Delta Air Lines annual report 1980

DELTA AIR LINES, INC.
1980 ANNUAL REPORT
At June 30, 1980, Delta provided scheduled air transportation
to 81 domestic cities and six foreign cities in 32 states, the
District of Columbia, and six foreign countries. During fiscal
1980, Delta initiated service to Daytona Beach, Fort Myers,
Description of Business
Delta Air Lines, Inc., is a certificated trunk air carrier pro-
viding scheduled air transportation for passengers, freight and
mail over a network of routes throughout the United States and
abroad. Delta's route structure connects the Northeast and
Midwest with the Southern States from Texas to Florida; the
-Southeast to the Midwest, West, Northwest, and California;
and Sarasota/ Bradenton, Florida; Seattle/Tacoma,
Washington; Portland, Oregon; and Salt Lake City, Utah. In
addition, during fiscal 1980, Delta added 16,597 route miles in
some 25 markets.
and the East Coast to Florida. In addition, Delta operates
flights to Canada, Bermuda, the Bahamas, Puerto Rico,
England and Germany. Service over nearly all of Delta's routes
is highly competitive. As an air carrier, Delta is subject to
federal regulation pursuant to the Federal Aviation Act of 1958,
as amended, as well as many other federal and state statutes.
Highlights of the Year
The following comparative summary highlights the
accomplishments of the past year in a number of major
categories. Dollars are expressed in thousands, except
per share figures.
Operating Revenues ..... ... . ... .. .. ...................... .
Operating Expenses ..... ... . ... ..... ... .................. .
Net Income ..... . .. ... . ...
.. .. .......................... .
Earnings Per Share ... ......... .. .. .... .... .. ... . .. ....... .
Revenue Passengers Enplaned .... ..... .. .. .. ...... ... ...... .
Available Seat Miles (000) ................. .... ............ .
Revenue Passenger Miles (000) ....................... . ...... .
Passenger Load Factor ......... ....... ..... ... ... . .. .. .. ... .
Contents
Highlights of the Year . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Report to the Stockholders . . . . . . . . . . . . . . . . . . . . . . 3
Earnings and Dividends . . . . . . . . . . . . . . . . . . . . . . . . 5
Operating Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Fares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Fuel Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Capitalization and Financing ..... ..... .......... 10
Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Flight Equipment and Purchase Commitments . . . . . . 12
Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Regulatory Matters . ................... .... .... 14
Financial Statements-
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Statements oflncome ...... .. ........ .... .... 18
Statements of Retained'Earnings .. .. .. ...... ... 19
Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Statements of Changes in Financial Position . ..... 20
N ates to Financial Statements. . . . . . . . . . . . . . . . . . 21
Report of Management . . . . . . . . . . . . . . . . . . . . . . . 25
Management's Analysis and Discussion
of Summary of Operations . . . . . . . . . . . . . . . . . . . . 25
Summary of Operations . . . . . . . . . . . . . . . . . . . . . . . . 26
Other Financial and Statistical Data ............... 26
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Officers ................. ........ ...... . . . ... 27
1980
$ 2,956,960
$ 2,864,323
$ 93,158
$ 4.69
39,713,904
43,217,372
26,171,197
60.56%
1979
$ 2,427,846
$ 2,218,814
$ 136,744
$ 6.88
39,360,368
39,826,891
25,518,520
64.07%
Per Cent
Change
+22%
+29
-32
-32
+ 1
+ 9
+ 3
5
1
Delta Air Lines' senior management has a combined total of 268 years of airline experience, all of it with Delta. Shown left to right seated:
R. S. Maurer, Vice Chairman of the Board and Secretary; David C. Garrett, Jr. , President and Chief Executive Officer; W. T. Beebe, Chairman
of the Board. Standing left to right: Robert Oppenlander, Senior Vice President-Finance; Hollis L. Harris, Senior Vice President-Passenger
Service; R. W. Allen, Senior Vice President-Administration and Personnel; J. W. Callison, Senior Vice President-General Counsel;
D. P. Hettermann, Senior Vice President-Technical Operations; J. A . Cooper, Senior Vice President- Marketing; and Frank F. Rox,
Senior Vice President- Flight Operations.
2
Report to Stockholders
It is my pleasure to report to you that fiscal 1980 was a
year of significant achievement for Delta Air Lines.
Earnings for the year totaled $93,158,000, $4.69 per share,
the third highest level of earnings in Delta's history.
Although the 1980 results were down 32% from the
record earnings of $136,744,000 in fiscal 1979, they repre-
sent an outstanding accomplishment in view of the fact
that the nation's other trunk airlines reported losses
totaling approximately $487 million for the same
12-month period.
During much of the year, the airline industry,
including Delta, suffered from softening traffic growth,
double-digit inflation including huge increases in fuel
costs, and the failure of the passenger mile yield to keep
pace with increases in operating expenses. Delta was able
to overcome many of these adverse circumstances with
careful expansion of its route system, strong cost control
measures, and the hard work and dedicated support of
the more than 36,000 professional airline people who
make up the Delta family.
Operating revenues for the fiscal year increased 22 %
to $2. 96 billion. Passenger traffic, which was affected
by the developing recession during much of the year,
increased 3% over fiscal 1979 when traffic was inflated
by a strike against United Airlines and by the grounding
of certain aircraft operated by other airlines. Average
revenue per passenger mile rose 21% to 10.45cc. Through-
out the year, the Civil Aeronautics Board granted fare
increases in an effort to allow the airlines to keep up with
rising costs, especially fuel. The inevitable time lag
between the cost increases and the collection of the
increased fares, however, cost the airlines many millions
of dollars in needed revenue. Late in the year the CAB
provided relief from the regulatory lag problem by giving
the airlines substantial flexibility to increase fares without
prior CAB approval. Throughout the year, heightened
competition among the airlines resulted in many new
discount fares as carriers sought to buy their way into
new markets or hold their share of existing markets. As
increasing numbers of passengers took advantage of the
discount fares, a substantial percentage of the fare
increases was nullified.
Operating expenses for the year totaled $2.86 billion,
an increase of $645.5 million or 29% over fiscal 1979.
Increased fuel costs accounted for 59% of the growth in
operating expenses, as the average price per gallon rose
81 % to 75.07cc. We were able to offset some of this in-
crease through the Company's redoubled efforts to
increase our efficient use of fuel. Delta increased revenue
plane miles 3% and available seat miles 9% while using
2. 9 million fewer gallons than in fiscal 1979. Tight control
over the level of employment held the increase in salaries
and related costs to 15%. Substantially all of the 6%
increase in personnel in the current year was related to
Delta's entry into new cities or new routes.
Delta's financial strength was demonstrated during
the year as the Company issued commercial paper for
the first time in its history. Delta's commercial paper re-
ceived the highest possible ratings, A-1 and P-1, from two
major rating agencies. In addition, the Company nego-
tiated a credit agreement with a group of 30 banks, which
provides for unsecured borrowings up to $150 million
at the prime rate. On June 30, 1980, the Company made
an initial borrowing of $60 million under the new agree-
ment and simultaneously prepaid the remaining
$57.7 million principal outstanding under the 1973
Bank Credit Agreement.
Early in the year the Company borrowed $35 million
from the Development Authority of Clayton County,
Georgia under a 6%% unsecured loan agreement. The
proceeds of the loan were used to construct Delta's
catering and cargo facilities at the Atlanta airport.
Long-term debt at year-end totaled $163.1 million,
including $15.2 million in current maturities. Debt was
equal to 18% of stockholder equity, one of the lowest
debt-to-equity ratios in the airline industry. During the
year, Delta financed more than 85% of its $356 million
capital expenditures with internally generated funds.
Delta's already strong route system was further
strengthened by the addition of eight new cities including
Daytona Beach, Fort Myers, Portland, Oregon, Salt Lake
City, Sarasota/ Bradenton and Seattle/Tacoma. How-
ever, most of our route development activity involved
implementing non-stop flights between cities which
Delta was already serving including Denver, St.Louis,
Orlando, Cleveland, Louisville, Reno, Ft.Wayne, and
Nassau. Subsequent to the end of the year, new nonstop
service was added between Atlanta and Bermuda. While
Delta has expanded its competitive position by moving
into markets served by other carriers, our system has
likewise been subjected to increased competition, partic-
ularly on routes from the East Coast to Florida and the
Midwest to Florida. Those carriers who entered our
markets have found that Delta's reputation for hard
competition is well founded. Already, some of them have
either abandoned or curtailed their initial operations.
3
Delta's aircraft fleet, one of the youngest and most
efficient in the airline industry, was further improved
by the addition of 13 new aircraft during the year, in-
cluding 10 Boeing B-727-200's, two Lockheed L-1011-l's
and one Lockheed L-1011-500. The Company sold six
Douglas DC-9-32's and two Douglas DC-8-Sl's, resulting
in a gain of $1.06 per share.
While fiscal 1980 was a satisfying year of solid
accomplishment for Delta, we look forward to the future
with great anticipation. Even though the country is now
in the midst of an economic recession and the rate of
inflation will likely continue at a high level for the coming
year, we believe that fiscal 1981 will show good results.
When the national economy stabilizes and begins to
grow, which we anticipate in fiscal 1981, Delta will be
able to take maximum advantage of its opportunities.
We can now plan and implement decisions as to what
domestic markets we want to serve, what fares we will
charge, and the level of service we will provide our
customers-all without substantial interference from the
CAB. Our success will depend upon our skill and hard
work and not upon the decisions of a government agency.
During the coming year, we expect traffic growth
to continue to be soft with some improvement late in the
year. Delta will continue careful expansion of its route
system. We expect to move into several major new
markets during the year and will continue to develop the
new markets added during 1980.
In the new environment of a free market, a number
of trunk airlines have restructured their route systems to
exclude service to all cities except major traffic centers.
Delta will continue to serve smaller markets through our
efficient "hub and spoke" system of aircraft scheduling.
We believe that such service is a major source of our
marketing strength and expect to continue to develop
such operations around the country.
To provide the additional capacity for our route
expansion program, we will take delivery of 12 new air-
craft during the coming year, including eight Boeing
B-727-200's, three Lockheed L-1011-l's and one Lockheed
L-1011-500. Early in the year we will move into the new
Atlanta terminal complex, the world's largest airline
passenger terminal. It will provide much needed addi-
tional space as well as the means for increased operating
flexibility.
The Company will continue to exercise strong cost
controls, especially in the areas of productivity and fuel
conservation, in order to maintain Delta's financial
position and to keep fares and rates at reasonable levels.
4
These efforts, however, will not detract from our con-
tinued recognition that a consistently high level of service
will be even more critical to success as competition
intensifies.
While we are optimistic about the future, we do
not minimize the obstacles in front of us. A free market
environment demands careful planning, efficient imple-
mentation, and the ability to react rapidly to changing
events. All the people who make up the Delta family are
committed to maintaining Delta's position of leadership
in the airline industry throughout the decade ahead.
J)~(!__~
DAVID C. GARRETT, JR.
