F I N A N C I A L H I G H L I G H T S f i s c a I l 9 9 6 ct 11 cl I 9 9 5
(Dollar amounts in millions, except share data. Data excludes restructuring and other
non-recurring charges and the cumulative effect of an accounting change.)
r 1996 1995 Change
lo R $12,455 $12,194 + 2%
perat,ng evenues .... ... .. ... .... ..
Operating Expenses ............ .. .... $11,163 $11,533 - 3%
Operating Income ........ .. ... .... . . . $1 ,292 $661 + 95%
Net Income ... .. .... ................. $662 $294 +125%
Primary Income Per Common Share .. $11.13 $4.07 +173%
Fully Diluted Income Per Common Share $8.49 $4.01 +112%
Dividends Declared on Common Stock $10 $10
Dividends Per Common Share .. .. .. .. $0.20 $0.20
Common Shares Issued a,nd
Outstanding at Year End .. ...... .. .. 67,778,106 50,816,010 + 33%
Debt-to-Equity Position . .. .. . ... .. .... 47%153% 65%/35%
Revenue Passengers Enplaned
(Thousands) .. ...... ... .. .. .. ... ... 91,341 88,893 + 3%
Revenue Passenger Miles (Millions) .... 88,673 86,417 + 3%
Available Seat Miles (Millions) ... . ..... 130,751 130,645
Passenger Mile Yield .. ... .. . ..... ... .. 13.10 13.10
Operating Revenue Per Available
Seat Mile .... .. ..... ... .. . ..... ... .. 9.53 9.33 + 2%
Operating Cost Per Available Seat Mile 8.54 8.83 - 3%
Passenger Load Factor .... .... ... .. ... 67.8% 66.2% +1.6 pts.
Breakeven Passenger Load Factor .. .. . 60.3% 62.3% - 2.0 pts.
Cargo Ton Miles (Millions) ... ... ... .. .. 1,368 1,500 - 9%
Cargo Ton Mile Yield ...... .. .... .. . ... 38.08 37.67 + 1%
Fuel Gallons Consumed (Millions) ... . . 2,500 2,533 1%
Average Jet Fuel Price Per Gallon . ... .. 58.53 54.09 + 8%
Number of Aircraft in Fleet at Year End 539 543 - 1%
Average Age of Aircraft Fleet at
Year End (Years) .... .. ... . ... .. . . ... 11.2 10.4 + 8%
Stage 3AircraftatYear End (As a
Percent ofTotal Aircraft) .. .. ... .... .
Average Seats Per Aircraft Mile .... , ... + 1%
Average Passenger Trip Length (Miles) .
AverageAircra
DELTA AIR LINES , INC .
{2
DELTA A I R LINES
COR P ORATE G O A L S
Providing safe, secure, and reliable air transportation is Delta Air Lines' absolute priority.
In pursuing t his imperative, our corporate vision is to become t he W orldwide Airline of
Choice for customers, stockholders and Delta people. W e will achieve this vision by
building on a hard-won competitive cost structure to provide value for our cus~omers,
sustained profitability and growth for our stockholders, and financial and personal
rewards for Delta people.
'
CUSTOMERS
Safe, secure and reli abl e service
Distinctive products
Wor ldwide service
STOCKHOLDERS
'
DELTA PEOPLE
Sustained profitability
Profitable growth
Sense of ownership
Tra ined for success
Hub car rie r cost leader
DESCRIPTION OF BUSINESS
Focused on results
Rewarded for performance
Delta Air Lines, Inc. provides scheduled air transportation over an extensive route network.
Based on calendar 1995 data, Delta is the largest U.S. airline as measured by aircraft
departures and passengers enplaned, and the third largest U.S. airline as
measured by operating revenues and revenue passenger miles flown.
As of August 16, 1996, Delta provided scheduled service to 153 domestic cities in
43 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands,
and 44 cities in 25 foreign countries. Service over most of Delta's routes is highly competitive.
In addition to scheduled passenger service, Delta also provides air freight,
mail and other related aviation services.
Delta is incorporated under the laws of the State of Delaware and is subject to government
regulation under the Federal Aviation Act of 1958, as amended, as well as many
other federal, state and foreign laws and regulations.
DELTA AIR LINES , INC .
R E P O R T T O -, 1 <, , /( Ii <, I ii <' , -,
To the Owners of Delta Air Lines:
In fiscal 1996, Delta Air Lines achieved the best financial results in the company's history.This tremendous achievement is a
tribute to the professionalism and commitment of the Delta people. Equally important for our future, Delta continued to put in place
the foundation to provide our company with the potential to earn superior financial returns year after year.
Delta is not finished with the task begun more than two years ago to return to sustained profitability and to create opportunities
for growth, but we are well on track. We approached the job in a disciplined, structured way. During fiscal 1
99 5, we stopped severe
financial losses through aggressive cost reductions, and we reported solid profits. Fiscal 1996 was a rebuilding year. Delta people reduced
costs further while they increased revenues, rebuilt our financial base and began to reshape our corporate strategy. A solid economy
helped produce record results, but most of all we helped ourselves through our actions. Fiscal 1997 will be a transition year. We will use
our hard-won experience to build on our rich past and create our future.
People who once wondered, "Will Delta stop the losses?" now ask, "What will Delta become?" This letter is the first installment
in the answer to that complex question.
FISCAL YEAR 1996 REVIEW
Delta's results for fiscal 1
996 set the stage for our future. Here are some of the financial highlights ( excluding restructuring and
other non-recurring charges in fiscal 1996 and the cumulative effect of an accounting change in fiscal 1995):
Operating income was $1.3 billion, the company's best fiscal year operating income performance ever; nearly doubling fiscal
1995 operating income of$661 million.
Net income of $662 million also exceeded the previous record, increasing 125% over fiscal 1995.
Total operating revenue and unit revenue (operating revenue per available seat mile) both grew 2% from fiscal 1995, the result
of strong domestic passenger traffic growth.
Total operating expenses and unit cost ( operating cost per available seat mile) declined over 3% as a result of continued
progress of Leadership 7.5 cost reduction initiatives, despite higher fuel costs, a 4.3 per gallon tax on jet fuel, and increased
passenger traffic.
Fully diluted earnings per common share increased by over I 00% to $8.49, after preferred stock dividend requirements.
Profit sharing earned by eligible Delta people totaled $144 million for the year.
Long-term debt declined to $1.8 billion from a high of $3.6 billion in June 1993, primarily through voluntary debt repurchases
and the conversion of Delta's 3.23% convertible subordinated notes into common stock. As a result of fiscal 1996 debt
repurchases and the conversion, interest expense will decline by approximately $65 million annually.
Stockholders' equity increased to $2.5 billion at June 30, 1996, from$ 1.8 billion at June 30, 1995.
Delta's unsecured long-term debt ratings were upgraded by both Moody's and Standard & Poor's to investment grade with
Moody's and one level below investment grade with Standard & Poor's.
Cash generated from operations was nearly $1.4 billion.
Delta's year-end liquidity position was $2.9 billion, including cash, short-term investments and available bank lines.
LEADERSHIP 7 . 5
Two years ago, Delta announced our Leadership 7.5 program to stop the financial threat to our company and to create a base
for profitable growth. Our goal was to reduce annual operating costs permanently by $2 billion by the end of fiscal 1997 as measured in
operating cost per available seat mile (ASM), the unit cost in commercial aviation. Our final unit cost target was 7.5 per ASM, close to
the unit costs of low-cost carriers which were expanding rapidly into our markets.Today, two years into the three year program, Delta
has the lowest costs of any major hub and spoke carrier; and during fiscal 1996 we reached our stated three year goal of earning a I 0%
operating margin.
We have not changed the 7.5 per ASM goal. There are many cost reduction opportunities we haven't found yet, and we will
search them out We intend to be smart about reaching that goal, however. The 7.5 goal was based on conservative revenue assumptions
made in late 1993 and early 1994. Revenues have been better than we anticipated due to a strong economy and good work by Delta
DELTA AIR LINES , INC .
people in sales, pricing and marketing. In this environment, focusing solely on cost reductions could limit our profitability. We won't
let that happen.
7.5 per ASM remains an important strategic goal. We will not reach that level, however, by the end of fiscal 1997. Instead, in fiscal
1
997, we will focus on improved profitability. As part of that effort, we increased our three year goal for operating margin to 1
2%, a very
tough target in our industry.
TOWARD A BROADER STRATEGIC VIEW
Renewed financial strength now enables Delta to broaden our strategic view. Cost reduction and control will be at the heart
of that strategy. Today, commercial aviation is enjoying good economic times, and we will adjust our short-term strategies and goals to
refiect this very welcome change. However, we won't be lulled into a false sense of security. In our cyclical industry, tough times will
return, and an unrelenting commitment to control costs is the only way to sustain profits in good times and bad.
Delta can, however, take the next step forward. Our company is moving toward a leadership strategy which balances superior
financial results for stockholders with our traditional dedication to safe, secure, reliable transportation, distinctive customer service
and a strong sense of unity and shared purpose among Delta people. In a service industry like ours, each of those constituencies -
stockholders, customers and Delta people - is critical to long-term profitability and growth.
Delta's turnaround has been more than a cost cutting exercise. Our company also is changing the way we work. The success of
the past two years reveals the company we are becoming. We set clear priorities, with safety and security as the first commitments;
understand that distinctive customer service is our competitive edge; rely on rigorous analysis, strategic planning and fiexible thinking to
recognize opportunities; lead change; set aggressive goals, strategies and plans; use cross-functional teams of Delta people to plan and
accomplish our work; demand tough-minded discipline once a course is determined; have an unrelenting commitment to results;
provide rewards for performance; respect each other and the work we do; and demand integrity in everything we do.
