... ' ' . ' . . ' ... . .. ' .... ' . . ......... .. ....... Other 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 . . ... .. . .. . .. .......... *Adjusted to reflect all stock splits through June 30, 1968 '26 1968 $396,793 11,142 17,511 3,488 2,628 $431,562 363,140 $ 68,422 3,036 $ 65,386 29,487 $ 35,899 235 $ 36,134 $1.88 .01 $1.89 $ 7,650 $0.40 $468,249 $194,974 $10.19 19,125,000 10,368,831 116,386 11,972,737 7,116,095 59.44% 1,609,704 814,782 5.58 3.03 22.56 OPERATING REVENUES & EXPENSES (In Millions of Dollars) 500 ----------- 450 = - Operating Revenues -------1--- 400 - - Operating Expenses ---...----11--- 350 - - - - - - - -- - 300 - - - - - - ------- 250 - - - - - -- - 200 ------- 150 ---- 100 - - - ,... ,_ ,_ - - - - - 50=(=-,...::::::: 0-'=~ -- ~ ~~ - - - - ~ W ~ ~ ~ M ~ ~ ~ ~ 1967 1966 $362,368 $291,350 11,044 6,926 16,840 13,902 3,754 3,211 3,830 3,541 $397,836 $318,930 308,737 253,092 $ 89,099 $ 65,838 641 1,676 $ 88,458 $ 64,162 41,670 30,170 $ 46,788 $ 33,992 2,402 562 $ 49,190 $ 34,554 $2.44 $1.78 .13 .03 $2.57 $1.81 $ 6,375 $ 6,056 $0.33 $0.32 $369,422 $314,350 $166,490 $123,675 $8.71 $6.47 19,125,000 19,125,000 9,422,422 7,556,422 100,270 84,835 9,687,337 8,196,349 6,415,467 4,997,958 66.23% 60.98% 1,304,889 1,090,282 735,898 569,625 . 5.65 5.83 3.16 3.06 23.66 23.21 FLIGHT EQUIPMENT (In Millions of Dollars) 500 - - - - - - - - - - - 450 400 350 300 250 200 150 100 - Cost - (Jet aircraft) { Net Book Value - - - r- c-- - Depreciation - -- = { Net Book Value =-;-: Cost -(Piston aircraft) - Depreciation - r- r- - - 1- .-- - 50 0 I I I 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 $1.17 .03 $1.20 $ 4,845 $0.25 $231,274 $ 95,177 $4.98 19,125,000 5,964,269 73,664 6,793,654 3,855,012 56.74% 907,014 442,239 6.07 3.12 23.50 - .... .... ,.. ... . 1964 $205,346 4,299 8,869 2,396 3,762 $224,672 189,871 $ 34,801 2,584 $ 32,217 16,523 $ 15,694 $ 15,694 $0.82 $0.82 $ 3,570 $0.19 $194,241 $ 77,017 $4.03 19,125,000 5,233,548 65,815 5,582,349 3,353,842 60.08% 740,852 378,465 6.12 3.38 25.63 -- r-- - r-- c-- ,.... _ EARNINGS PER SHARE* (In Dollars) 3.00 - - - - - - - - - - - - - Earnings from 2_ 50 _ Operations F"' _ - Gain on Disposition ; of Aircraft I' 2.00 - - Estimated Benefits - from Strike of 1.50 Five Competitors - 1.00 .50 - 0 1963 1962 1961 $191,355 $155,994 $134,946 4,483 3,414 2,579 8,305 5,814 4,070 2,280 1,669 1,408 3,650 2,886 3,129 $210,073 $169,777 $146,132 177,622 154,671 134,431 $ 32,451 $ 15,106 $ 11,701 3,155 2,862 2,733 $ 29,296 $ 12,244 $ 8,968 15,472 6,579 4,842 $ 13,824 $ 5,665 $ 4,126 1,320 526 $ 13,824 $ 6,985 $ 4,652 $0.72 $0.30 $0.25 .07 .03 $0.72 $0.37 $0.28 $ 2,550 $ 1,520 $ 1,346 $0.13 $0.08 $0.08 $181,433 $158,088 $134,938 $ 64,893 $ 53,619 $ 41,056 $3.39 $2.80 $2.44 19,125,000 19,125,000 16,833,516 4,606,367 3,768,707 3,569,778 61,242 55,713 49,455 . 