President and Chief Executive Officer
August 20, 1980
Earnings and Dividends
Fiscal 1980 earnings were $93.2 million ($4.69 per
share), a decrease of 32% from the record earnings of
$136.7 million ($6.88 per share) reported in 1979. The
following table compares operating results for fiscal
1980 and 1979.
Per Cent
1980 1979 Change
(in Th ousands)
Operating Income . ........ $ 92,637 $209,032 56%
Other Expense (Income):
Interest Expense ....... 21,852 16,178 + 35
Less-Interest
Capitalized ... . . .. . ... 10,790 6,717 + 61
11,062 9,461 + 17
Gain on Disposition
of Aircraft . . ... . . (36,091) (20,514) + 76
Realized/ Unrealized
Loss on Foreign
CurrencyTranslation. 3,735 7,110 47
Miscellaneous Income,
Net ...... . (10,687) (9, 069) + 18
(31,981) (13, 012) +146
Income Before Taxes. 124,618 222,044 44
Provision for Income Taxes:
Income Taxes Provided 54,433 104,429 . 48
Amortization of
Investment Tax
Credits . .. (22,973) (19,129) + 20
31,460 85,300 63
Net Income .. . . . . . .
. . $ 93,158 $136,744 32%
Net Income Per Share . . ... . . $4.69 $6.88 32%
Operating income in fiscal 1980 totaled $92.6 million,
a decline of 56% from last year, as the combined effects
of general inflation and spiraling fuel prices caused oper-
ating expenses to increase 29% to $2.86 billion while
operating revenues grew only 22% to $2.96 billion.
Other income was up $19 million, due principally to
increased gains on the sale of aircraft and a reduction in
the loss on foreign currency translation. Net interest
expense increased $1.6 million, the result of a higher level
of debt and record high interest rates, partially offset by
a $4.1 million increase in interest capitalized.
Income taxes were provided on book income at a
rate of approximately 44% in fiscal 1980 and 47% in 1979.
The lower rate in 1980 reflects the full-year reduction in
the Federal corporate income tax rate to 46% and the
application of long-term capital gains tax on qualifying
aircraft sales. The provisions for income taxes were
reduced by investment tax credit amortization of
$23.0 million in 1980 and $19.1 million in 1979.
The Company made dividend payments totaling
$23.9 million during the year, equal to $1.20 per share,
a 14% increase over the $20.9 million, $1.05 per share,
paid last year.
Fiscal 1980 was the 31st consecutive year in which
Delta has made cash dividend payments.
Earnings per Share
In Dollars
'80
'79
'78
'77
'76
'75
'74
'73
1 2
Dividends per Share
In Dollars
'80
'79
'78
'77
'76
'75
'74
'73
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I I
I I
I I
I I
I I
I I
I I
I I
I I
.25
3 4 5 6
I
I
I
I
I
I
I
I
I
.50 .75 1.00
7
1.25
5
Operating Revenues
Operating revenues for fiscal 1980 and 1979 are compared
by major revenue categories in the following table:
Scheduled Passenger ..... . .
Cargo ............. . .... .
Charter ... . ........... . . .
Other, Net ....... .. ... . . .
Total .... ........... .
1980 1979
(In Th ousands)
$2,733,820 $2,213,024
190,490 167,904
5,344 24,691
27,306 22,227
$2,956,960 $2,427,846
Per Cent
Change
+24%
+13
-78
+23
+22 %
Total operating revenues in 1980 increased by
$529 .1 million to $2. 96 billion from the $2.43 billion re-
ported last year. Both passenger and cargo traffic were
adversely impacted by the developing recession in fiscal
1980, while traffic in fiscal 1979 was inflated by a strike
against United Airlines and the temporary grounding of
certain aircraft operated by other airlines.
Passenger revenues from scheduled operations grew
24% or $520.8 million to $2.73 billion. Revenue passenger
miles (RPM's) totaled 26.17 billion, a 3% gain over the
previous year. During the year, Delta implemented
domestic fare increases totaling 48%. However, the pas-
senger mile yield increased only 21% to 10.45 due to a
significant increase in the use of discount fares. Revenue
passenger miles from discount traffic amounted to 45%
of domestic RPM's compared to 37% in 1979 and 27%
in 1978. Discount traffic in Delta's operations to Europe
amounted to 79% of total European RPM's.
Cargo revenues grew 13% to $190.5 million. Cargo
ton miles were essentially the same as last year while the
average ton mile yield rose 13%. Delta freight operations
continue to be affected by increased competition as the
result of deregulation of cargo services.
In response to the continued proliferation of dis-
count travel and the Company's desire to maximize
scheduled services, charter operations were reduced
significantly in 1980, resulting in a $19.3 million reduction
in charter revenue to $5.3 million. Other net revenues
were up $5.1 million.
Per Cent
Revenue Statistics 1980 1979 Change
Revenue Passenger
Miles ( 000) .. .... 26,171,197 25,518,520 + 3%
Revenue Passengers
Enplaned .............. 39,713,904 39,360,368 + 1
Passenger Load Factor . . .... 60.56% 64.07% 5
Passenger Mile Yield ... . .. . 10.45(): 8.67(): +21
Cargo Ton Miles ( 000) . . .... 310,406 309,518
Cargo Ton Mile Yield 61.37(): 54.25ct +13
6
Serving meals is just one of many duties of a flight attendant
to insure our passengers a pleasant trip.
Average Passenger Mile Yield
Cents per Mile
I I I I I I
'80
I I I I I I
'79
I I I I I I
'78
I I I I I I
'77
I I I I I I
'76
I I I I ! I
'75
I I I I I I
'74
I I I I I I
'73
I I I I I I
2 4
I I
I I
I I
I I
I I
I I
I I
I
I
I
6 8 10 12
Operating Expenses
Total operating expenses for the year increased
$645.5 million or 29% while cash expenses were up 31 % .
Operating capacity increased 9% to 43.22 billion avail-
able seat miles as revenue plane miles were up 3%. By far
the most significant factor affecting Delta's operating
expenses was the continuing increase in the price of fuel.
Other factors were the accelerated spiral of general
inflation and the fully expensed start-up costs for new
cities and routes.
The following table compares operating expenses
by major expense category for fiscal 1980 with 1979.
Salaries and Related Costs ..
Aircraft Fuel .. .. ... . . ... .
Aircraft Maintenance
Materials and Repairs . . . .
Aircraft Rentals . .. . . ... .. .
Other Rentals .. . . . .... . . .
Landing Fees . .. . .. . .. . . . .
Passenger Food and
Related Supplies .. ..... .
Agency Commissions .. . .. .
Advertising .... . ... .
Other Cash Costs . . .. . . .. .
Total Cash Costs . .
Depreciation and
Amortization ... . ..... .
Total Operating
Expenses . .. .. .
1980 1979
(In Th ousands)
$1,161,487 $1,014,144
857,165 475,683
64,325 52,689
6,501 7,369
38,245 33,819
45,014 41,446
100,003 92,223
114,304 79,183
39,385 32,760
243,800 206,211
$2,670,229 $2,035,527
194,094 183,287
$2,864,323 $2,218,814
Per Cent
Change
+15 %
+80
+22
-12
+13
+ 9
+ 8
+44
+20
+18
+31 %
+ 6
+29 %
Increases in fuel costs alone accounted for 60% of
the increase in Delta's cash costs. While fuel conservation
efforts produced a reduction of 2. 9 million gallons from
the 1979 consumption total, the average price per gallon
rose 81 % to 75. 07 . During the June, 1980 quarter, fuel
price increases moderated somewhat, but the average
price for the month of June, 1980 was 87.63 per gallon.
Salaries and related costs rose 15% as the result of
wage increases, payroll tax increases and a 6% growth in
the level of employment.
Aircraft maintenance materials and repairs expense
was up 22% reflecting inflation, the increase in the fleet
size and the cost of various programs to increase the effi-
ciency and service life of the aircraft fleet. Aircraft rental
expense decreased 12% as two leased L-1011-200 aircraft
were returned to the lessor late in fiscal 1980.
Increased passenger revenue and the growing
percentage of revenue generated by travel agency sales
accounted for the 44% growth in agency commissions.
Landing fees increased 9%, due mainly to rate increases.
The 20% growth in advertising expense reflects the
added promotional costs for the new cities, routes and
fares. Other cash costs increased 18%. Depreciation and
amortization expense increased 6% due to the continued
introduction of new aircraft.
For the current year, the breakeven load factor
increased slightly to 58.51 % from 58.02% in fiscal 1979.
Per Cent
O perating Statistics 1980 1979 Change
Revenue Plane Miles (000) .. 269,972 262,115 + 3%
Available Seat Miles (000) . . 43,217,372 39,826,891 + 9
AvailableTonMiles(000) .. . 5,748,143 5,357,995 + 7
Fuel Gallons Consumed (000) 1,141,885 1,144,823
Average Price Per
Fuel Gallon . . . .. . .. . ... 75.07(!: 41.55(!: +81
Passenger Load Factor . . ... 60.56% 64.07% 5
Breakeven Load Factor ... . . 58.51 % 58.02% + 1
Average Price of Jet Fuel
In Dollars per Gallon
I l
'80
I 1
'79
r I
'78
I I
'77
I I
'76
I I
'75
r
-,
'74
I I
'73
I I
.20 .40 .60
Actual and Breakeven Load Factors
.80
70% . - - - - - - - - - - - - - - - - - -- - - - - ~
Actual
Breakeven
60% ~ - - , - - - - - - - - - - - - - - -
50%
40%
30%
7
Fares
In response to the rapid escalation of costs, especially
fuel costs, the CAB allowed the airlines to implement a
number of fare increases during the year. Delta's in-
creases in basic domestic fares totaled 48%. In addition,
several increases in international fares were implemented.
The increase in the average yield per revenue passenger
mile, however, did not keep pace with either the cost in-
creases or the increases in fares. The average yield for the
year was 10.45<t, 21 % above the average for fiscal 1979.
While the CAB recognized the need for fare in-
creases, its procedures for approving increases caused
a considerable delay from the time costs went up until the
time carriers could begin collecting the higher fares. The
CAB responded to this situation by shortening the time
for periodic review of the carriers' need for fare increases,
from every six months to every three months, and then
two months. Such frequent changes in the fare resulted
in the confusion of passengers, travel agencies, and car-
riers alike. Finally, the CAB resolved both problems
by issuing an interim policy which allows the carriers
substantial flexibility to raise and complete freedom to
lower fares from the standard industry fare level without
prior CAB approval. This new policy gives the carriers
flexibility to adjust fares to meet their individual needs as
well as to reduce the frequency with which fares are
changed. Since the new fare flexibility policy was issued,
Delta has raised its domestic fares 9% while other carriers
raised their fares by a substantially larger percentage. In
markets where they are directly competitive with Delta,
however, other carriers generally have reduced their
fares to match Delta's lower fare.
In addition to the confusing situation involving
basic fares, the industry was beset by a growing number
of deep discount fares as carriers tried to establish posi-
tions in new markets and protect historical shares of
old markets.