DELTA EXPRESS
On October I, 1996, Delta begins Delta Express, our new low-fare product initially serving IO cities in the northeast and
midwest with 62 daily non-stop fiights to Orlando and four other Florida cities. Delta saw the need to create this type of service to
compete with the growing number of low-fare carriers in our markets. Equally important, Florida has long been a critical market for
Delta, and we intend to maintain a strong competitive presence there. Before we could launch a product, however, we had to get our
costs in line. Our cost reduction program achieved that, with a critical boost from the new pilot contract which makes pilot costs on the
new service very competitive. The new Delta service will offer low fares with high value for our customers. This new service will be run
by a dedicated group of Delta professionals on the ground and in the air: It will be low-fare travel with a Delta touch, including assigned
seats, SkyMiles, and modern Delta aircraft maintained and fiown by experienced Delta people.
GOALS AND VAL U ES
We don't have all the answers yet to every question about our future, but we have a clear view of what we intend to be as we
work toward our vision of becoming the Worldwide Airline of Choice. Importantly for Delta, our business goals closely match our core
values as we pursue our vision.
Delta will offer safe, secure and reliable transportation. This is the foundation of our service and our first commitment to our
customers and to ourselves.
We will offer distinctive customer service. Our founder, CE. Woolman, called it "service and hospitality from the heart."
We know that this Delta-style service is our historical competitive edge, and we intend to build on that tradition. During fiscal 1996,
Delta began a company-wide training program, "Success Through Service," to renew our commitment to customer service. Delta
senior officers and I were in the first group to complete the program, and every Delta person will participate. Delta also added front line
people in selected areas to bolster service as customer traffic increased. In addition, Delta opened the Operations Control Center, a
state-of-the-art facility for improving customer service by closely coordinating the fiow of aircraft on Delta's 2,600 daily fiights across
our worldwide system. Every month, we ask 1,200 of our customers to measure us on 18 critical aspects of customer satisfaction, such
as the efficiency of our check-in process and the attentiveness of our fiight attendants. We take this feedback seriously, and hold our-
selves responsible for meeting tough targets.
DELTA AIR LINES, INC .
Delta intends to be the financially strongest hub and spoke carrier in the United States. We intend to be the lowest cost and
most profitable hub and spoke carrier in the United States, and a company that will provide superior returns for stockholders. Superior
financial returns aren't the only measure of success, but they are the "enabler"that allows us to do everything else we must do to succeed.
Delta will serve customers worldwide. Delta has the strongest route network in the United States, and we are a leading
international carrier. In addition, we have created a network of 13 code share agreements with quality airlines in Europe, the Pacific and
L
atin America. During fiscal 1996, Delta, Swissair; Sabena and Austrian Airlines received approval of antitrust immunity from the
U.S. Department ofT ransportation to pursue a ( D e l t a h a s t h e s t r o n g e s t
global marketing alliance.
route network in the United States, and
Our goal isto establish a seamless transportation system we are a leading in le mat ion al carrier.
which allows our customers to go anywhere in the world by connecting through Delta hubs and the hubs of our partners and business
associates.This ability to take people from Boise to Bucharest and beyond through a network of U.S. and international hubs distinguishes
Delta from point-to-point airlines and makes us a worldwide carrier.
Delta people will be aligned with corporate goals and achievements through a sense of unity, ownership and shared purpose.
Delta's internal strength is based on the belief that people who share a sense of unity and common purpose can create superior results
D e I t a p e o p I e w i l l b e a I i g n e d w i t h c o r p o r a t e g o a l s for our stockholders, our customers and
and achievements through a sense of unity,
ownership and shared purpose.
Delta people themselves.
So much has occurred at Delta in recent years
that it is difficult at times to put it into perspective. In a very short period of time we have moved from a one-dimensional company with
service primarily in the United States to a multi-dimensional company offering a variety of aviation products around the world.
Our industry is going through difficult and very challenging times that require decisive and fundamental change. As the people of Delta
face these challenges everyday, we are committed to emerge stronger and more focused than ever.
The one unshakable constant throughout the recent past has been the critical role of Delta people. They have a powerful
commitment to this company and a deep respect for each other as professionals. Delta never lost the key to its future - Delta people.
New programs strengthened the ties. Pay for performance programs help align Delta people with results, but Delta people also
share in the company's success through profit sharing. In fiscal 1996, these programs paid $144 million. Proposed, broad-based stock
option programs for most Delta personnel to be considered by Delta stockholders in October would make the sense of ownership
even stronger. In addition, during fiscal 1996, Delta people chose seven colleagues for the new Delta Personnel Board Council.
Three members of that group, along with a Delta pilot, attend regularly scheduled, quarterly Board of Directors meetings. They don't
vote, but they do have the ability to be heard and to make a difference. Other groups within Delta add to this sense of shared
participation in the company
During the fiscal year; Delta pilots overwhelmingly approved a new four year collective bargaining agreement. It was a forward-
looking step by pilots and important for Delta. It not only helps to lower Delta's costs while addressing many issues critical to pilots, but
it also allows the entire company to focus on the future together.
Belief in people is the critical core value of Delta. Some people contend that this company has moved away from this rich legacy
I take a very different view. I believe that the commitment to Delta and to each other by the people who work here is a deep reservoir
of strength which allowed us to survive the testing times and has put us in position to prosper once again. We will not abandon our
traditions which give us such great strength. We will build on them and replenish that reservoir in order to meet the ever-changing
requirements of our fiercely competitive business.
Delta will continue to be a great airline. We are now becoming a better business as well, built on clear goals and solid values.
That combination, which no other airline can match, is the new tradition of Delta.
Ronald W Allen
Chairman of the Board, President 9nd Chief Executive Officer
August 16, 1996
DELTA AIR L I NES, INC.
s}
OPERATIONAL /(\IC\\
( THE YEAR IN REVIEW
i September 1995 Quarter Highlights
Delta and A ll Nippon A irways announce plans for a broad-based business and marketing alliance between
the two airlines. Plans include code sharing on fiights between the two countries, starting with Tokyo (Narita) -
Los Angeles, which is served by both carriers.
Delta, Swissair; Sabena, and Austrian Airlines file a joint application to the U.S. Department of Transportation
seeking antitrust immunity for agreements that would allow the carriers to pursue a global marketing alliance.
USA Today names Delta best U.S. Domestic Airline as ranked by their survey of airline customers.
Delta reports best-ever September quarter financial results, recording operating income of$386 million and net
income of$201 million.
December 1995 Quarter Highlights
Delta realigns its domestic route syst em and repositions resources as a strategic step in its plan to restore and
sustain profitability.The realignment increases long-haul fiying and reduces short-haul fiying at Atlanta, adds
frequencies and new service at Cincinnati, and reduces and refocuses resources at Dallas/Fort Worth.
Delta announces formation of a new cargo unit, bringing cargo marketing, sales and service, and administrative
functions into a single business unit.
Delta reports operating income of$ 1
69 million and net income of$70 million forthe quarter.
March 1996 Quarter Highlights
Delta and the American Express Company launch the Delta SkyMiles co-branded credit card, allowing card-
members to earn one Delta SkyMile for every dollar charged to the card.
Delta announces plans to begin phasing out its entire Lockheed L-1011 fieet, with all L-1011 s to be removed from
transatlantic service by late 1998.
Delta and the Air Line Pilots Association (ALPA) announce a tentative collective bargaining agreement on a new
four year contract for Delta pi lots.
Delta reports record March quarter operating income of $169 million and net income of $63 million, excluding
restructuring and other non-recurring charges.
June 1996 Quarter Highlights
Delta's Board of Directors adopts, subject to stockholder approval, two broad-based stock option plans for Delta
people involving 24.7 million shares of Delta common stock. Concurrently, the Board authorizes a common stock
repurchase program of up to 24.7 million shares and approves the attendance of Delta personnel representatives
at regular quarterly Board of Directors meetings.
Delta's new collective bargaining agreement with ALPA becomes effective May I, 1
996. Delta also announces
projected cost savings under the agreementtotaling approximately $760 million over the four year term of the
contract, before considering any payments under the pilots' profit sharing program.
Delta announces redemption of its 3.23 % Convertible Subordinated Notes due June 15, 2003. As a result of the
conversion of substantially all the notes into shares of common stock, long term debt is reduced by $626 million
and stockholders' equity is increased by approximately the same amount. In addition, approximately $46 million in
annual interest expense w ill be eliminated.
DELTA AIR LINES , INC .
Delta announces its election to redeem on July 11, 1996 all outstanding shares of its Series C Convertible
Preferred Stock and related Depositary Shares. A s a result of the conversion of the preferred stock into
approximately 17.5 million shares of Delta's common stock, Delta will eliminate approximately $80 million in
annual preferred dividend payments.
Delta, Swissair, Sabena, and Austrian Airlines receive U.S. Department ofrransportation approval of antitrust
immunity for agreements allowing the carriers to pursue a global marketing alliance.
Delta unveils its new worldwide corporate identity in conjunction with the Grand Reopening of its flagship Crown
Room membership club at Hartsfield Atlanta International A irport.
For the quarter, Delta reports best-ever operating income of$569 million and net income of$328 million,
excluding a restructuring charge. For the fiscal year ended June 30, 1996, Delta reports all-time record operating
income of $1.3 billion and net income of $662 million, excluding restructuring and other non-recurring charges.
r LEADERSHIP 7.5 AND BEYOND
i
In April 1994, Delta announced Leadership 7.5, a three year plan to return the Company to sustained profitability
and position it for future growth. The core of the program was a goal of reducing the Company's annual operating expense
by approximately $2 billion by the end of the June 1997 quarter: Delta also established operating cost per available seat mile
( unit cost) goals of 8.6 for the June 199 5 quarter, 8.0 for the June 1996 quarter, and 7.5 for the June 1997 quarter: The
unit cost goals reflected the phase-in of the $2 billion in targeted cost savings, excluding restructuring and other non-recurring
charges, and assumed other costs and operating capacity would remain at calendar 1993 levels.