4,953,787 4,123,318 3,389,547 3,004,157 2,393,991 2,034,047 60.64% 58.06% 60.01 % 648,185 542,232 442,251 342,661 269,044 223,592 6.37 6.52 6.63 3.56 3.74 3.95 27.40 28.52 30.40 STOCKHOLDER EQUITY PER SHARE* (In Dollars) 12 - - - - - - - - - - - 11 ----------- 10 9 8 7 6 5 4 3 2 0 - - - - - 1960 $109,672 2,140 4,250 1,362 2,767 $120,191 113,460 $ 6,731 1,313 $ 5,418 2,735 $ 2,683 156 $ 2,839 $0.16 .01 $0.17 $ 1,346 $0.08 $121,890 $ 38,902 $2.31 16,833,504 3,241,511 49,405 3,027,450 1,757,208 58.04% 387,552 195,373 6.24 3.74 29.28 1959 $ 94,062 2,152 3,879 1,206 2,506 $103,805 94,420 $ 9,385 554 $ 8,831 4,769 $ 4,062 $ 4,062 $0.24 $0.24 $ 673 $0.04 $ 95,427 $ 37,410 $2.22 16,833,324 2,988,241 46,022 2,622,740 1,554,630 59.28% 324,018 174,936 6.05 3.58 29.14 '27 BOARD OF DIRECTORS R. W. FREEMAN W. T.BEEBE B. W. BIEDENHARN R. W. COURTS C.H. DOLSON EMERY FLINN EDWARD H. GERRY CHARLESH.KELLSTADT JOHN R. LONGMIRE R.S.MAURER T. M. MILLER DELTA AIR LINES, INC. Chairman of the Finance Committee, New Orleans, Louisiana Atlanta, Georgia Monroe, Louisiana Atlanta, Georgia Atlanta, Georgia Miami, Florida New York, New York Miami, Florida St. Louis, Missouri Atlanta, Georgia Atlanta, Georgia WINSHIP NUNNALLY Atlanta, Georgia CARLETON PUTNAM Washington, D. C. GEORGE M. SNELLINGS, JR. Monroe, Louisiana OFFICERS C.H.DOLSON Administration W. T.BEEBE R. W.ALLEN R: H. WHARTON Finance ROBERT OPPENLANDER PAULW.PATE W. A. ATCHISON M. 0. GALLOWAY J.R.HOWELL HUGH H. SAXON Legal R. S. MAURER ROBERTL. GRIFFITH J.A. COOPER MORRIS SHIPLEY Marketing T. M. MILLER SHELBY D. DEMENT CHARLES P. KNECHT J. W. MEYER Operations DAVID C. GARRETT, JR. T. P. BALL JACKS. KING L. G. RODEFELD C.B. WILDER 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 24, 1968, Monroe, Louisiana 28 President Senior Vice President-Administration Assistant Vice President-Administration Assistant Vice President-Personnel Senior Vice President-Finance and Treasurer Vice President-Properties Assistant Vice President-Computer Services Assistant Vice President-Comptroller Assistant Treasurer Assistant Treasurer Senior Vice President-General Counsel and Secretary Vice President-Federal Affairs Assistant Vice President-Economic Research Assistant Vice President-Civic Affairs Senior Vice President-Marketing Assistant Vice President-Traffic and Sales Assistant Vice President-Sales Assistant Vice President-Customer Relations Senior Vice President-Operations Assistant Vice President-Flight Operations Assistant Vice President-Flight Control Assistant Vice President-Communications Assistant Vice President-Technical Operations The friendly service offered by the stewardess is an important part of our total effort to produce the finest in jet service for the traveling public. DELTA AIR LINES, INC., GENERAL OFFICES, ATLANTA AIRPORT, ATLANTA, GEORGIA 30320