The result has been substantial diversion from full
fares to discounts. For Delta, discount fares accounted
for 45% of domestic revenue passenger miles, up from
37% in fiscal 1979. In Delta's operations to Europe,
discount fares were used on 79% of the revenue pas-
senger miles.
The Distribution of Passenger Traffic by Fare Type
Revenue Passenger Miles in Billions
'80
'79
'78
'77
'76
-
-
-
-
-- T
5 10
i -
I l
I ,1
15 20
First Class-Full Fare Coach-Full Fare Discount
I
25
International
Service ~s his ~iddle na11:e- th.e passenger service agent- always there to help the Delta passenger, whether it's giving directions to a
connecting flight or helping a little girl find her lost doll.
8
30
Fuel Matters
During fiscal year 1980, Delta's fuel cost continued the
unprecedented climb that began late in fiscal 1979. The
average price per gallon soared from 41.55 to 75.07, an
increase of 81 % . The average price for the month of June,
1980, was 87.63. Aircraft fuel accounted for 30% of
Delta's total operating expenses in fiscal 1980 compared
with 21% in 1979. The impact of the enormous increases
in the price of fuel was softened by tight cost control
measures aimed at holding down the average price of
fuel and making the Company's use of fuel as efficient
as possible.
The Company has taken action on a number of
fronts to offset the continued escalation of fuel prices.
These measures include the expansion of Delta's fuel
storage capabilities across the country, developing new
fuel suppliers, contracting for the exclusive use of barges,
becoming a direct shipper on a number of pipeline
systems, developing new through-put arrangements,
and participating in exchanges of fuel between cities.
The Company has continued its efforts toward
achieving greater conservation in the use of fuel. Delta's
fuel conservation measures taken during the past year
include a reduction in aircraft cruise speeds, improved
coordination of maintenance activities to reduce the
number of test flights, more efficient aircraft procedures
for ground operations, improved aircraft aerodynamic
cleanliness, and increased use of flight simulators to
reduce aircraft training flights. These actions produced a
9% improvement in the seat mile productivity per fuel
gallon consumed.
Delta will achieve additional fuel efficiency in the .
coming year as part of its fleet is equipped with sophisti-
cated devices which will provide optimum fuel usage for
every flight condition.
Revenue Passenger Miles per Fuel Gallon
'80
'79
'78
'77
'76
'75
'74
'73
.
~
I
15
I
]
I
I
20
j .
I_
25
Delta's reservation agents answer the telephone more than 180,000
times each day of the year, making reservations as well as providing
information about schedules, fares, tickets, and a host of other
helpful travel information.
Fuel Consumption
Millions of Gallons
'80
'79
'78
'77
'76
'75
'74
'73
250
I
I
500 750
I
I
I
I
I
I
1000 1250
9
Capitalization and Financing
At June 30, 1980, long-term debt totaled $163.1 million,
including current maturities, up from $140.3 million for
the previous year. Early in the year, the Company bor-
rowed $35 million from the Development Authority of
Clayton County, Georgia to finance a flight kitchen and
a cargo terminal at the new Atlanta Airport Terminal
Complex. The loan, which carries an interest rate of
6% % , provides for interest-only payments through 1999
and interest and principal payments from the year 2000
through 2011.
Late in the year, the Company negotiated a credit
agreement with a group of 30 banks which provides for
unsecured borrowings up to $150 million, at prime inter-
est rate, on a revolving basis through June, 1982. At that
time, the outstanding principal will be converted to a
one-year term loan. On June 30, 1980, the Company bor-
rowed $60 million under the new agreement. On the same
date, Delta prepaid the remaining $57.7 million principal
outstanding under the 1973 Bank Credit Agreement.
During the year, the Company issued commercial
paper for the first time in its history to provide an
alternative source of short-term funds at interest rates
substantially below the prime rate. At June 30, 1980, the
outstanding balance was $30. 9 million with various
maturity dates to August 4, 1980, at interest rates
ranging from 8.25% to 9.625%.
Stockholder Equity per Share
In Dollars
'80
'79
'78
'77
'76
'75
'74
'73
10
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I I I
I I I
I I I
I I I
I I I
I I I
I I I
I I
I
I I
10 20 30 40 so
Also during the year, the Company acquired
$3.3 million of the 6 % Convertible Subordinated
Debentures for future sinking fund requirements.
Outstanding purchase commitments at year-end for
new aircraft, related spare engines, and modification of
the DC-8-61 fleet will require future expenditures of
approximately $1.2 billion. Mandatory repayments of
long-term debt due in fiscal 1981 total $15.2 million.
Total stockholder equity at June 30, 1980, was
$922 million or $46.38 per share, an increase of 8% over
the $42.89 per share last year.
Passengers seldom see Delta's mechanics, but their skill and
dedication insure that every Delta aircraft is both safe and efficient.
Facilities
In the fall of 1980, Delta will move its Atlanta operations
into the $400 million Central Passenger Terminal
Complex. Designed to accommodate up to 60 million
passengers annually, it will be the largest facility of its
kind in the world. The terminal complex will be made up
of four areas: two landside terminal buildings and their
connecting bridge areas; the people mover and pedes-
trian mall connecting the terminals and concourse
buildings; four concourse buildings containing the flight
arrival and departure areas; and a special facility for
international flights. The new terminal complex contains
2.6 million square feet of usable space.
Delta's ability to serve its passengers in Atlanta will
be greatly enhanced at the new terminal with features
which include: over 300 linear feet of ticket counter space;
50 all-weather passenger loading positions; a baggage
claim area 10 times larger than presently available; and
sophisticated equipment designed to make the pas-
senger's journey as comfortable and troublefree as
possible. Delta's annual rental and operating costs in the
new terminal will be approximately $20 million.
In addition to the passenger terminal complex,
Delta's new Atlanta facilities will include an air cargo
terminal and a flight kitchen which will be the largest ca-
tering facility serving a single airline in the United States.
To support Delta's growing system, new terminal
facilities have been occupied in the Florida cities of Fort
Myers, Sarasota/ Bradenton, and Daytona Beach, and
in the Northwest cities of Seattle/Tacoma, Portland,
Oregon and Salt Lake City. Delta opened a reservations
facility in San Juan, and other reservations offices were
enlarged during the year. Subsequent to the end of the fis-
cal year, a new reservations office was opened in Denver.
The Company has also begun architectural and
engineering work for a major expansion of its mainte-
nance and overhaul base and for construction of a new
flight training building to house flight simulators, instruc-
tors and support personnel to be located at Hartsfield
Atlanta International Airport.
The Company has sold its Greenbriar office complex
in Atlanta. The terms of the sale include options for Delta
to lease the facilities from the purchaser for periods up
to 19years.
Workmen put the finishing touches to the new midfield terminal at Hartsfield Atlanta International Airport, the world's largest airline
passenger terminal complex. Designed to meet the demands of the air traveler well into the future, this new facility is capable of serving
60 million passengers annually. Delta will operate SO all-weather passenger loading positions at the new terminal.
11
Flight Equipment and Purchase
Commitments
During the past fiscal year, Delta accepted delivery of
10 advanced model Boeing B-727-200 aircraft, two
Lockheed L-1011-laircraft and one long-range L-1011-500
aircraft. The fleet was reduced by the sale of six DC-9-32
aircraft and two DC-8-51 aircraft and the return of two
leased L-1011-200 aircraft to the lessor. At June 30, 1980,
Delta's fleet consisted of the following aircraft:
Type of
O w ned
A ircraft Seats Leased Total
L-1011-500 . .. . . . . . 241
L-1011-1/ 200 . . . . .
. 293
DC-8-61 . . . ... .... 198
DC-8-51 .. .... . . .. 142/152
B-727-200 .. .. . . . . . 137
DC-9-32 ....... . .. 88
Total . . . .... .. . . . .. .. . . ..
2
29
13
7
113
41
205
7
2
29
13
7
120
41
7 212
At the end of the fiscal year, arrangements had been
finalized for the sale of one DC-9-32 aircraft which is to
be delivered in December, 1980.
The following table shows Delta's aircraft purchase
commitments for fiscal 1981 through 1985:
Years Ending Lockheed Lockheed Boeing Boeing
June 30: L-1011-500 L-1011-1 B-727-200 B-767-200
1981 . . . ... . . . 1 3 8
1982 . . . . .. . . . 4
1983 .. . . .. ... 11
1984 . .. . . . ... 7
1985 ..... . .. . 2
Total .... 1 7 8 20
During fiscal 1980, Delta reached agreement with
the lessor to purchase two B-727-200 aircraft which are
currently being leased from GATX Leasing Corporation.
The purchases are scheduled to be completed in the
September, 1980, and March, 1981, quarters. Subsequent
to the fiscal year end, Delta exercised one option to pur-
chase an additional B-727-200 with delivery scheduled
for the December, 1981 quarter, and three options were
allowed to expire.
At June 30, 1980, Delta had an agreement providing
for options of up to 12 additional Lockheed L-1011-1 air-
craft with tentative deliveries in fiscal years 1982 through
1985. Delta also had an agreement providing for options
of up to 22 additional Boeing B-767-200 aircraft with
tentative deliveries in fiscal years 1984 through 1987.
The Company has finalized arrangements for the
re-engining of the DC-8-61 fleet. The program will begin
in November, 1981, with completion scheduled in August,
1983. Also, the Company has begun retrofitting the
DC-9-32 fleet with engine noise suppression kits, and the
modification will be completed by February, 1982.
12
Delta operates the largest fleet of Boeing B-727-200 aircraft in the
world, providing efficient service to millions of passengers from
Maine to California.
The Douglas DC-9-32 aircraft provides frequent and convenient
flight schedules to millions of passengers on Delta's medium and
short-haul routes.
Delta's Lockheed L-1011 TriStars provide our passengers
with unsurpassed comfort and luxury on both domestic and
international flights.
Personnel
At June 30, 1980, the team of Delta Professionals
numbered 36,883 (includingl,840 temporary and part-
time employees), compared to the June 30, 1979, total of
36,546 (including 2,038 temporary and part-time em-
ployees). Direct salaries totaled $936.5 million, a 14%
increase over last year, and related fringe benefits
increased 17% to $225.0 million. Expenditures for salaries
and fringe benefits equalled 39 of each revenue dollar
versus 42<!: in fiscal 1979.
During the year, Mr. W. T. Beebe, Chairman of the
Board, retired as an employee of the Company after 32
years of service. Subsequently, the Board of Directors re-
elected Mr. Beebe to the Board as an outside director and
elected him Chairman of the Board, a newly created posi-
tion as an officer of the Board. Mr. David C. Garrett, Jr.
continues in his position as Delta's President and Chief
Executive Officer.
Delta's strong leadership was further developed by
the promotion of six officers to positions of increased
responsibility and by the election of eight new officers.