Developments in the airline industry during fiscal 1996 reaffirmed Delta's belief that the only W?+Y for the Company
to succeed in the highly competitive environment in which it operates is to permanently reduce operating costs to a
competitive level. The level of low-cost, low-fare competition in Delta's domestic markets continued to rise during fiscal
1996 at a rate faster than that experienced by Delta's major competitors, negatively impacting average fare levels in
affected markets. Traffic patterns during fiscal 1996 validated the
prediction that business traffic growth would stabilize while leisure
. traffic growth would accelerate. 10
*Excludes restructuring charges
8
As of June 30, 1995, Delta had succeeded in achieving its first
Leadership 7.5 unit cost goal, beating the 8.6 goal by a generous
margin with a unit cost of8.39 for the June 1995 quarter: By the
end of fiscal 1995, Delta had already implemented initiatives
estimated to generate approximately $1.6 billion in annual cost
reductions. During fiscal 1996, the Company continued to reduce
costs, recording a 3% reduction in both total operating expenses
and unit costs for the year, excluding restructuring and other
non-recurring charges. Actual June 1
996 quarter unit cost came in
at 8.33, excluding a restructuring charge.The June 1996 quarter
unit cost reflects expense reductions in several categories which
were partially offset by a significant increase in the price of jet fuel, a
7 . . . . . ..
June '94 . June '9 5 June '96 Long-term
Goal
in cents
QUARTERLY UNIT C OST *
DELTA AIR LINES , INC .
{s
4.3 per gallon federal tax on jet fuel and costs associated with carrying record levels of passenger traffic during the quarter.
A major milestone was reached in the Leadership 7.5 program in April 1996, when Delta pilots ratified a new four
year collective bargaining agreement, which became effective May I, 1996.The new agreement is expected to contribute
approximately $760 million to Leadership 7.5 cost reductions over the four year term of the contract, before considering
any payments under the pilots' profit sharing program.
A key outcome of the new pilot agreement is the formation of a low-fare operation. Subsequent to the end of
fiscal 1996, the Company announced the October I, 1996 launch of Delta Express, a low-fare business unit within Delta
operating in certain highly competit ive, leisure-oriented markets within Delta's system. Delta Express will begin daily
nonstop service connecting IO midwest and northeast cities with Orlando and four other Florida cities, operating with a
dedicated fleet of Boeing 737-200 aircraft. Delta Express is scheduled to grow to 25 aircraft by January, 1997
In July 1996, the Company announced a shift in strategy from a strict focus on operating costs to a more balanced
approach that focuses on both operating cost reduction and revenue improvement. Delta's success in strengthening its
financial condition, changes in the industry environment, and a renewed emphasis on customer service motivated the shift.
While the unit cost goal of 7.5 per available seat mile will be maintained as a long-term goal, the Company no longer expects
to reach this goal by the June 1997 quarter. Delta increased its three year operating margin goal to 12% by the end of fiscal
1999. Delta's operating margin goal is aggressive, and no assurance can be given that the Company will meet this goal.
( INTERNATIONAL OPERATIONS
i Transatlantic Performance
The financial performance of Delta's transatlantic operations continued to improve during fiscal 1996, with the
June 1996 quarter representing the fourth consecutive quarter in which Delta reported twelve month operating profits in
the transatlantic, excluding restructuring and other non-recurring charges. Cost reductions and marketing initiatives
contributed to a $119 million improvement in transatlantic
operating income for fiscal 1
996 versus fiscal 1
995. Delta
reported $76 million in operating income, excluding restructuring
and other non-recurring charges, in fiscal 1996 compared with an
operating loss of$43 million for fiscal 1995.These results are
based on allocations performed in accordance with requirements
established by the U.S. Department of Transportation.
The improvement in transatlantic profitability resulted
from both cost reductions and revenue improvements.Total
operating expenses declined 5% as a result of continued
implementation of cost reduction initiatives, excluding restructuring
and other non-recurring charges. Unit revenues increased 7%
over fiscal 1
99 5, result ing from higher passenger mile yields and
increased code share revenues.These improvements were
accomplished despite a 6% reduction in transatlantic capacity as
a result of cancellation of unprofitable routes.
DELTA AIR LINES, INC.
*As reported to U.S. Department ofTransportation;
excluding restructuring and other non-recurring charges
/00 :
0 :
(/00):
(200) :
(300) :
(400) :
(500) :
(600) :
FY93 FY94 FY95 FY96
,n m1/lions of dollars
TRANSATLANT I C OPERAT I NG RESULTS *
12 MONTH MOV I NG TOTALS
During fiscal 1996, Delta announced service changes consistent with the Company's commitment to eliminating
unprofitable routes. In the second quarter of fiscal 1
996, the Company discontinued service from Paris to Tel Aviv; from
New York-Kennedy and Atlanta to Hamburg; from Dallas/Fort Worth to Frankfurt; from Frankfurt to Delhi; and from
New York-Kennedy to Lisbon.
Delta continued to pursue new or expanded code sharing arrangements as a means of establishing, maintaining, or
increasing its presence in key international markets while efficiently managing resources. During fiscal 1996, Delta expanded
its code sharing agreement with Austrian Airlines to form a trilateral agreement with Malev Hungarian Airlines to code
share from Atlanta to Vienna and Budapest Delta and Austrian Airlines also expanded their agreement to include code
sharing on service from New York-Kennedy to Vienna. In addition, Delta announced a new code sharing agreement with
Aer Lingus for service between New York-Kennedy, Dublin, and Shannon airports.
During the June 1
996 quarter, Delta, Swissair, Sabena, and Austrian Airlines received approval of antitrust immunity
from the U.S. Department of Transportation to pursue a global marketing alliance.The alliance agreements establish a legal
framework, subject to the negotiation of definitive operating agreements, to allow the four carriers to form a seamless
transatlantic air transport system while retaining their unique corporate and national identities, and to link Delta's strong U.S.
domestic hub system with four additional hubs in Europe - Brussels, Zurich.Vienna, and Geneva.The alliance will include
code sharing; pricing, scheduling, and operational coordination; and joint sales and marketing opportunities.
Other International Operations
Delta implemented several initiatives to strengthen its Pacific operations. During fiscal 1
996, Delta and Korean Air
announced a new code sharing agreement between the two carriers on Korean's flights between Atlanta and Seoul, Korea,
via Chicago. Delta and All Nippon Airways also announced their formation of a broad-based alliance on flights between
the United States and Japan, including code sharing. In D ecember 1995, Delta discontinued service from Portland to Taipei
and Bangkok, and from Los Angeles to Hong Kong.
r DELTA CUSTOMERS
i
Superior customer service remains a core value of Delta Air Lines. During fiscal 1996, Delta identified refinements
needed to ensure that during and after Leadership 7.5, Delta continues to serve its customers with the quality that the
Company's customers and D elta's own people demand.
During fiscal 1996, Delta implemented "Success Through Service," a program designed to provide standards,
training, and measurements for delivering an enhanced level of customer service to every Delta customer. Plans call for
every Delta person to receive "Success Through Service" training by the end of fiscal 1997.
Since fiscal 1995, Delta has monitored customer satisfaction by surveying 1,200 customers each month. In response
to customer feedback, Delta took actions to further enhance customer service, particularly in areas impacted by the
strong growth in passenger traffic during the second half of fiscal 1996. Selective airport staffing was added at the Atlanta
and Cincinnati stations.Three hundred additional flight attendants were hired to effectively handle higher passenger loads.
Reservation centers increased staff and implemented technology to manage increasing call volumes and to provide special
services for high value customers. Outsourcing programs were refined to ensure consistent delivery of"Delta-style" service.
DELTA AIR LINES , INC .
{10
These programs and others demonstrate Delta's long-standing commitment to consistently meet and exceed its
customers' expectations. Delta's customer service continues to improve as a result of these and other init iatives, and such
measures as customer satisfaction ratings, on-time performance, and reliability showed marked improvements during the
June 1
996 quarter as compared to the March 1
996 quarter.
r DELIA PEOPLE
i
By the beginning of fiscal 1
996, Delta had substantially concluded the staffing reductions called for under Leadership
7.5, reducing headcount by 14% in fiscal 1
995. During fiscal 1
996, Delta took necessary steps to address specific customer
service issues primarily related to higher passenger loads. At the
conclusion of fiscal 1
996, headcount had increased 1
% from June 30,
1
995, reflecting selective recall and hiring of personnel in critical
customer service areas.
As a result of continued control of headcount. salaries and
related costs, in fiscal 1
996, Delta achieved reductions in salaries and
related costs of 8% from the level of fiscal 1
994, the year in which
Leadership 7.5 was announced. Derta's employee productivity as
of June 30, 1996, exceeded that of its major competitors, as
measured by available seat miles per employee.
Delta's new collective bargaining agreement with it s pilots
represented a major step toward restoring the Delta people's
traditional sense of unity and shared purpose. In addition, the
Company initiated several other efforts during fiscal 1996 to
reward its people for their dedication and commitment and
further align personnel objectives w ith stockholder goals:
During fiscal 1
996, Delta people earned $144 million
through the Company's profit sharing program. With the
72.000 :
70,000 :
68,ooo j
66,000 :
64,000 :
62,ooo j
60,000 :
58,000 :
56,0oo = .............. .. . .....
June '9 3 June '94 June '9 5 June '96
full-time equivalent employees
STAFFING LEVELS AT YEAR END
implementation of the new collective bargaining agreement for Delta pilots, substantially all Delta personnel now
participate in a profit sharing or other incentive compensation program.
On April 24, 1996, Delta's Board of Directors adopted, subject to stockholder approval, two broad-based stock
option plans for Delta people involving 24.7 million shares of Delta common stock.
On April 25, 1996, the Board adopted a proposal inviting selected representatives of various personnel groups
across Delta to attend its regular quarterly meetings.This initiative will provide Delta personnel with a new
channel of communication with the Board.
DELTA AIR LINES, INC .
( A IR C R AFT FLEET
i
Delta continues to maintain one of the youngest, most efficient and technologically advanced fleets in the U.S.
airline industry. During fiscal 1996, the Company continued to refine its aircraft fleet plan to simplify the fleet, improve
operating efficiency, and better meet
Aircraft Fleet
At June 30, 1996
Average Age of
Aircraft Type
Type of Aircraft (years) Owned
8-727-200 .. .. ... .. .. 19.3 106
8-737-200 . . .. .. . .... 11 .6
8-737-300 . . . . . .. .... 10.
8-757-200 . . ... ... . .. 7.4 45
8-767-200 . ..... . . . .. 13.1 15
8-767-300 .. . .. .. ... . 7.1 2
B-767-300ER . . . .. ... . 4.2 10
L-1011 - 1. . . . . ... .. . . . 19.2 31
L-1011-200 .. .. . . . ... . 18.0 I
L-1011 -250 . . .. .. ..... 13.7 6
L-1011-500 . .......... IS. 17
MD-11 . . ... .... . .... 3.1 s
MD-88 .......... . ...
MD-90 .. ........ . ...
Leased
23
53
13
41
24
7
7
57
Total
129
54
13
86
15
26
17
31
6
customer expectations.
During fiscal 1996, Delta announced
plans to retire all 55 Lockheed L-1011
aircraft from its fleet, including the removal
of all L-1011 aircraft from transatlantic service
by the end of fiscal 1998. At the same time,
Delta announced an agreement with The
Boeing Company to purchase 12 additional
Boeing 767-300ER aircraft for delivery in
fiscal 1997 and 1998, and to cancel its 52
orders (22 of which were subject to
reconfirmation by Delta) and 56 options to
purchase Boeing 737-300 aircraft.
The newly ordered 767-300ER
aircraft, together with aircraft already on
order, will replace all L-1011 aircraft now being used in transatlantic service.The L-1011 aircraft being removed from
transatlantic service will be reconfigured and used for domestic service, where they will replace older; less efficient versions
of the L-1011. See Note 17 of Notes to Consolidated Financial Statements.
During fiscal 1996, Delta accepted delivery of 11 new aircraft, including one B-757-200 aircraft; two B-767-300ER
aircraft; one MD- I I aircraft; and seven MD-90 aircraft.
Also during fiscal 1996, the Company sold one L-1011-1 aircraft, and returned to lessors the remaining nine
A3 I0-300 aircraft and five B-727-200 aircraft.
Subsequent to June 30, 1996, Delta entered into a definitive agreement with the Nordam Group, Inc., to purchase,
between fiscal years 1997 and 2000, 25 shipsets of Stage 3 engine hush kits for B-737-200 aircraft, with an option to
purchase an additional 30 shipsets.
The aircraft orders include four
MD-90 aircraft scheduled for delivery after
fiscal 1
997 that are subject to reconfirma-
tion by Delta. See Note 9 of Notes to
Consolidated Financial Statements.
Aircraft Delivery Schedule
Aircraft on Firm Order at June 30, 1996
Delivery in Year Ending June 30:
After
Orders 1997 1998 1999 2000 2001 2001 Total
8-757-200. . . . . . . 3 4
8-767-300 . . . ... .
B-767-300ER . ... . s
MD-II ........ .
MD-90 .. . ....
DELTA AIR LINES , INC .
9
I
2 2
_ 3
_
11}
Aircraft Delivery Schedule 2,500
Aircraft on Option at June 30, 1996
Delivery in Year Ending June 30:
After
Options 1997 1998 1999 2000 2001 2001 Total
2,000 Ground Propert)' and
B-757-200 .... . .. 2 2 24 28 Equipment
B-767-300ER .. . .. 9 5 14 Flight Equipment
5 5 5 2 17
(includes leased aircraft.)
MD-II .........
MD-88 ...... . . . 15 15 1,500
MD-90 ......... II 7 8 24 50
Total ...... . .. 42 19 13 50 124
-- -- - - -- --
1,000
Delta's aircraft which are subject to reconfirmation or are
on option provide the Company with the flexibility to adjust
scheduled aircraft deliveries.
500
The MD-88 options may be converted into MD-90
orders, and the B-767-300ER options may be converted into
B-767-300 orders, all at Delta's election.
'87 '9 I '92 '93 '94 '95 '96
in millions of dollars
CAPITAL EXPE DITURES
Delta continues to evaluate long-term aircraft alternatives with the goal of achieving the optimal mix of aircraft to
meet operational needs. Delta also intends to continue its efforts to carefully manage capital spending and simplify the fleet.
F I N A N C I A L I (' \' i C \\
Management's Discussion and Analysis of F
inancial Condition and Results of Operations
RESULTS OF OPERATIONS - Fiscal 1996 Com ared with Fiscal 1995
For fiscal 1996, Delta recorded net income of$156 million ($1.42 primary and fully diluted earnings per common
share after preferred stock dividend requirements) and operating income of$463 million. In fiscal 1995, Delta recorded
net income of$408 million ($6.32 primary and $5.43 fully diluted
I 2 *Excludes restructuring and other non-recurring charges
/0
8
and cumulative effects of accounting changes
0 . . . . .. . ..... . . . . . .. .. .. . ..... ... .... . . . . .. . . . .
(2)
(4)
(6)
(8)
(10)
(12)
'87 '88 '89 '90 '9 I '92 '93 '94 '95 '96
,n dollars
PRIMARY EARNINGS ( LOSS )
PER COMMON S HARE *
earnings per common share after preferred stock dividend require-
ments), and operating income of$66I million.
Fiscal 1996 results include pretax restructuring and other
non-recurring charges totaling $829 million ($506 million after-tax
or $9.71 per common share) related to the write-down of Delta's
Lockheed L-1011 fleet and the continuation of the Company's
Leadership 7.5 cost reduction program. See Note 17 of Notes to
Consolidated Financial Statements.
Fiscal 1995 results include a one-t ime $114 million after-tax
benefit ($2.25 primary and $1.42 fully diluted benefit per common
share) related to the adoption of Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment
Benefits" (SFAS 112). See Note IO of Notes to Consolidated
Financial Statements.
DELTA AIR LINES, INC .
Excluding the restructuring and
other non-recurring charges in fiscal 1996
and the cumulative effect of the adoption of
SFAS 112 in fiscal 199 5, net income for fiscal
1996totaled $662 million ($11.13 primary
and $8.49 fully diluted earnings per common
share after preferred stock dividend
requirements) and operating income was
$1.3 billion, compared to net income of
$294 million ($4.07 primary and $4.0 I fully
diluted earnings per common share after
preferred stock dividend requirements) and
operating income of$661 million in
fiscal 1995.
The improvement in financial results
forfiscal 1996ascomparedtofiscal 1995
primarily reflects cost reductions in most
operating expense categories under the
Company's Leadership 7.5 program. These
reductions resulted in a $370 million, or 3%,
decline in operating expenses, excluding
restructuring and other non-recurring
charges in fiscal 1996. Passenger revenue
increased $297 million, or 3%, due to
increased traffic stimulated by competitive
pricing actions, the expiration of the U.S.
transportation excise tax and general
improvements in economies worldwide.
Operating revenues for fiscal 1996
Financial Results Summary
Operating Revenues . ... .. . ..... .
Operating Expenses ... .. . ... ... .
Operating Income . . . .... .. . . .. . .
Other Expenses, Net . .... .. . . . . .
Income Before Income Taxes
and Cumulative Effect of
Accounting Change . ..... . .. ... .
Income laxes Provided, Net . . ... . .
Income Before Cumulative Effect
of Accounting Change . . .. . ... . . .
Cumulative Effect of Accounting
Change, Net oflax ... ... . . . . .. .
Net Income . . . ....... .. .... .. . .
Preferred Stock Dividends . . . .... .
Net Income Available to
Common Stockholders . . . ... .. .
Primary Income
Per Common Share:
Before Cumulative Effect of
Accounting Change ........ . .
Cumulative Effect of
Accounting Change ..... .. . . .
Fully Diluted Income
Per Common Share:
Before Cumulative Effect of
Accounting Change . . . . ... .. .
Cumulative Effect of
Accounting Change ...... . .. .
Number of Shares Used to
Compute Net Income
PerCom
1996 1995
(In Millions, Except
Share Data)
$12,455 $12,194
11 ,992
463
~ )
276
~
156
156
~
$ 1.42
$ 1.42
~
661
_JJ..~n
494
__QQQ)
294
114
408
~
$ 4.07
2.25
$ 6.32
$ .01
1.42
$ 5.43
+ 2%
+ 4
- 30
+12
- 44
- 40
- 47
- 62
- 7
- 77%
-65%
-78%
- 65%
- 74%
NIA -
NIA
were $12.5 billion, up 2% from $12.2 billion in fiscal 1995. Passenger revenue increased 3%, the result of 3% growth in
revenue passenger miles.The passenger mile yield was virtually unchanged. Domestic load factor increased two points to
66%, as domestic revenue passenger miles
and domestic capacity rose 6% and 3%,
Operating Revenue Detail
Passenger .. . ... ...... . ...... . . .