Those officers receiving promotions during the year
include John P. Davis, Vice President-Maintenance;
Lamar Durrett, Vice President-Facilities and Technical
Operations Administration; C. J. May, Vice President-
Engineering; and R. A. McKinnon, Vice President-
Marketing Administration. Subsequent to the end of the
year, Jeanette Easley was promoted to Vice President-
In-Flight Service and C. A. Thompson was promoted to
Vice President-Stations Administration. The newly
elected officers are: Don M. Adams, Assistant Vice
President-Law; R. G. Caldwell, Assistant Vice
President-Personnel Administration; Susan Q. Downer,
Assistant Secretary; Robert S. Harkey, Assistant Vice
President-Law; W.W. Hawkins, Assistant Vice
President-Marketing; Dickey C. Lee, Assistant Vice
President-Internal Auditing; W. Allen Reed, Assistant
Treasurer-Investment Management; and Lawson Rollins,
Assistant Comptroller-Revenue Accounting. In addition
to Mr. Beebe's retirement, J. T. Maples, Assistant Vice
President-Marketing Planning, retired following 37
years of service; Charles P. Knecht, Vice President-
Marketing Programs, retired after 44 years of service;
and J. A. York, Vice President-Personnel Programs,
retired after 33 years of service. Each of these men made
many outstanding contributions to Delta and the airline
industry during their long and distinguished careers.
Every passenger is given attentive service at Delta's conveniently
located City Ticket Offices, whether it's for ticket purchases,
reservations or just for information.
Marketing
Delta expanded its operations into eight new cities
during the year including Daytona Beach, Fort Myers,
and Sarasota/ Bradenton, Florida; Seattle/ Tacoma,
Washington; Portland, Oregon; and Salt Lake City, Utah.
In addition a number of new nonstop routes were added
between cities the Company was already serving includ-
ing Atlanta to Nassau and St.Louis; Dallas/ Fort Worth
to Denver, Little Rock, San Antonio, and Houston;
Orlando to Cleveland, Philadelphia, and Boston; New
York City to West Palm Beach; Ft.Wayne to Louisville
and Atlanta; and Phoenix to San Diego. In total, Delta
added 16,600 new route miles to its system in fiscal 1980.
On July 19, 1980, nonstop service was added between
Atlanta and Bermuda.
In fiscal 1980, while other carriers relied heavily on
discount coupons, games, lotteries, and various other
giveaway promotions, Delta chose to invest its mar-
keting resources in lasting improvements in its customer
services. The Company completed the automation of all
its ticket offices and began a program to automate
certain travel agencies. Improvements were made to
Delta's automated reservations system. New and more
efficient rnmmunications systems were added to Delta's
reservations offices. Additional ticket offices were added .
at locations convenient to customers in major cities
across the country.
Delta is committed to further improvements to its
already highly regarded customer service in all aspects-
reservations, ticketing, in-flight service, baggage handling
and convenient flight schedules. During the coming year,
a computerized fare system will be introduced which will
quickly calculate fares for the most difficult and involved
itinerary and produce for the customer a printed report 1
showing each flight, date and fare for each planned trip.
13
Regulatory Matters
The Civil Aeronautics Board (CAB) continues to admin-
ister an uneven transition to deregulation of the industry,
with rapid deregulation in some areas, but with slow
progress, or no progress at all, toward deregulation
in other areas.
With regard to market entry, the CAB has rapidly
removed regulatory restraints. Thus, air carriers are free
(with only minor exceptions) to enter domestic markets
of their choice, and this has been accomplished within
less than two years after the Airline Deregulation Act of
1978 was passed, rather than the three years contem-
plated by that Act. Also, where foreign governments
have been willing to negotiate liberal bilateral agreements
so as to permit multiple designations of each country's
carriers, the CAB has used expedited show cause pro-
cedures to grant authority to all interested U.S. carriers,
and President Carter has routinely approved these
decisions. With other, more restrictive bilateral agree-
ments, the CAB has been required to engage in carrier
selection among competing applicants, and the pre-
vailing policy in making these selections has been to
choose the carrier or carriers proposing the lowest fare
and most varied quality of service options, with emphasis
on enhancing competition among U.S. flag carriers-
particularly over the North Atlantic.
The CAB's administration of route exit (suspen-
sions, terminations and reductions of service) has been
generally consistent with the Congressional intent that
carriers should have greater flexibility to shift resources
from one market to another, so long as an individual
community is not deprived of a minimum level of service
(defined in the law as "essential air service") required to
tie the area into the national air transportation system.
Fare deregulation has not proceeded as rapidly as
decontrol of market entry or relaxation of exit con-
straints. Throughout 1979 and until May of 1980, the
CAB permitted domestic fares to exceed the "standard
industry fare level" (the SIFL, defined by the Airline
Deregulation Act of 1978 as the fares in effect on July 1,
1977, as adjusted for subsequent cost changes) by not
more than 10%, although fares as much as 50% to 70%
below the SIFL have been permitted.
In May of 1980, the Board adopted an "interim"
policy, which grants total freedom to set fares below the
SIFL, and the following expanded flexibility above the
SIFL: unlimited pricing flexibility in markets of 200 miles
length or less; a 50% upward pricing zone in 200-400 mile
markets; and 30% upward flexibility in markets over
400 miles. Shortly after adopting this interim policy, the
Board modified its procedure for adjusting the SIFL:
during the latter half of 1979 and the first six months of
1980, the CAB adjusted the SIFL for rapidly escalating
fuel and other costs as often as every two months. The
14
Each flight crew thoroughly prepares for every flight, checking
the weather conditions along the flight route as well as airport
conditions at each destination.
The constant study of local and en route weather conditions
by Delta's staff of meteorologists assures passenger comfort
on every flight.
new procedure under the interim policy will revert to
adjustment of the SIFL for all cost changes every six
months, which is the period prescribed by the Airline
Deregulation Act. The Board has also recently decided to
extend the domestic zone of flexibility to Puerto Rican,
Hawaiian, Virgin Island and Alaskan routes.
Delta's gate agents, in addition to boarding passengers, take care
of all the last minute details necessary to insure passengers have
an enjoyable flight.
Delta's customer service agents know that fast baggage service is
a vital part of our professional service to every passenger.
This interim fare flexibility policy is under review
by the CAB for further modification. The policy has also
been challenged by the Aviation Consumer Action
Project (ACAP) a consumerist organization, in the
Federal Court of Appeals for the District of Columbia
Circuit. The Court has denied an ACAP motion for stay
of the interim policy, pending full review of the
ACAP appeal.
CAB regulation of international fares has also
changed because of the passage in early 1980 of the
International Air Transportation Competition Act of
1979. This law transposes the procompetitive domestic
policies to international markets, including the establish-
ment of zones of flexibility in the pricing of international
fares. The International Act establishes a "standard
foreign fare level" (SFFL), which is based upon fares in
effect on October 1, 1979, except that the CAB has dis-
cretion to establish a different SFFL for markets with as
much as 25% of total traffic carried by U.S. carriers in
foreign air transportation. The SFFL must be adjusted
every 60 days for fuel cost changes, and at least semi-
annually for other cost changes. Within a zone of 5%
above the SFFL and 50% below, carriers are free to adjust
international fares with only limited provision for
suspension of such fares by the CAB.
Although in the foregoing areas the CAB has been
generally faithful to the Congressional mandate to place
maximum reliance upon market forces and competition
(rather than governmental regulation) to shape air
transportation, other CAB activities remain highly
inconsistent with the economic principles underlying
deregulation. The major area of inconsistency involves
efforts by the CAB's Bureau of Consumer Protection to
interfere with the day-to-day relations between carriers
and their customers. Such interference includes detailed
regulation of carrier advertising, seating accommoda-
tions (smoking vs. nonsmoking preferences), reserva-
tions procedures and denied boarding rules. In other
areas, the CAB is particularly rigid and out of tune with
the spirit of deregulation: for example, the Board has
promulgated rules requiring burdensome and expensive
notice of routine schedule revisions.
Under these circumstances, Delta believes that it is
highly desirable for the Congress to accelerate the sunset
of the Civil Aeronautics Board so that pressures will
not build to extend the life of the agency beyond the
currently-slated expiration date of January 1, 1985; and
so that artificial governmental constraints and wasteful
regulations can be quickly eliminated. Only then will
the industry have the opportunity to function as the
openly competitive, free enterprise system the Congress
called for in the Airline Deregulation Act.
Presently certain members of the Congress are
actively pursuing legislation that would significantly
modify the role of the FAA iri the fostering and regula-
tion of commercial air transportation and would change
the existing aircraft certification procedures. It is Delta's
opinion that the existing system of certification pro-
cedures and operational policies has developed one of the
safest and best air transportation systems in the world.
Delta Air Lines recommends against a major overhaul of
the certification/ continuing airworthiness process but
endorses only fine tuning of those procedures.
15
DELTA AIR LINES, INC.
Balance Sheets June 30, 1980andl979
ASSETS
Current Assets:
Cash . ............ ...... . .. .. .. ... ...... .. ... .. . .... . ......... . . . . .
Short-term cash investments, at cost . . .. ... . . . .... ... . . ... .. ... ...... .. .
Accounts receivable, net . . . . ...... .. . .. .. .. ... .. ... ...... ... ........ .
Maintenance and operating supplies, at average cost .. .. .. ..... .. .. ..... . . .
Prepaid expenses, etc . .. .. .... . . ... . .. . ... ..... . .... . ............ .. .. .
Total current assets .. .... ... .. .. ... ... ......... .. .... . ...... . ... .
Property and Equipment (Notes 2 and 4):
Flight Ground Property
Equipment and Equipment
Cost-
1980 . .. . . .... . .. .. . . ... ....... . ... .. . $2,388,808 $ 372,793
1979 ... . ... . ... . .. ... .. . ... . .... .... . 2,164,422 315,900
Accumulated depreciation-
1980 ............. ... . . ...... ....... . . $1,031,681 $ 177,091
1979 . . . ... . .. .. ............. . ....... . 895,532 165,397
Advance payments for new equipment (Note 2) .. . ...... . ........ . ... . .. .
Other Assets:
Funds held by bond trustee (Note 3) .............. . ... ... .. . .. ..... .. . . .
Other assets . . .. . . . .. . . .. . ...... .... . .... . ... . .. . ..... . .. . ........ . .
16
1980 1979
(In Thousands)
$ 37,963
101
38,064
283,039
37,836
10,558
369,497
2,761,601
1,208,772
1,552,829
90,952
1,643,781
18,120
11,141
29,261
$2,042,539
$ 25,712
3,216
28,928
229,284
16,275
9,696
284,183
2,480,322
1,060,929
1,419,393
78,420
1,497,813
6,329
6,329
$1,788,325
LIABILITIES AND STOCKHOLDER EQUITY
Current Liabilities:
Current maturities of long-term debt .... . .. ... .. . .. . . . . . ......... . ..... .
Note payable . ... . ............ . ...... .. .... ... ........ .. . .. ........ .
Commercial paper outstanding (Note 7) .. . ................. .. . . ........ .
Accounts payable and accrued liabilities .......... ... ........ . ....... . . . .
Air traffic liability ... .... ... . . . . . . ...... .... .. . .. ..... ... . ..... ..... .
Accrued income taxes .... ..... . .... .... .. . .... ... ...... . ... ... ... .. . .
Total current liabilities ...... . . .. . ... ...... .... ... . ............ . . .