Cargo . ......... .. ........ . ... .
Other.Net .. .. .... . .. . . ...... .
lotal ..... . .... ... ..... . .... .
1996 1995
(In Millions)
$1 1,616 $1 1,319
521
318
$12,455
565
310
$12,19
+ 3%
- 8
+ 3
+ 2%
,
respectively. The domestic passenger mile
yield decreased 1%, the result of discount
fare promotions and the continued
presence of low-cost, low-fare carriers in
markets served by Delta. International load
DELTA AIR LINES, INC .
. ~?:17~:~i~-'.'?::~~Jf:~ ?
.?!:>. i
'-
~t:=:~.
~t!?~?! .\~::~~?~:. '. ?~
L~~c~~.1~
=.90~r.~~
1996 DISTRIBUTION OF
OPERATING REVENUES
Revenue-Related Statistics
1996 1995 Change
Revenue Passengers
Enplaned (Thousands) . . ..... . . 91,341 88,893 + 3%
Revenue Passenger Miles (Millions) 88,673 86,417 + 3%
Passenger Load Factor . ... .. .. . . 67.8% 66.2% +1.6 pts
Passenger Mile Yield . . ... .... .... 13.10 13.10
Cargo Ton Miles (Millions) ..... .. 1,368 1
,500 - 9%
Cargo Ton Mile Yield . .. ...... . .. 38.08 37.67 + 1%
Operating Revenue Per Available
Seat Mile ....... . .. .. ........ 9.53 9.33 + 2%
factor increased one point to 73%, as international revenue passen-
ger miles decreased 7% while operating capacity decreased 8%.The
decline in international capacity is mainly due to the cancellation of
service on certain international routes.The international passenger
mile yield increased 2%, primarily due to higher average fare levels in
certain international markets.
Cargo revenues in fiscal 1996 decreased 8%to $521 million,
the result of a 9% decline in cargo ton miles, partially offset by a 1% increase in the ton mile yield.The decrease in cargo ton
miles is primarily due to the cancellation of service on certain international routes and the resulting decrease in the
average cargo trip length.
All other revenues were up 3% to $318 million, mainly due to increased revenues from joint marketing programs
associated with the Company's SkyMilesfrequent fiyer program. See Note I of Notes to Consolidated Financial Statements.
Operating expenses in fiscal 1996 totaled $12.0 billion, up 4% from $11.5 billion in fiscal 1995. Operating capacity
increased less than 1% to 130.8 billion available seat miles, and operating cost per available seat mile increased 4% to 9.17.
Excluding restructuring and other non-recurring charges in fiscal 1996, operating expenses were down 3%, and operating
cost per available seat mile decreased 3%.
Operating Expense Detail
1996 1995 Change
(In Millions)
Salaries and Related Costs . .. .... $ 4,206 $ 4,354 - 3%
Aircraft Fuel . . ........... . .... . 1,464 1,370 + 7
Passenger Commissions . ... . .. . . 1,042 1,195 -13
Contracted Services . . .. .. . . . .. . 704 556 +27
Depreciation and Amortization ... 634 622 + 2
Other Selling Expenses .... . ... .. 594 618 - 4
Aircraft Rent . ... . .... . .. .. .... . 555 671 -17
Facilities and Other Rent ... . .... 379 436 - 13
Aircraft Maintenance Materials
and Outside Repairs .... . .... . 376 430 - 13
Passenger Service ... . ..... . . . . . 368 443 - 17
Landing Fees .... . ..... . ... . . . . . 248 266 - 7
Restructuring and Other
Non-Recurring Charges . ......
Other ...................... . .. + 4
DELTA AIR LINES , INC .
Salaries and related costs decreased
3%, primarily due to a lower average number
of employees during the year and lower
employee travel and benefit expenses,
partly offset by increased costs associated
with other employee compensation plans,
primarily profit sharing.
Aircraft fuel expense increased 7%,
as the average fuel price per gallon rose 8%
to 58.53, partially offset by a 1% reduction
in gallons consumed.
Passenger commissions expense
declined 13%, mainly due to the implemen-
tation of a maximum commission payment on domestic tickets and lower base commission rates.
Contracted services expense rose 27%, the result of increased outsourcing of information technologies services
and certain airport functions.
Depreciation and amortization expense increased 2%,
the result of the acquisition of additional owned aircraft and the
extension of leases on 40 B-737-200 aircraft in the June 1995
quarter which, for accounting purposes, resulted in those leases
being reclassified from operating to capital leases. This increase was
partially offset by certain international routes becoming fully
amortized and the write-down of the L-1011 fleet See Note 17 of
Notes to Consolidated Financial Statements.
Other selling expenses decreased 4%, primarily the result
of lower advertising and promotion expense, partially offset by
higher booking fee payments to computer reservation system
providers related to domestic traffic growth.
Aircraft rent expense decreased 17% due to the return of
certain aircraft to lessors and the extension of leases on 40
B-737-200 aircraft previously discussed.
Facilities and other rent expense declined 13%, the result of
*Excludes restructuring and other non-recurring charges
Other Selling Expenses 5%
r. }J~c
:9tf ~~i~!~~?:~~i 10:~~~rj9(
~ ~ .C?!-'.~!1~ -~~p_a_ics_ -~~
P.a.s.s~
_
n_g~c ?
.e
!.v
i~~ }~
: Other 6%
: : Salaries & Related Costs 38%
:. ~!c~r_afi. -
~~~I
.!-
~~
~-~~~~/~. ~-~?.~~i~~ t~.~~ _I.~~
:. f.a.s.s_
e_n_g~c ~?'!;';!i~~i_o_
n_~ -
~%
:. S?:1.t:9~~<!. ~~C~i~!=.s. ?~.
j .?~p_r_e_cj9~i..~ .8: .~'!:?i .. .~ -~~
as a percent of total operating expenses*
1996 DI ST RIB U TI O OF
O P E R AT I NG EX P ENSES
reduced charges for certain airport facilities and the subleasing of excess space in some locations.
Aircraft maintenance materials and outside repairs expense decreased 13%, reflecting credits received from engine
and brake manufacturers, improved engine reliability resulting in fewer engine removals, the elimination of certain engine
types from service due to fleet simplification, and lower material cost resulting from the write-down of inventory related
to the L-1011 aircraft. See Note 17 of Notes to Consolidated Financial Statements.
Passenger service expense declined 17%, reflecting continued benefits from catering changes and other cost
reduction programs, partially offset by increased passenger traffic, primarily on domestic routes.
Operating Statistics
1996
Available Seat Miles (Millions) . . . . . . . . 130,75 I
Available Ton Miles (Millions) . . . . . . . . . 18,084
Fuel Gallons Consumed (Millions). ... . 2,500
Average Fuel Price Per Gallon . . . . . . . . 58.53
Breakeven Passenger load Factor:
Including Restructuring and other
Non-Recurring Charges. . . . . . . . . 65.1
%
Excluding Restructuring and other
Non-Recurring Charges. . . . . . . . . 60.3%
Operating Cost Per Available
Seat Mile:
Including R
estructuri"I and other
Non--RecurriJ11
1995
130,645
18,150
2,533
54.09
62.3%
62.3%
Change
- 1%
+ 8%
+2.8pts.
- 2.0pts.
Landing fees expense declined 7%,
mainly reflecting favorable rate adjustments
and credits received at certain airports.
Fiscal 1996 operating expenses
include $829 million pretax restructuring
and other non-recurring charges. The
charges include a $452 million write-down
of Delta's Lockheed L- IO 11 fleet and related
assets and $377 million related to the
continuation of the Company's Leadership
7.5 cost reduction programs. See Note 17 of
Notes to Consolidated Financial Statements.
DELTA AIR LINES , INC .
All other operating expenses increased 4%, primarily reflecting the October I, 1
99 5, expiration of the exemption
from the 4.3 per gallon federal tax on commercial aviation jet fuel used in domestic operations, partially offset by an
increase in services provided to outside parties.
Nonoperating expense for fiscal 1996 totaled $ 1
87 million, compared to $ 167 million in fiscal 1995. Interest
expense decreased 8%, primarily due to a lower average level of outstanding debt, partially offset by an increase in interest
related to the extension and reclassification of 40 B-737-200 aircraft leases previously discussed. Interest capitalized on
funds advanced for t he purchase of flight equipment and construction of faci lities decreased 1
3%, primarily resulting from
a lower average balance of outstanding advance payments for equipment. Interest income declined 9% to $86 million,
primarily due to a lower average level of short-term investments and lower interest rates during the year. Miscellaneous
expense, net was $30 million for fiscal 1
996 compared to less than $ 1 million for fiscal I995. This expense was primarily
due to costs associated with the repurchase and retirement of long-term debt and foreign exchange losses.
r
i RES UL IS OF OPE RA I IONS - Fiscal 1995 Com pared with Fiscal 1994
For fiscal 1
995, Delta recorded net income of$408 million ($6.32 primary and $5.43 fully diluted earnings per
common share after preferred stock dividend requirements) and operating income of $661 million. In fiscal 1994, Delta
recorded a net loss of $409 million ($ 1
0.32 primary and fully diluted loss per common share after preferred stock dividend
requirements), and an operating loss of $447 million.
Fiscal 1995 resu lts include a one-time $114 million after-tax benefit ($2.25 primary and $1.42 fully diluted benefit
per common share) related t o the adoption, effective July I, 1
994, of SFAS 112. See Note 10 of Notes to Consolidated
Financial Statements. Fiscal 1
994 results include pretax restructuring charges totaling $526 million ($331 million after tax,
or $6.59 per common share) related to the Company's Leadership 7.5 program, and an early retirement program
completed during t he December 1993 quarter. See Note 1
7 of Notes to Consolidated Financial Statements.
Excluding the cumulative effect of the adoption ofSFAS 112, net income for fiscal 1
995 totaled $294 million ($4.07
primary and $4.0 I fully diluted earnings per common share after preferred stock dividend requirements) and operating
income was $66 1 million. Excluding restructuring charges, the net loss for fiscal 1994 totaled $77 million ($3.73 primary
and fully diluted loss per common share after preferred stock dividend requirements) and operating income was $79 million.
The improvement in financial results for fiscal 1995 versus fiscal 1994 was primarily due to cost reductions under the
Company's Leadership 7.5 program. Leadership 7.5 initiatives contributed to cost reductions in most operating expense
categories, resu lting in a $465 million, or 4%, decline in operating expenses in fiscal 1
99 5 compared to fiscal 1994,
excluding restructuring charges in fiscal 1
994.
Operating revenues for fiscal 1
995 were $ 1
2.2 billion, up 1
% from $12. 1 billion in fiscal 1
994. Passenger revenue
increased less than 1%, the result of 1% growth in revenue passenger miles partly offset by a 1
% decline in the passenger
mile yield to 13.1
0. Domestic load factor. increased slightly, as domestic revenue passenger miles grew 2% w hile domestic
capacity rose 1
%. Domestic traffic growth was primarily due to traffic stimulated through discount fare promotions and
other competit ive pricing actions, which contributed to a 1% decrease in the domestic passenger mile yield. International
load factor rose five points to 72%, as international revenue passenger miles grew 1
% and international operating capacity
fell 6%.The international passenger mile yield was unchanged.
Cargo revenues in fiscal 1
995 increased 3% to $565 million. Cargo ton mi les increased 8%, primarily due to
international cargo traffic growth, and the ton mile yield declined 5%, mainly the result of increases in long-haul cargo traffic
DELTA AIR. LINES, INC .
and lower domestic mail contract rates. All other revenues were up 21% to $310 million, mainly due to increased revenues
from joint marketing programs.
Operating expenses in fiscal 1995 totaled $ 11.5 billion, down 8% from $12.5 billion in fiscal 1
994. Operating capacity
decreased 1% to 130.6 billion available seat miles, and operating cost per available seat mile declined 7% to 8.83. Excluding
the fiscal 1994 restructuring charges, operating expenses for fiscal 199 5 were down 4%, and operating cost per available
seat mile decreased 3%, in fiscal 1995 compared to fiscal 1994.
Nonoperating expense for fiscal 1995 totaled $167 million, compared to $213 million in fiscal 1994. Interest
expense decreased 4%, primarily due to a lower average level of outstanding debt, partially offset by an increase in interest
expense related to the extension of 40 B-737-200 aircraft leases previously discussed. Interest capitalized on funds
advanced for the purchase of flight equipment and construction of facilities declined 9%, primarily resulting from a lower
average balance in construction work in progress. Interest income increased 67%, or $38 million, primarily due to a higher
average level of short-term investments and higher interest rates during the year.
CAPITALIZATION, FINANCING AND LI UIDITY - Fiscal Year 1996
Cash and cash equivalents and short-term investments totaled $1.6 billion at June 30, 1996, compared to $1.8 billion
at June 30, 1995.The principal sources of funds during fiscal 1996 were $1.4 billion of cash from operations; $35 million
from the issuance of common stock; and $26 million from the sale of flight equipment.
During fiscal 1996, Delta invested $639 million in flight equipment and $297 million in ground property and
equipment.The Company also made payments of$440 million on long-term debt and capital lease obligations, including
Delta's voluntary repurchase and retirement of $224 million principal amount of
long-term debt.The Company paid cash dividends of$80 million on
its Series C Convertible Preferred Stock, $30 million on its Series B
ESOP Convertible Preferred Stock, and $ 1
0 million on its Common
Stock. In addition, Delta paid $66 million to repurchase 821,300
common shares under the common stock repurchase program
discussed below.The Company may repurchase additional long-term
debt and common stock from time to time.
As of June 30, 1996, the Company had negative working capital
of$356 million, compared to negative working capital of$427 million
at June 30, 1995. A negative working capital position is normal for
Delta and does not indicate a lack of liquidity.The Company expects
to meet its current obligations as they become due through available
cash, short-term investments and internally generated funds,
supplemented as necessary by debt financing and proceeds from sale
and leaseback transactions. At August 16, 1996, the Company had
$1.25 billion of credit available under its 1995 Bank Credit Agreement,
subject to compliance with certain conditions. See Note 7 of Notes
to Consolidated Financial Statements.
4,000 :
3,500 :
3,000 :
2,500 :
2,000 :
1,500 :
1,000 :
500 :
0 : . . . ............. . ... . .... . ...... .. . .... . .... . .
'87 '88 '89 '90 '9 I '92 '93 '94 '95 '96
in millions of dollars
LONG-TERM DEBT & CAPITAL LEASES
Long-term debt and capital lease obligations, including current maturities, totaled $2.3 billion at June 30, 1996, compared
DELTA AIR LINES , INC .
{1s
to $3.3 billion at June 30, 1995. Stockholders' equity was $2.5 billion
at June 30, 1996, compared to $1.8 billion at June 30, 1995.The
Company's debt-to-equity position, including current maturities, was
47% debt and 53% equity at June 30, 1996, compared to 65% debt
and 35% equity at June 30, 1995.
At August 16, 1996, there was outstanding $290 million
principal amount of the Delta Family-Care Savings Plan's Series C
Guaranteed Serial ESOP Notes (Series C ESOP Notes), which are
guaranteed by Delta.The Series C ESOP Notes currently have the
benefit of a credit enhancement in the form of a letter of credit in the
amount of$470 million under Delta's Credit Agreement with ABN
AMRO Bank and a group of banks. Delta is required to purchase the
Series C ESOP Notes in certain circumstances. See Note 7 of Notes
to Consolidated Financial Statements.
r FISCAL YEAR 1995
3,000
2,500
2,000
1,500
1,000
500
0 . .......... . ........ . ............. . . .. . ...... .
'87 '88 '89 '90 '9 I '92 '93 '94 '95 '96
in millions of dollars
STOCKHOLDERS ' EQUITY
i In fiscal 1995, the principal sources offunds were $1.1 billion of cash from operations, $139 million from Pan Am
Corporation for the repayment of certain debtor-in-possession financing (including $24 million recorded in cash from
operations representing accrued interest, net of the settlement of certain other claims); and $137 million from the sale of
flight equipment. During fiscal 1995, Delta invested $458 million in flight equipment and $168 million in ground property
and equipment.The Company also made payments of $572 million on long-term debt and capital lease obligations,
including Delta's voluntary repurchase and retirement of$534 million principal amount of long-term debt. In addition, the
Company paid cash dividends of $80 million on its Series C Convertible Preferred Stock, $30 million on its Series B ESOP
Convertible Preferred Stock, and $10 million on its Common Stock.
r FISCAL YEAR 1994
i
In fiscal 1994, the principal sources offunds were $1.3 billion of cash from operations, which included $300 million
from the sale of certain accounts receivable (see Note 5 of Notes to Consolidated Financial Statements); $748 million
proceeds from aircraft sale and leaseback transactions; $226 million of long-term borrowings; and $103 million from the
sale of flight equipment. Delta invested $1.0 billion in flight equipment, net of advance payment refunds of$94 million, and
$173 million in ground property and equipment.The Company made payments of$547 million on long-term debt and
capital lease obligations, and paid cash dividends of $80 million on its Series C Convertible Preferred Stock, $30 million on
its Series B ESOP Convertible Preferred Stock, and $10 million on its Common Stock.
DELTA AIR LINES , INC .
r NEW ACCOUNTING STANDARDS
i During fiscal 1996, Delta adopted Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of'' (SFAS 121 ). This statement requires that
the carrying values of long-lived assets, including certain identifiable intangibles held and used by an entity, be reviewed for
impairment, and potentially written down, whenever events or changes in circumstances indicate that the carrying amounts
of the assets may not be recoverable. See Note 17 of Notes to Consolidated Financial Statements for information regarding
the write-down of Delta's L-1011 aircraft and related assets due to the early retirement of this fleet
Effective July I, 1
994, Delta adopted SFAS 112, which resulted in a cumulative after-tax transition benefit of $114 million
($2.25 primary and $1.42 fully diluted benefit per common share) in fiscal 1995, primarily due to the net overfunded status
of the Company's disability and survivorship plans. See Note IO of Notes to Consolidated Financial Statements.
Also effective July I, 1994, the Company adopted American Institute of Certified Public Accountants Statement of
Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans" (SOP 93-6).The adoption of SOP 93-6
increased reported net income available to common stockholders shown in the Consolidated Statements of Operations
by $8 million for fiscal 1995, and increased primary and fully diluted earnings per common share for that period by $0.16
and $0.28, respectively See Note 15 of Notes to Consolidated Financial Statements.
In October 199 5, the Financial Accounting Standards Board issued Statement ofFinancial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). SFAS 123 establishes a fair value based method of
accounting for stock options. Entities may elect to either adopt the measurement criteria of the statement for accounting
purposes, thereby recognizing an amount in results of operations on a prospective basis, or disclose the proforma effects
of the new measurement criteria in Notes to Consolidated Financial Statements. The Company intends to adopt the pro
forma disclosure features of SFAS 123, which are effective for fiscal year 1997.