Long-Term Debt (Note 3) .. ...... . .. . .. .. ......... . ............. . . .. ... . . .
Deferred Credits:
Deferred income taxes
Unamortized investment tax credits . ... .. . .......... ....... .. . ... . . ... .
Other . ... .... . ... . . . . . .... . ...... ... ....... . ... . . . ... ... : .. . .. ... .
Commitments and Contingencies (Notes 2, 4 and 8)
Stockholder Equity (Note 6):
Common stock, par value $3.00 per share-
Authorized 25,000,000 shares; outstanding
19,880,577 shares .. . .... .. .. . .......................... . ........ .
Additional paid-in capital . ...... .. . .. ............. .. ... . .......... .. .
Retained earnings ....... . ...... . ..... ... ....... . . .. ........ . .. . .... .
The accompanying notes are an integral part of these balance sheets.
DELTA AIR LINES, INC.
1980 1979
(in Thousands)
$ 15,225
30,934
237,349
263,831
3,225
550,564
147,901
329,142
87,953
5,010
422,105
59,642
80,088
782,239
921,969
$2,042,539
$ 14,832
30,104
198,117
148,060
17,276
408,389
125,483
314,126
81,927
5,732
401,785
59,642
80,088
712,938
852,668
$1,788,325
17
DELTA AIR LINES, INC.
Statements of Income For the years ended June 30, 1980 and 1979
1980 1979
(In Thousands)
Operating Revenues:
Passenger ........................................................ . $2,733,820 $2,213,024
Cargo ... . .. . .. .. . .. .... . .. . . .. . ... ... ... ... ..... ........ ........ . 190,490 167,904
Other, net ....................................................... . 32,650 46,918
Total operating revenues 2,956,960 2,427,846
Operating Expenses:
Salaries and related costs ........................................... . 1,161,487 1,014,144
Aircraft fuel .... . ....... ....... ........... ...... ..... ...... .. ..... . 857,165 475,683
Aircraft maintenance materials and repairs ............................ . 64,325 52,689
Rentals and landing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,760 82,634
Passenger service . ....... .... .... .... ...... .... . . . ...... . .......... . 115,996 106,088
Agency commissions . . . . . . . . . . . . . . . . . . . . . . ....................... . 114,304 79,183
Other cash costs .................................................. . 267,192 225,106
Depreciation and amortization ........ .............. .. .... ........ .. . 194,094 183,287
Total operating expenses ........... ....................... . . . . 2,864,323 2,218,814
Operating Income . .. ..... ... .............. . ........ . .. .. ... .. ....... . . . 92,637 209,032
Other Expense (Income):
Interest expense .................................................... . 21,852 16,178
Less-Interest capitalized ............................ . ....... .. .. . 10,790 6,717
11,062 9,461
Gain on disposition of aircraft ....................................... . (36,091) (20,514)
Realized and unrealized loss on foreign currency translation, net ... . ... . . . . . 3,735 7,110
Miscellaneous income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,687) (9,069)
(31,981) (13,012)
Income Before Income Taxes . . .. ........ . ........ . .... . ................. . 124,618 222,044
Provision for Income Taxes (Note 5):
Income taxes provided ... .. ... . ....... ....... .......... . . ... ... .. .. . 54,433 104,429
Amortization of investment tax credits ................................ . (22,973) (19,129)
31,460 85,300
Net Income .......................................................... . $ 93,158 $ 136,744
Net Income Per Common Share .. ......... .. . . .... ............ . ... ....... . $4.69 $6.88
The accompanying notes are an integral part of these statements.
18
DELTA AIR LINES, INC
Statements of Retained Earnings For the years ended Ju ne 30, 1980 and 1979
1980 1979
(In Thousands)
Balance at Beginning of Year . ... . ... .. . . . .... .. .... . .. . .. .... . .. . ...... . . . . $712,938 $597,069
Add (Deduct):
Net income . . ..... . . . ....... ... . .. . ......... . .. .... ..... . .. . .. .... .
Cash dividends- $1.20 per share in 1980 and $1.05 per share in 1979 .. .. . ... . .
93,158
(23,857)
136,744
(20,875)
Balance at End of Year . . ..... ..... .. . ...... . ... . ..... ..... . .. .. .. . .. . . ... .
The accompanying notes are an integral part of these statements.
Auditors' Report
ARTHUR ANDERSEN & Co.
ATLANTA, GEORGIA
To the Stockholders and the Board of Directors of
Delta Air Lines, Inc.:
$782,239
We have examined the balance sheets of DELTA AIR LINES, INC. (a Delaware corporation) as of
$712,938
June 30, 198Oand 1979; and tne'related statements of income, retained earnings and-
changes in financial position for
the years then ended. Our examinations were 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.
In our opinion, the financial statements referred to above present fairly the financial position of
Delta Air Lines, Inc. as of June 30, 1980 and 1979, and the results of its operations and the changes in its financial
position for the years then ended, in conformity with generally accepted accounting principles applied
on a consistent basis.
Atlanta, Georgia,
August 20, 1980.
19
DEL
TA AIR LINES, INC.
Statements of Changes in Financial Position For the years ended June 30, 1980 and 1979
1980 1979
(In Thousands)
Funds Provided By:
Net income .. . . ... ........ . . . ..... .. ... . .... ... ................... . $ 93,158 $136,744
Add (deduct) items not affecting working capital-
Depreciation and amortization .. .. .......... ... .. ... ... . .... . .... . 194,132 183,325
Deferred income taxes .. ... . ... . ... ... .. .. ..... . . .. ... .. ..... ... . 15,016 17,886
Unrealized loss on translation of long-term portion of debt
payable in pounds sterling ..... . ...... . . . ........... . ........ . 2,868 6,076
Investment tax credits, net of amortization . . .. ... . . .............. . .. . 6,026 . 13,833
Other .... ..... . .. .... .... . .... .. . . ... . ........ . .. . . ... ..... . . . (517) (319)
Total from operations . . . . ........... .. . ... . .. . .... .. .. . . . . . 310,683 357,545
Obligations under capitalized leases (Note 4) . .... ........ ....... . .... ... . 13,510
Long-term financing (Note 3) ..... . ... . ...... . ... . ....... ..... ........ . 95,000
Funds held by bond trustee (Note 3) . .... . . . ...... .. ... . . . . . . . .. . ... . .. . (18,120)
Disposition of property and equipment (book value) ...... . . ...... ..... . . . 16,036 3,799
Other ... . ..... .. . .. ...... . ..... . . . ...... ... ... .. ..... .... .. . .. . .. . 1,275 2,807
404,874 377,661
Funds Used For:
Property and equipment additions-
Flight equipment, including advances . ............... .. .... ... .. . . . . 276,751 334,466
Ground property and equipment .. .. .. . . .. . .. ...... . ........ . .... . 79,088 36,716
355,839 371,182
Reduction of long-term debt, net of unrealized foreign currency
gains and losses .. .. .... .. .. . .. . .. . ... . ... ... ....... . ... .. . . .... . 75,450 61,434
Cash dividends ... . ...... . ....... . .... ... ....... .. . ... . . . . . ... . ... . . 23,857 20,875
Increase in long-term notes receivable ..... ... .......... .. . . ... . ... .. . .. . 6,464
Other . . . . . .. ...... .. . .... .. ..... ... ... . ... .. .... ... . .. . ...... . ... . 125 712
461,735 454,203
Decrease in Working Capital .......... .... . . . . . .... ..... .. . . . . .... . ... .. . . $ 56,861" $ 76,542
Changes in Working Capital Components:
Increase (decrease) in-
Cash and short-term investments $ 9,136 $(95,183)
Accounts receivable, net ...... . ....... . .. . ............... .. .. . .. . 53,755 48,265
Other current assets . .. . ...... . . ..... ..... . . . .. ... ... . . .. . ...... . 22,423 5,971
Decrease (increase) in-
Current maturities of long-term debt .. ..... . . .. . . . ... . ..... .... . . .. . (393) (5,101)
Note payable . ......... .. .. . ... ... . . .. .. ..... . .. . . ..... ... . .. .. . 30,104 (30,104)
Commercial paper outstanding (Note 7) .. .. ... . .. .. ... ...... .. .. .. . . (30,934)
Accounts payable and accrued liabilities . . ... . ... ... .. . .. . .. . .... . . . (39,232) (31,151)
Air traffic liability ..... .. ..... . . . .. .. . .. . . .. . ... . . . .. . . ....... . . . (115,771) (18,453)
Accrued income taxes .. .. ......... . .. . ... . .. . ...... . . . . . . ... ... . . 14,051 49,214
Decrease in Working Capital .... .. ......... . ...... . ......... ... ... . . . ... . . $ 56,861 $ 76,542
The accompanying notes are an integral part of these statements.
20
Notes to Financial Statements
June 30, 1980 and 1979
1. Summary of Accounting Policies:
Passenger Revenue-Passenger ticket sales are recorded
as revenue when the transportation is used. The value of
unused tickets is included in current liabilities in the
financial statements.
Depreciation and Amortization-Substantially all of the
Company's flight equipment is being depreciated on a straight-
line basis to residual values (10% of cost) over a IO-year period
from dates placed in service. Ground property and equipment
is depreciated on a straight-line basis over its estimated service
life (various lives ranging from three to 30 years). Leased prop-
erties under capital leases are amortized on a straight-line basis
over the life of the lease.
Maintenance and Repairs-All maintenance and repair
costs, including engine and airframe overhauls, are charged to
maintenance expense when incurred. Major replacements and
betterments are capitalized.
Interest Capitalized-Interest attributable to funds used
to finance the acquisition of new aircraft and construction of
major ground facilities is capitalized as an additional cost of
the related asset. Interest is capitalized at the Company's
average interest rate on long-term debt or, where applicable,
the interest rate related to specific borrowings. Capitalization
of interest ceases when the property or equipment is placed
in service.
Foreign Currency Transactions-Realized and unrealized
foreign exchange adjustments are included in income on a
current basis.
Retirement Plans-All of the Company's permanent
employees are covered under its noncontributory trusteed
plans providing for retireg1
g[lt, disability and survivor bene-
fits. The total expense under these plans amounted to approx-
imately $88,941,000 in 1980 and $75,897,000 in 1979. The
Company's policy is to fund each year's accrued costs under
the plans, which costs include amortization of prior service
costs over varying periods up to 30 years.
As of June 30, 1979 (date of most recent actuarial study),
the actuarial present value of accumulated plan benefits and
the plan net assets available for benefits under the Company's
defined benefit pension plans were as follows:
Actuarial present value of
accumulated plan benefits:
Vested .. ... .. . . .. .. .. . . . .. . ...... . .. . . .
Nonvested
Net assets available for benefits . .... . . . .. . . . ... . . .
June 30,
1979
(/11 Th o11sa11ds)
$442,852
13,066
$455,918
$411,953
The weighted average assumed rate of return used in
determining the actuarial present value of accumulated plan
benefits was 8.0 percent.
DELTA AIR LINES, INC.