( FUTURE OUTLOOK
i DeferredTaxAsset
At June 30, 1996, Delta had a net cumulative deferred tax asset of$767 million, which consists of$2.2 billion of
deferred tax assets, offset by $1.4 billion of deferred tax liabilities. Included in the deferred tax assets are, among other_
items, $724 million related to obligations for postretirement benefits and $354 million related to alternative minimum tax
(AMT) credit carryforwards. The AMT credit carryforwards do not expire.
Management believes that a significant portion of the deferred tax assets will be realized through reversals of exist-
ing taxable temporary differences with similar reversal patterns. To realize the benefits of the remaining deferred tax assets,
excluding AMT credits, Delta needs to generate approximately$ I. I billion in future taxable income. Based on expectations
for future taxable income, the extended period over which postretirement benefits will be recognized, and the fact that
AMT credits do not expire, management believes that it is more likely than not that the deferred tax assets will be realized.
Although Delta experienced book and tax losses in fiscal years 1991 through 1994, the Company reported book
and tax income in fiscal years 1995 and 1996. Furthermore, the Company has consistently reported book income in all
DELTA AIR LINES , INC .
{20
other fiscal years since 1947 with the excep-
tion of fiscal year 1983.The accompanying
chart is a summary of Delta's pretax book
income (loss) and taxable income (loss) for
Pretax Book Income (Loss) . ... ..... . .
Taxable Income (Loss) . .. . . . . ..... . . .
the last three fiscal years, prior to net operating loss carrybacks.
1996
$276
$635
1995
(In Millions)
$494
$282
1994
$(660)
$(411)
The book and tax income reported for fiscal years 199 5 and 1996 reflect significant improvements in the Company's
financial performance, primarily resulting from operating expense reductions achieved under the Leadership 7.5 program.
Delta's ability to generate the expected amounts of taxable income from future operations is dependent upon
various factors, many of which are beyond management's control. Accordingly, there can be no assurance that Delta will
meet its expectations of future taxable income. However; after considering Delta's earnings history, the actions that Delta
has already taken and will continue to take to improve its financial performance, expectations of future taxable income,
and other relevant considerations, management believes that it is more likely than not that future taxable income will be
sufficient to fully utilize the deferred tax assets which existed at June 30, 1996. See Note 16 of Notes to Consolidated
Financial Statements.
Commitments
Future expenditures for aircraft, engines and engine hushkits on firm order as of August 16, 1996, are estimated
to be $2.4 billion, excluding aircraft orders subject to reconfirmation by Delta.The Company expects to finance these
commitments using available cash, short-term investments and internally generated funds, supplemented as necessary by
debt financings and proceeds from sale and leaseback transactions. The Company also has certain commitments related to
its code sharing arrangements. See Note 9 of Notes to Consolidated Financial Statements. Also, see Note 8 of Notes to
Consolidated Financial Statements for information on the Company's lease commitments.
Competitive Environment
Delta expects that low-fare competition is likely to continue in domestic and international markets. If price
reductions are not offset by increases in traffic or changes in the mix of traffic that improve the passenger mile yield, Delta's
operating results will be adversely affected.
FuelTax
The Omnibus Budget Reconciliation Act of 1993 imposes a 4.3 per gallon tax on commercial aviation jet fuel
purchased for use in domestic operations. Based on Delta's fiscal 1997 expected domestic fuel requirement of 2.1 billion
gallons, the continued imposition of this fuel tax will result in operating expense of approximately $90 million annually.
Delta and other U.S. airlines are actively lobbying for a repeal of this tax.The outcome of these efforts cannot be determined.
Transportation Excise Tax
Upon the January I, 1996, expiration of the I 0% transportation excise tax applicable to domestic travel, the 6.25%
domestic cargo waybill tax and the $6 per passenger international departure tax, the Company discontinued collecting
these taxes. These taxes were reinstated during August 1
996, effective for the remainder of the calendar year. The impact
of this reinstatement on Delta cannot be determined.
DELTA AIR LINES , INC .
Broad-Based Stock Option Plans
On April 24, 1996, Delta's Board of Directors adopted, subject to stockholder approval, two broad-based,
non-qualified stock option plans for Delta personnel providing for the issuance of stock options to purchase 24.7 million
shares of Delta common stock.
One plan is for eligible non-pilot personnel and the other is for Company pilots.The non-pilot and pilot plans involve
stock options to purchase 14.7 million and 10 million shares of common stock, respectively.The non-pilot and pilot plans
are being presented to stockholders as one proposal. For additional information, see Note 1
3 of Notes to Consolidated
Financial Statements.
The pilot stock option plan is an integral part of the new collective bargaining agreement between the Company
and the Air Line Pilots Association (ALPA), which represents Delta's pilots. A LPA has the right to reopen the new collective
bargaining agreement in its entirety if any required stockholder approval of the pilot stock option plan is not obtained,
and Delta and ALPA are unable to reach agreement within 30 days on providing pilots w ith equivalent value to the pilot
stock option plan.
Stock Repurchase Authorization
On April 24, 1996, Delta's Board of Directors authorized the Company to repurchase up to 24.7 million shares of
its common stock and common stock equivalents. For additional information see Note 14 of Notes to Consolidated
Financial Statements.
Antitrust Litigation
In February 1995, Delta changed its travel agency commission program by implementing certain maximum
commission payments for the sale of domestic airline tickets. Class action antitrust litigation filed by travel agents against
Delta and several other airlines that initiated travel agent commission cap programs is pending in the United States District
Court in Minneapolis. The travel agents allege that the defendant airlines conspired to reduce the commissions paid to
travel agents in violation of the federal antitrust laws, and are seeking damages of approximately $725 million, to be trebled
under the antitrust laws.The District Court has denied the motions for summary judgment filed by the airlines.The jury
trial of this lawsuit is scheduled to begin on September 3, 1996. See Note 11 of Notes to Consolidated Financial
Statements.
Forward-Looking Information
The information contained in this Annual Report regarding the cost savings that Delta currently anticipates under
the new collective bargaining agreement with ALPA is forward-looking, and the actual results could differ materially
from the results that Delta currently anticipates.The specific factors that could cause the actual results to differ materially
from the expected results include, among other things, ( I) ALPA's right to reopen the new contract if there is a Change of
Control (as defined) of Delta or if any required stockholder approval of the pilot stock option plan is not obtained;
(2) the number ofB-737-200 aircraft that Delta utilizes under reduced operating costs; (3) aircraft deployment and
utilization rates; and (4) competitive factors and general economic conditions.
. ......... , ...................................................................................

DELTA AIR LINES , INC .
( REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
i
To the Stockholders and the Board of Directors of
Delta Air Lines, Inc.:
We have audited the accompanying consolidated balance sheets of Delta Air Lines, Inc.
(a Delaware corporation) and subsidiaries as of]une 30, 1996 and 1995, and the related consolidated
statements of operations, cash flows and stockholders' equity for each of the three years in the period ended
June 30, 1996. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements (pgs. 28-49) referred to above present fairly, in all material
respects, the financial position of Delta Air Lines, Inc. and subsidiaries as of]une 30, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years in the period ended June 30,
1996, in conformity with generally accepted accounting principles.
As discussed in Notes 15 and 10 in the Notes to Consolidated Financial Statements, effective July 1,
1994, the Company changed its methods of accountingfor employee stock ownership plans and
postemployment benefits.
Atlanta, Georgia
August 16, 1996
r REPORT OF MANAGEMENT
l
The integrity and objectivity of the information presented in this Annual Report are the
responsibility of Delta management. The financial statements contained in this report have been audited
by Arthur Andersen LLP, independent public accountants, whose report appears on this page.
Delta maintains a system of internal financial controls which are independently assessed on an
ongoing basis through a program of internal audits. These controls include the selection and training of
the Company's managers, organizational arrangements that provide a division of responsibilities, and
communication programs explaining the Company's policies and standards. We believe that this system
provides reasonable assurance that transactions are executed in accordance with management's
authorization; that transactions are appropriately recorded to permit preparation of financial statements
that, in all material respects, are presented in conformity with generally accepted accounting principles;
and that assets are properly accounted for and safeguarded against loss from unauthorized use.
The Board of Directors pursues its responsibilities for these financial statements through its
Audit Committee, which consists solely of directors who are neither officers nor employees of the
Company. The Audit Committee meets periodically with the independent public accountants, the
internal auditors and representatives of management to discuss internal accounting control, auditing
and financial reporting matters.
THOMAS J. RO ECK, JR.
Senior Vice President - Finance
and Chief Financial Officer
DELTA AIR LINES, INC.
RONALD W. ALLEN
Chairman of the Board, President
and Chief Executive Officer
DIRECTORS AND () / / 1 ( (', -,
( BOARD OF DIRECTORS
i
RONALD WALLEN
Chairman of the Boord, President and Chief Executive Officer; Delta Air Lines, Inc.
EDWIN L.ARTZT
Chairman of the Executive Committee of the Boord of Directors, The Procter & Gamble
Company; Retired Chairman of the Boord and Chief Executive Officer; The Procter & Gamble
Company, Cincinnati, Ohio
HENRY A BIEDENHARN, Ill
Retired Chairman of the Boord, President and Chief Executive Officer; Ouachita
Coco-Colo Bottling Company, Inc., Monroe, Louisiana
JAMES L. BROADHEAD
Chairman of the Boord and Chief Executive Officer; FPL Group, Inc.;
Chairman of the Boord and Chief Executive Officer;
Florido Power & Light Company.Juno Beach, Florido
EDWARD H. BUDD
Chairman of the Executive Committee of the Boord of Directors, The Travelers Group,
Inc., New York, New York; Retired Chairman of the Boord and Chief Executive Officer;
The Travelers Corporation, Hartford, Connecticut
GEORGE D. BUSBEE
Of counsel to low f,rm of /(jng & Spolding,Atlonto, Georgia; former Governor of Georgia
R. EUGENE CARTLEDGE
Chairman of the Boord, Savannah Foods & Industries, Inc., Savannah, Georgia;
Retired Chairman of the Boord and Chief Executive Officer;
Union Comp Corporation, Wayne, New Jersey
MARY JOHNSTON EVANS
Director of various corporations
GERALD GRINSTEIN
Retired Chairman, Burlington Northern Santo Fe Corporation;
Retired Chairman and Chief Executive Officer; Burlington Northern Inc.,
Fort Worth, Texas
JESSE HILL.JR.