Income Taxes-Total income taxes are provided by
applying the applicable statutory tax rates to book income
before income taxes. Deferred income taxes are provided for
all significant items (principally depreciation and other
property items) where there is a timing difference in recording
such items for financial reporting purposes and for income tax
purposes. Investment tax credits are amortized (as a reduction
of the provision for income taxes) over seven years (see
Notes).
Earnings Per Share-Net income per common share is
computed based on the weighted average number of out-
standing shares during the year (19,880,577 shares in 1980
and 1979).
2. Aircraft Purchase and Sale Commitments:
At June 30, 1980, the Company had outstanding pur-
chase commitments for the acquisition of 12 Boeing B-727-200
aircraft, two leased Boeing B-727-200 aircraft, 42 Boeing
B-767-200 aircraft, 19 Lockheed L-1011-1 aircraft and one
Lockheed L-1011-500 aircraft, including related spare engines.
The commitments include the following aircraft for which the
Company has options to purchase: four Boeing B-727-200's
which can be confirmed at specified interim dates to August,
1980; 22 Boeing B-767-200's which can be confirmed at speci-
fied interim dates through June, 1985; and 12 Lockheed
L-1011-l's which are cancelable by specified interim dates 21
months prior to delivery. Subsequent to June 30, 1980, one
Boeing B-727-200 aircraft was confirmed for delivery in fiscal
year 1982, and the remaining three options for purchases of
Boeing B-727-200 aircraft were allowed to expire unexercised.
The Company has entered into an agreement to re-engine its
fleet of 13 Douglas DC-8-61 aircraft during fiscal years 1982
through 1984.
Excluding the 22 Boeing B-767-200 and 12 Lockheed
L-1011-1 aircraft under options, these purchase and re-engining
commitments at June 30, 1980, will require estimated future
expenditures of approximately $1,227,000,000 as follows:
$250,000,000-1981;$222,000,000-1982;$422,000,000-1983;
$266,000,000-1984; and $67,000,000-1985.
The Company presently anticipates financing these
commitments, including new aircraft purchases, from inter-
nally generated funds, supplemented as required by inter-
mediate-term loans.
The Company has entered into an agreement to sell one
DC-9-32 aircraft to be deliver~d before January, 1981.
21
DELTA AIR LINES, INC.
3. Long-Term Debt:
At June 30, 1980 and 1979, the Company's long-term
debt and capitalized lease obligations (including current
maturities) were as follows:
a) Due Lazard Brothers & Co. , Limited,
under 5 %, 6% and 7 % unsecured
notes, repayable in pounds sterling in
semiannual installments to 1986
($9,339,000payable in fiscal 1981)-
At original exchange rates . . . . . .
Unrealized (gain) loss on-
Current maturities . . , . ... . . .. ... .
Long-term portion . . .. . .. . . ..... .
At current exchange rates .. ... . .. . . .
b) Due banks under 1973 unsecured
credit agreement (as amended) at
prime interest rate. The remaining
balance at June 30, 1980, was
voluntarily prepaid, in full, without
penalty . .. . ... . . . . .... . . . . . . .
c) Due banks under1980 unsecured credit
agreement, providing for borrowings
up to $150,000,000, at prime interest
rate, ona revolving basis through June,
1982, at which time the balance
outstanding will be converted into a
one-year term loan repayable in
quarterly installments of $5,000,000
beginning September 30, 1982, with
the remaining balance payable on
June 30, 1983 ... . . .. . . . . . ... .. . . .. .
d) Convertible Subordinated Debentures,
6 %, maturing Augustl, 1986, with
annual sinking fund redemptions of
$1,100,000. The remaining obligations
,.afJ~n~ 3o, l9sO~na 1979: ~rEtaHer"" ,,
deducting$6,404,000and$4,237,000,
respectively, of debentures acquired
for future sinking fund requirements
(Note6) ...... .. . . . .. .
e) Due the Development Authority of
Clayton County under a 65/s %
unsecured loan agreement, repayable
in installments beginning in the year
2000, with the remaining balance
payable in 2011 .... .. .. . . .
f) Other notes, with various interest
rates and maturity dates ($463,000
payable in fiscal 1981) .......... .
g) Capitalized lease obligations
($5,423,000 payable in fiscal 1981)-
(Note 4) . . ... . ......... . . . .
Total .. .
Less-Current maturities
Total long-term debt
22
1980 1979
(in Thousands)
$ 42,384 $51,587
136 (677)
806 (2,604)
- - -
43,326 48,306
57,653
60,000
11,196 14,463
35,000
1,567 2,781
12,037 17,112
163,126 140,315
(15,225) (14,832)
$147,901 $125,483
At June 30, 1980, the annual maturities of long-term debt
and capitalized lease obligations for the next five fiscal years
were as follows: Amount
1981
1982
1983
1984
1985
(In T/1
ousa11ds)
$15,225
13, 783
71,218
9,966
5,385
The Company's debt agreements include limitations on
indebtedness and other obligations. In connection with the
1973 and 1980 bank credit agreements, the Company has
informally agreed to maintain on deposit with the lending
banks average balances (including normal working balances)
equal to 10% of the average daily outstanding borrowings,
with the average balances and borrowings being computed
over the term of the agreement. There are no legal restrictions
on the Company's use of these funds. At June 30, 1980, there
was no restriction in the agreements as to the payment of
cash dividends.
In July, 1979, the Development Authority of Clayton
County issued $35,000,000 of 6%% Special Facilities Revenue
Bonds, the proceeds of which were loaned to the Company
under a 6%% unsecured loan agreement. Payments made by
the Company under the loan agreement are pledged by the
Development Authority to the bond trustee. By the terms of
the trust indenture and the agreement with the Development
Authority, funds from the loan are held by a trustee for the
payment of construction costs of certain facilities and for
a debt service reserve fund. At June 30, 1980, the amount on
deposit with the trustee was $18,120,000.
The Company currently plans to enter into a loan agree-
ment with the Development Authority of Fulton County,
Georgia, under which the Company would borrow $29,000,000
in October, 1980, repayable within three years.
4. Lease Obligations:
Effective July 1, 1978, under the provisions of Financial
Accounting Standards Board Statement No.13, the Company
capitalized certain aircraft and other equipment leases that
were previously accounted for as operating leases. The capi-
talization and amortization of these capital leases did not
have a material effect on the financial statements.
At June 30, 1980, the Company leased seven Boeing
B-727 aircraft (two of which are to be purchased in 1981) and
certain airport terminal and maintenance facilities, ticket
offices, and other property and equipment under agreements
with terms of more than one year. Amounts charged to rental
expense for operating leases were $44,746,000 in 1980 and
$41,188,000 in 1979.
At June 30, 1980, the Company's minimum rental com-
mitments under capital leases and noncancelable operating
leases with initial or remaining terms of more than one year
were as follows:
Payable tor
Fiscal Year
1981
1982
1983
1984
1985
After1985 ........................ .
Total minimum lease payments ....... .
Amounts representing interest
(at rates of 5.4% to 10.3%) ......... .
Present value of minimum
lease payments ................. . . .
Capital Opera ling
Leases Leases
(/11 Thousands)
$ 6,103 $ 34,887
4,713 37,467
1,516 36,863
975 36,220
330 35,681
620,877
13,637 $801,995
1,600
$ 12,037
The Company is participating in a major expansion of
terminal facilities at Hartsfield Atlanta International Airport
presently planned to open in September, 1980. Operating
lease rentals for the new facilities are reflected above. Purchase
of two leased Boeing B-727-200 aircraft (Note 2) in 1981 will
have the effect of reducing the total minimum lease payments
and the present value of minimum lease payments for capital
leases by $1,876,000 and $1,795,000, respectively.
5. Income Taxes:
The provision for income taxes in 1980 and 1979
consisted of:
1980 1979
(/11 Thousands)
Current taxes ..... .. ....... ........ . $ 10,418 $ 53,581
Deferred taxes ..................... . 15,016 17,886
Investment tax credits ............... . 28,999 32,962
Income taxes provided ........... . . 54,433 104,429
Amortization of
investment tax credits ........... . (22,973) (19,129)
$ 31,460 $ 85,300
Total income taxes provided were approximately 44%
in 1980 and 47% in 1979 of book income before taxes. As of
June 30, 1980, all available investment tax credits had been
utilized to reduce Federal income taxes payable.
The provision for deferred income taxes resulted from
the tax effect of the timing differences related primarily to
depreciation and other property items.
6. Common Stock:
At June 30, 1980, the Company had 44,784 common
shares reserved for conversion (at $250 per share) of the
Convertible Subordinated Debentures.
DELTA AIR LINES, INC.
7. Short-Term Borrowings:
Interim financing of operations is obtained through the
issuance of commercial paper and the use of other short-term
borrowings. At June 30, 1980, outstanding commercial paper
totaled $30,934,000, with various maturity dates to August 4,
1980, at interest rates ranging from 8% to 9%%. In connec-
tion with the issuance of the commercial paper, the Company
obtained a $50,000,000 line of credit. Commercial paper issued
in excess of $50,000,000 is supported by the Company's 1980
Bank Credit Agreement (see Note 3).
In connection with a purchase of Boeing B-767-200
aircraft, the Company issued a note during 1979 in the amount
of $30,104,000 payable on or before February 26, 1980. The
interest rate on the note was equal to the prime rate. The note
was paid in full on December 20, 1979.
The average interest rate and average and maximum
outstanding balances of short-term borrowings during1980
were as follows:
Maximum amount of borrowings
outstanding at any month-end .. .. .. .
Average daily borrowings
during period .................... .
Weighted average interest rate
on borrowings during period .. . .. . . .
8. Contingencies:
1980
(/11 Thousands)
$55,567
$40,534
11.77%
The Company is a defendant in certain legal actions re-
lating to environmental problems (primarily noise), alleged
employment discrimination practices, other matters con-
cerning past and present employees, disputes concerning the
Company's liability for payment of fees and charges for certain
airport facilities; and other matters related to the Company's
business. Given the unsettled status of the law in many of the
areas involved, the outcome of these actions is difficult to
predict. In the present opinion of management and its legal
counsel, however, the disposition of these matters is not likely
to have any material adverse effect on the Company's financial
position or operations.
9. Quarterly Financial Data (Unaudited):
Three Months Ended
Sept.30 Dec.31 Mar.31 June30
Fiscal 1980 I In Millions. facept Per Share A111ountsJ
Operatingrevenues $670.6 $703.8 $769.1 $813.5
Operating income.... .. . .. $ 2.0 $ 16.8 $ 28.7 $ 45.1
Net income ............. .
Net income per share ..... . .
Net income per share includes
gain on sales of aircraft of ...
Fiscal1979
Operating revenues ...... .
Operating income .... ... . .
Net income ............. .
Net income per share ...... .
Net income per share includes
$ 12.6 $ 37.6
$ 0.63 $ 1.06 $ 1.10 $ 1.89
$ .28 $ .33 $ .01 $ .44
$574.0 $574.2
$ 57.7 $ 46.4
$ 32.7 $ 34.1
$ 1.65 $ 1.71
$597.3 $682.3
$ 34.4 $ 70.5
$ 26.2 $ 43.7
$ 1.32 $ 2.20
gain on sales of aircraft of . . . $ . 01 $ . 22 $ .16 $ .13
---
23
DELTAAIRLINES, INC.
10. Constant Dollar and Current Cost Data (Unaudited):
In 1979, the Financial Accounting Standards Board
(FASB) issued Statement No. 33, Financial Reporting and
Changing Prices, requiring that certain historical financial
data be restated utilizing two different approaches to measure
the impact of changing prices: (1) the "constant dollar"
approach, which reflects the effect of general inflation on the
purchasing power of the dollar; and (2) the "current cost"
approach, which reflects the changes in relative prices for
specific goods and services.
Data developed in compliance with Statement No. 33 is
of an experimental nature and should be viewed with caution.
Calculations derived from the application of Statement No. 33
involve a substantial number of assumptions and estimates,
and may not reflect the most accurate reporting of the effects
of inflation on the Company.
Under the constant dollar concept, the historical cost at
June 30, 1980, of property and equipment was aged by year of
acquisition. This historical cost was adjusted to a common
index level at June 30, 1980, by the application of the U.S.
Government Consumer Price Index for All Urban Consumers
("CPI-U"). The CPI-U is a widely used measure of inflation
and is the specific index selected by the FASB to measure the
effect of general inflation. Depreciation and amortization
were recalculated on a straight-line method, using historical
Statement of Income Adjusted for Changing Prices (Unaudited)
For the year ended June 30, 1980
depreciation rates applied to the constant dollar cost.
The gain from the decline in purchasing power was deter-
mined by calculating the changes in monetary assets and
liabilities in 1980 constant dollars. In times of inflation, there
is a purchasing power loss in holding monetary assets such as
cash and receivables and a purchasing power gain in holding
monetary liabilities such as debt and payables.
For flight equipment, current cost (specific prices) was
determined by utilizing the purchase price information for
current production aircraft types as furnished by the Air
Transport Association and current market values for non-
production aircraft as published in various industry sources.
For spare engines and components, the current cost was deter-
mined by applying the historical ratio of the cost of spare
engines and components to the current cost of the related air-
craft fleets. For ground property and equipment, the current
cost was computed in the same manner as the constant dollar
information. Current cost depreciation expense was com-
puted by multiplying the historical rates by the current costs
determined above.
Current tax laws do not recognize deductions for current
cost depreciation and amortization expense; therefore, income
taxes provided are reported in historical dollars as required by
Statement No. 33.
As Reported
in the
Financial
Statements
(Historical Cost)
Adjusted for
General
Inflation
(Fiscal 1980
Constant Dollar)
Adjusted for
Change in
Specific Prices
(Current Cost)
(111 Thousands Excet fo r Per 5'1are Data)
Operating revenues . . . .. . ... .. . ... ..... . . . . . . . .. .. . . . .. . . .... . .. .... . . $2,956,960 $2,956,960 $2,956,960
Depreciation and amortization expense ... ... . .. . .. . . . .... .... .... ... . . . .
Operating expenses (excluding depreciation and amortization) . .. . . ... . .. . . . .
Gain on disposition of property . ... .. . . . .. . ... . ... . .... .. .. .. . . . .. ... .. .
Other expense (income), net .. ... ... ..... . ....... . .... . . . .. .. . . . . . . .... .
Income taxes provided . . . .. . . . .. ... . . .. .. .. .. . . . . . .. . . .. . .. . .
Amortization of investment tax credits . . ..... .. .... . ...... . . .
Total expenses ... .. . .. . . . . . .. ... .. .... . .......... .
Net income (loss) ... . . . . . .. . ..... . .. ..... . . ........ .. . ... . .. . . . . .. . . . .
Net income (loss) per share .. ... . ... . . ....... .. .. ... . . ... .. . .. . . . .. ... . .
194,094
2,670,229
(36,444)
4,463
54,433
(22,973)
2,863,802
$ 93,158
$ 4.69
286,648
2,670,229
(34,146)
4,463
54,433
(32,100)
2,949,527
$ 7,433
$ .37
Gain from decline in purchasing power of net amounts owed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62,948
Effect on property and equipment of:
Increase in specific prices (current cost)* .. . . . .... .. . ... . .. . .. . ..... . . . . . . .... .. ... . .. ..... . . ... .. .. . . ... .
Increase in general price level ( constant dollar) . . . . . . . . . . . . .. . ... . .. . . . .... . . .... . .. ... . . . . . . .
Excess of increase in specific prices over the increase in the general price level . . ... . .... . . . . . . .. ... .. . .. . . ... .... . .
NetassetsatJune30,1980..... .... . . . . . .. . ... .. .. .. . . .. . ... .. ... . . ..... $ 921,969 $1,872,077
*At June 30, 1980, ?":?'ed and leased p:operty and equipment, stated at current cost, net of adjusted accumulated depreciation
from date of acqu1s1t10n, was $2.59 billion compared with the historical depreciated cost of $1.64 billion.
Five-Year Comparison of Selected Supplementary Financial Data (Unaudited)
Stated in Average Fiscal 1980 Dollars For the Year Ended June 30,
Operating revenues . . . .. . . .... . . . . ... . .. . .. .. .. .
Gain from decline in purchasing
power of net amounts owed ...... ... . . . . .. . . . . . .
Cash dividends paid per common share ... . . . .
Market price per common share at year-end . . . .
Average c9nsumer price index (1967 = 100) . .. .
24
1980 1979 1978 1977
$2,956,960
62,948
1.20
39.25
232.5
(/n T'1ousa11ds Exce t for Per 5'1are Data)
$2,750,849
1.19
45.46
205.2
$2,541,774
.93
56.24
187.6
$2,274,274
.93
47.28
175.8
317,748
2,670,229
(39,835)
4,463,
54,433
(32,100)
2,974,938
$ (17,978)
$ (.90)
$ 62,948
$ 349,688
298,813
$ 50,875
$1,866,641
1976
$2,138,863
.84
62.25
166.2
Report of Management
The integrity and objectivity of the information presented in
this Annual Report is the responsibility of Delta management.
The financial statements contained in this report have been
examined by Arthur Andersen & Co., independent public
accountants. Their report, shown on page 19, expresses an
informed judgment as to whether management's financial
statements present fairly, in conformity with generally
accepted accounting principles, the Company's financial posi-
tion and operating results.
Delta maintains a comprehensive system of internal
financial controls and an extensive program of internal audits.
These controls include careful selection of its managers, organ-
izational arrangements that provide an appropriate division
of responsibilities, and communication programs aimed at
assuring that the Company's policies and standards are under-
stood throughout the organization. We believe that this system
provides reasonable assurance that transactions are executed
in accordance with management's authorization and that they
are appropriately recorded so as to permit preparation of
financial statements in conformity with generally accepted
accounting principles and adequately safeguard, verify, and
maintain accountability of assets.
The Board of Directors pursues its responsibilities for
these financial statements through its Audit Committee, which
consists solely of outside directors. They meet regularly with
the independent auditors and representatives of management
to review the activities of each and to insure that each is
properly discharging its responsibilities.
DAVID C. GARRETT, JR. ROBERT OPPENLANDER
President and Chief Executive Officer Senior Vice President- Finance
Quality control inspectors continually check Delta's aircraft to insure
that each one meets the highest standards of safety and performance.
DELTA AIR LINES, INC.
Management's Analysis and Discussion
of Summary of Operations
A comparison of the results of operations for fiscal years 1980
and 1979 can be found in previous sections of this report. The
following is a comparison of the results of 1979 and 1978.
Net income for the year ended June 30, 1979, was a
record $136,744,000 ($6.88 per share), a 4% increase over the
$131,127,000 ($6.60 per share) earned in 1978.
Operating revenues totaled $2.43 billion, an increase of
18% from the $2.05 billion in 1978. Passenger revenue grew
19% to $2.21 billion as revenue passenger miles were up 23%
to 25.52 billion, and the passenger mile yield was 8.67ct, a
decline of 3%. Cargo revenues increased 10% including a
$1.6 million mail pay adjustment applicable to prior years.
Other revenues were up 28% including a $6.4 million increase
in charter revenues.
Operating expenses for fiscal 1979 totaled $2.22 billion,
20% above fiscal 1978, while operating capacity increased
13% to 39 .83 billion available seat miles. Revenue plane miles
increased 9% to 262.1 million. Salaries and related expenses
grew 22% as a result of wage and payroll tax increases and a
12% growth in average employment. Aircraft fuel expense
rose 24%, reflecting an 11% increase in consumption and a
12% increase in the annual average price per gallon to 41.55ct.
Aircraft maintenance materials and repairs expense increased
18% reflecting an increase in the number of overhauls and
checks due to the expanding aircraft fleet. Passenger revenue
increases and the continued rise in the number of passengers
using travel agencies accounted for the 22% growth in agency
commissions. All other cash expenses rose 17% as the result of
inflation and the growth in operation.
Non-operating income for 1979 decreased 34% to
$13.0 million. Net interest expense declined 37%, the result of
a lower level of outstanding debt and an increase in capitalized
interest. Gains on aircraft sales totaled $20.5 million, down
37% from the previous year. The translation of foreign debt
resulted in a $7.1 million loss compared to a $3.3 million loss
in 1978. Miscellaneous income increased $1.4 million prin-
cipally the result of higher interest income.
Income taxes were provided on book income at a rate of
approximately 47% compared to 49% in 1978. The provisions
were reduced by investment tax credit amortization of
$19.1 million in 1979 and $15.7 million in 1978.
25
DELTA AIR LINES, INC.
Summary of Operations For the years ended June 30
(Dollars expressed in thousands except per share figures)
1980 1979 1978 1977 1976
Operating revenues:
Passenger .................... $2,733,820 $2,213,024 $1,861,100 $1,575,642 $1,406,417
Cargo ....................... 190,490 167,904 153,233 114,800 100,626
Other, net ................. . . 32,650 46,918 36,578 29,203 21,899
Total operating revenues ........... 2,956,960 2,427,846 2,050,911 1,719,645 1,528,942
Operating expenses ................ 2,864,323 2,218,814 1,845,816 1,578,464 1,411,333
Operating income ................. $ 92,637 $ 209,032 $ 205,095 $ 141,181 $ 117,609
Interest expense, etc., net* .......... 375 392 9,673 18,236 29,103
Gain on disposition of aircraft ....... 36,091 20,514 32,689 29,403 7,680
Realized and unrealized loss (gain) on
foreign currency translation ..... 3,735 7,110 3,339 (2,699) (13,357)
Income before income taxes ......... $ 124,618 $ 222,044 $ 224,772 $ 155,047 $ 109,543
Income taxes . . . . . . . . . . . . . . . . . . . . . 31,460 85,300 93,645 62,667 39,336
Net income ...................... $ 93,158 $ 136,744 $ 131,127 $ 92,380 $ 70,207
Net income per share .......... $4.69 $6.88 $6.60 $4.65 $3.53
Dividends paid ................... $23,857 $20,875 $14,911 $13,916 $11,928
Dividends paid per share . . . . . .. $1.20 $1.05 $.75 $.70 $.60
*Has been reduced by interest
capitalized of ................. $10,790 $6,717 $4,794 $2,922 $3,247
Other Financial and Statistical Data
1980 1979 1978 1977 1976
Long-term debt .................. . $ 147,901 $ 125,483 $ 167,331 $ 237,497, $ 350,968
Stockholder equity ............... . $ 921,969 $ 852,668 $ 736,799 $ 620,583 $ 542,112
Stockholder equity per share ....... . $46.38 $42.89 $37.06 $31.22 $27.27
Shares of common stock outstanding . 19,880,577 19,880,577 19,880,577 19,880,577 19,880,577
Revenue passengers enplaned ...... . 39,713,904 39,360,368 33,007,670 28,811,966 27,996,665
Available seat miles (000) .......... . 43,217,372 39,826,891 35,135,046 32,614,260 30,389,761
Revenue passenger miles (000) ...... . 26,171,197 25,518,520 20,825,722 18,042,339 17,621,247
Passenger load factor ............. . 60.56% 64.07% 59.27% 55.32% 57.98%
Breakevenloadfactor ............ . 58:51% 58.02% 52.74% 50.36% 53.14%
Available ton miles (000) .......... . 5,748,143 5,357,995 4,743,778 4,478,038 4,145,183
Revenue ton miles ( 000) ........... . 2,934,375 2,916,585 2,426,265 2,113,798 2,034,848
Passenger revenue per
passenger mile . . . . . . . . . . . . .... 10.45 8.67<1: 8. 94<t 8.73<1: 7.98
Operating expenses per
available seat mile ............ . 6.63 5.57<1: 5.25<t 4.84 4.64
Operating expenses per
available ton mile ............ . 49.83 41.41<1: 38.91 35.25<1: 34.05
26
Board of Directors
R. W. ALLEN
KARL D. BAYS
W. T. BEEBE
B. W. BIEDENHARN
R. W. COURTS
C. H. DOLSON
R. W. FREEMAN
DAVID C. GARRETT, JR.
EDWARD H. GERRY
JESSE HILL, JR .
JOHN R. LONGMIRE
R. S. MAURER
BILL MICHAELS
T. M. MILLER
ROBERT OPPENLANDER
CARLETON PUTNAM
Senior Vice President- Administration &
Personnel
Chairman of the Board and Chief
Executive Officer, American Hospital
Supply Corporation, Evanston, 1/linois
Chairman of the Board
Chairman of the Board and Director,
Ouachita Coca-Cola Bottling Co. ,
Biedenharn Realty Co., Inc., and Ouachita
Candy Co. , M onroe, Louisiana
Director and Chairman of the Executive
Committee, Atlantic Realty Co., Atlanta,
Georgia
Chairman of the Executive Committee
Chairman of the Compensation and
Finance Committees; Chairman of the
Board and Director, Louisiana Coca-Cola
Bottling Co. , Ltd., New Orleans, Louisiana
President and Chief Executive Officer
Partner of Gerry Brothers & Co.,
In vestment Management, New York,
New York
President, Chief Executive Officer and
Director, Atlanta Life Insurance Company,
Atlanta, Georgia
Partner of investment banking firm of
I. M. Simon & Co., St.Louis, Missouri
Vice Chairman of the Board and Secretary
Chairman of the Audit Committee;
Chairman of the Board, Chief Executive
Officer and Director, Storer Broadcasting
Co. , Miami, Florida
Retired Senior Vice President- Marketing
Senior Vice President- Finance
Private Investments
GEORGE M. SNELLINGS, JR. M ember of the law firm of Snellings,
Breard, Sartor, lnabnett & Trascher,
M onroe, Louisiana
AUDIT COMMITTEE
BILL MICHAELS, Chairman
KARL D. BAYS
JESSE HILL, JR.
JOHN R. LONGMIRE
CARLETON PUTNAM
COMPENSATION COMMITTEE
R. W. FREEMAN, Chairman
W. T. BEEBE
R. W. COURTS
T. M. MILLER
GEORGE M. SNELLINGS, JR.
COMMITTEE ON DIRECTORS
W. T. BEEBE, Chairman
KARL D. BAYS
R. W. FREEMAN
DAVID C. GARRETT, JR.
EDWARD H. GERRY
GEORGE M. SNELLINGS, JR.
EXECUTIVE COMMITTEE
C.H. DOLSON, Chairman
R. W. ALLEN
W. T. BEEBE
B. W. BIEDENHARN
DAVID C. GARRETT, JR.
R. S. MAURER
ROBERT OPPENLANDER
FINANCE COMMITTEE
R. W. FREEMAN, Chairman
W. T. BEEBE
R. W. COURTS
EDWARD H. GERRY
T. M. MILLER
GEORGE M. SNELLINGS, JR.
Officers
EXECUTIVE
DAVID C. GARRETT, JR.
R. S. MAURER
CORPORATE AFFAIRS
M. E. DULLUM
ROBERT H. COWART
C. G. SWEAZEA
SUSAN Q. DOWNER
IKE LASSETER
FINANCE
ROBERT OPPENLANDER
W. A. ATCHISON
J. D. DUNN
M. 0 . GALLOWAY
REX A. McCLELLAND
DICKEY C. LEE
JULIUS P. GWIN
LAWSON ROLLINS
FRANK S. CHEW
W. ALLEN REED
AUDLY TOLLER, JR.
FLIGHT OPERATIONS
FRANK F. ROX
C. A. SMITH
LEGAL
J. W. CALLISON
DONM. ADAMS
ROBERTS . HARKEY
E. A. THOMPSON
MARKETING
J. A. COOPER
R. L. GIBSON
R. A. McKINNON
W. WHITLEY HAWKINS
HENRY ROSS
PASSENGER SERVICE
HOLLIS L. HARRIS
JEANETTE EASLEY
E. L. HAMNER
FOY PHILLIPS
C. A. THOMPSON
PERSONNEL
R. W. ALLEN
RUSSELL H. HEIL
JOHN HUME
R. G. CALDWELL
H. M. JOHNSON
EUGENE H. STEWART
TECHNICAL OPERATIONS
D. P. HETTERMANN
JOHN P. DAVIS
R. LAMAR DURRETT
C. J. MAY
J. K. BURNETTE
A. C. FORD
W. L. MILLER
DELTA AIR LINES, INC.
President & Chief Executive Officer
Vice Chairman of the Board & Secretary
Vice President- Government A ffairs
A ssistant Vice President- Consumer A ffairs
A ssistant Vice President- Public A ffairs
A ssistant Secretary
A ssistant Secretary
Senior Vice President- Finance
Vice President- Computer Serv ices
Vice President- Purchasing
Vice President- Finance
Vice President- Properties
A ssistant Vice President- Internal Auditing
Comptroller
A ssistant Comptroller- Revenue A ccounting
Treasurer
A ssistant Treasurer- Investment Management
A ssistant Treasurer- Treasury
Senior Vice President- Flight O perations
Vice President- Flight Operations
Senior Vice President- General Counsel
A ssistant Vice President- Law
A ssistant Vice President- Law
A ssistant Vice President- Economic Research
Senior Vice President- M arketing
Vice President- Traffic
Vice President- Marketing Administration
A ssistant Vice President- Marketing
A ssistant Vice President- Marketing Services
Senior Vice President- Passenger Service
Vice President- In-Flight Service
Vice President- Stations Planning
Vice President- Passenger Service
Vice President- Stations A dministration
Senior Vice President- A dm inistration &
Personnel
Vice President- Personnel Benefits
Vice President- Personnel Relations
A ssistant Vice President- Personnel
Administration
A ssistant Vice President- Employment
A ssistant Vice President- Corpo rate Security
Sen ior Vice President- Technical Operations
Vice President- Maintenance
Vice President- Facilities & Technical
Operations A dministration
Vice President- Engineering
A ssistant Vice President- Quality Control
A ssistant Vice President- Long Range Planning
A ssistant Vice President- M ateriel Serv ices
27
DELTA AIR LINES, INC. _
Transfer Agent and Registrar
The Citizens and Southern National Bank
P. 0. Box 105555
Atlanta, Georgia 30399
Auditors
Arthur Andersen & Co.
25 Park Place, N.E.
Atlanta, Georgia 30303
Annual Meeting
October 23, 1980, Monroe, Louisiana
Common Stock
Listed on the New York Stock Exchange
Market Prices and Dividends
Fiscal Yearl980
Quarter Ended:
September 30 .. . .. . .. . . . .
December 31 ..... . . . . .. . .
March31 .... . . ... ..... . .
June 30 ...... . ... .
Fiscal Year 1979
Quarter Ended :
Market Price Range of
Common Stock on
N ew York Stock Exchange
High Low
47 3/s 39 5/s
43 1/s 36
40 3/s 33 1/s
40 3/s 31
September 30 . . . . . . . . . . . . 58 45 1/s
December 31 . . . . . . . . . 50 1/s 38 1/s
March31 . . ...... .... .. . . 45 36
June30 ... .. .. ... . . . . . . . . 43 37
Availability of Form 10-K
Cash
Dividends
Paid Per Share
$.30
.30
.30
.30
$.25
.25
.25
.30
The Company will supply, upon written request and without
charge, a copy of the Company's annual report for the fiscal
year 1980 on Form 10-K to any person beneficially owning or
owning of record any of the common stock of the Company on
September 2, 1980. Requests for the report should be directed
to R. S. Maurer, Secretary, Delta Air Lines, Inc. , Hartsfield
Atlanta International Airport, Atlanta, Georgia 30320.
Notice to the Stockholders of Delta Air Lines, Inc.
Part 245 of the Economic Regulations of the Civil Aeronautics
Board provides that: (1) any person who either owns, as of
December 31st of the year preceding issuance of this annual
report, or subsequently acquires, beneficially or as trustee,
more than 5%, in the aggregate, of any class of the capital
stock or capital of Delta Air Lines, Inc. , shall file with the
Board a report containing the information required by Section
245.12 of Subpart 245, on or before April 1, as to the capital
stock or capital owned as of December 31 of the preceding
year, and, in the case of the stock subsequently acquired, a
report under Section 245.13, within 10 days after such acquisi-
tion, unless such person has otherwise filed with the Board a
report covering such acquisition or ownership, (2) any bank
or broker covered by (1), to the extent that it holds shares as
trustee on the last day of any quarter of a calendar year, shall
file with the Board, within 30 days after the end of the quarter,
a report in accordance with the provisions of Section 245.14;
and (3) any person required to report under this subpart who
grants a security interest in more than 5% of any class of the
capital stock or capital of Delta Air Lines, Inc. shall within
30 days after granting such security interest file with the Board
a report containing the information required in Section 245.15.
Any stockholder who believes that he may be required to file
such a report may obtain further information by writing to
the Director, Bureau of Operating Rights, Civil Aeronautics
Board, Washington, D.C. 20428.
Delta Air Lines, Inc.
28
General Offices, Hartsfield Atlanta International Airport
Atlanta, Georgia 30320