Retired Chairman of the Boord,Atlonto Life Insurance Compony,At/onto, Georgia
PETER D. SUTHERLAND
Chairman and Managing Director of Goldman Sachs International, London, England,
and a General Portner ofThe Goldman Sachs Group, L.P. and Goldman,
Sachs & Co., New York, NewYork;former Director-General of the Genera/Agreement
on Tariffs and Trade
ANDREW J.YOUNG
Vice Chairman, Low Companies Group, lnc.,Atlonto, Georgia; former Mayor of Atlanta, Georgia;
Co-Chairman oftheAtlonto Committee for the Olympic Gomes
AUDIT COMMITTEE
JESSE HI LL, JR., Chairman
HENRY A. Bl EDEN HARN, Ill
JAMES L. BROADHEAD
MARY JOHNSTON EVANS
PETER D. SUTHERLAND
BENEFIT FUNDS INVESTMENT
COMMITTEE
EDWARD H. BUDD, Chairman
EDWIN L. ARTZT
HENRY A BIEDENHARN, Ill
JESSE HILL, JR.
ANDREW J.YOUNG
EXECUTIVE COMMITTEE
RONALD W ALLEN, Chairman
EDWARD H. BUDD
R. EUGENE CARTLEDGE
GERALD GRINS
TEIN
JESSE HILL, JR.
FINANCE COMMITTEE
R. EUGENE CARTLEDGE.Chairman
EDW IN L.ARTZT
EDWARD H. BUDD
GEORGE D. BUSBEE
GERALD GRINSTEIN
PERSONNEL, COMPENSATION &
NOMINATING COMMITTEE
GERALD GRINS
TEIN, Chairman
JAMES L. BROADHEAD
R. EUGENE CARTLEDGE
MARY JOHNS
TON EVANS
DELTA AIR LINES , INC .
r
i OFFICERS
RONALD W ALLEN
Chairman of the Board, President and
Chief Executive Officer
HARRY C. ALGER
Executive Vice President - Operations
ROBERTW COGGIN
Executive Vice President - Marketing
MAURICEWWOR
TH
Executive Vice President - Customer Service
W MAR
TIN BRAHAM
Senior Vice President - Delta Staffing
Services Business Unit Development
ROBERT S. HARKE
Y
Senior Vice President - General Counsel
and Secretary
THOMAS J. ROECK, JR.
SeniorVice President - F
inance
and Chief Financial Officer
ROBERT G. ADAMS
Vice President- P
ersonnel
HAROLD L. BEVIS
Vice President- Public Affairs
VINCENT F. CAMINITI
Vice President - Safes
W E. DOLL
Vice President - Cargo
MARKA. P. DRUSCH
Vice President- Marketing Development
MICHAELS. ELLENBURG
Vice President - Purchasing
TERRY M. ERSKINE
Vice President - P
ersonnel Relations
VICKI B. ESCARRA
Vice President-Airport Customer Service
H. D. GREENBERG
Vice President - Flight Operations
JULIUSP.GWIN
Vice President - B
.usiness P
lanning
JOHN K. LAUBER
Vice President - Corporate Safety
and Compliance
P
AUL G. MATSEN
Vice President- Corporate Planning
HAROLD G. MCDONALD
Vice President-Aircra~ and Hangar
Maintenance
MICHAEL G. MrnLICOTT
Vice President- Europe and Asia
LEON A. PIPER
Vice President - Personnel Benefits
JENNY R. POOLE
Vice President - In-Flight Service
THOMAS J. SLOCUM
Vice President - Corporate Communications
RAYVALEIKA
. Vice President - Technical Operations
D. SCOTT YOHE
Vice President - Government Affairs
MICHAEL M.YOUNG
Vice President- Community Affairs
JAMES G. MATHEWS
Controller
JAMES H. SAN REGRET
Treasurer
DEAN C.ARVIDSON
Assistant Secretary
SUSANT HUDSON
Assistant Secretary
LESLIE P. KLEMPERER
Assistant Secretary
as of August 16 , 1996
CONSOLIDATED bc1la11ce sheets
June 30, /996 and /995
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
Short-term investments ................................. .
Accounts receivable, net of allowance for
uncollectible accounts of$44 at June 30,
1996, and $29 at June 30, 1995 .............. . ............. .
Maintenance and operating supplies, at average cost . . ........ . .... .
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . ......... .
Prepaid expenses and other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets ................ . ................ .
Property and Equipment:
Flight equipment ...................................... .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . .
Flight equipment under capital leases ......................... .
Less: Accumulated amortization . . . . . . . . . . . . . . . ......... .
Ground property and equipment ...... . .... . ............... .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . .... .
Advance payments for equipment . . . . . . . . . . . . . . . . . ......... .
Other Assets:
Marketable equity securities
Deferred income taxes . . . . . . . . . . . .. . .. . . ....... . ........ .
Investments in associated companies. . . . . . . . . . . . . . . . .... . .... .
Cost in excess of net assets acquired, net of
accumulated amortization of$84 at
June 30, 1996, and $75 at June 30, 1995 ...................... .
Leasehold and operating rights, net of accumulated
amortization of$183 atJune 30, 1996,
and $165 at June 30, 1995 . . . . . . . . . . . . . . . . . .... .. ........ .
Other ............................................. .
1996 1995
(In Millions)
$ 1,145
507
968
73
352
237
3,282
8,202
3,235
$ 1,233
529
755
68
234
195
3,014
9,288
4,209
4,967 5,079
515
127
388
2,697
1,532
537
99
438
2,442
1,354
I, 165 1,088
275 331
6,795 6,936
473
415
266
265
140
590
2,149
$12,226
398
506
265
274
177
573
2,193
$12,143
LIABILITIES AND STOCKHOLDERS' E UITY
Current Liabilities:
Current maturities of long-term debt . .. . .. .... .. . . .... . ..... .
Current obligations under capital leases ................. . .. . . . .
Accounts payable and miscellaneous accrued liabilities .. . ... ....... .
Airtraffic liability .. .. ... ... . . .. . . ... .. .. .... . . .. ..... . . .
Accrued rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued salaries and vacation pay. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . .. . .. .. .. . . . . . . ... ... . . . ... .
Noncurrent Liabilities:
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Credits:
Deferred gain on sale and leaseback transactions . . . . . . . . . . . .. .... .
Manufacturers' and other credits ............ . ............... .
Commitments and Contingencies (Notes 7, 8, 9 and 11 )
Employee Stock Ownership Plan Preferred Stock:
Series B ESOP Convertible Preferred Stock, $1.00 par value, $72.00 stated
and liquidation value; issued and outstanding 6,738,740 shares
at June 30, 1996, and 6,786,632 shares at June 30, 1995 .. . . . . . . . . .
Unearned compensation under employee stock ownership plan . . . . ... .
Stockholders' Equity:
Series C Convertible Preferred Stock, $1.00 parvalue, $50,000 liquidation
preference; issued and outstanding 13,978 shares at June 30, 1996 and
23,000 shares at June 30, 1995 ..... .. ........ . ........... . .
Common Stock, $3.00 par value; authorized 150,000,000 shares; issued
72,265,994 shares at June 30, 1996, and 54,537,103 shares at June 30, 1995.
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gain on noncurrent marketable equity securities .. .. .. . .
Treasury stock at cost, 4,487,888 shares at June 30, 1996, and
3,721,093 shares at June 30, 1995 .. . ........ . ..... . ........ .
The accompanying notes are an integral part of these consolidated balance sheets.
1996 1995
(In Millions, Except Share Data)
$ 40
58
1,540
1,414
201
385
3,638
1,799
1,796
616
376
425
5,012
802
96
898
485
(347)
138
217
2,627
( 119)
126
(311)
2,540
$ 12,226
$ 15 1
61
1,473
1,1
43
235
378
3,441
2,683
1,7 1
4
556
438
395
5,786
860
1
09
969
489
(369)
120
164
2,016
( 184)
83
(252)
1,827
$12,143
-
C O N S O L I D AT E D S TAT E M E N T S of o p c r c1 I i o 11 s
For the years ended June 30, /996, /995 and 1994
1996 1995 1994
Operating Revenues:
(In Millions, Except Per Share Data)
Passenger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cargo .. .. ........ . ........ ..... ... ...... .
Other, net .. . .......... ...... .. ........... .
Total operating revenues ........... . ....... .
Operating Expenses:
Salaries and related costs . . . . . . . . . . . . . . . . . . . . . . .
Aircraft fuel . ...... ...... ... ............... .
Passenger commissions . . . . . . . . . . . . . . . ........ .
Contracted services . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . ... ... .
Other selling expenses ........... . . . . . ... . ... . .
Aircraft rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .
Facilities and other rent ..... . .. . ....... . ... ... .
Aircraft maintenance materials and outside repairs ..... .
Passenger service . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Landing fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other non-recurring charges . ....... .
Other . ... .. . .. .. . . ..... .. . . ........ . .... .
Total operating expenses ............. . ... .. .
Operating Income (Loss) . ... .. ...... . . .. . . . . .. . .. .
Other Income (Expense):
Interest expense .... .. ............... . ...... .
Interest capitalized .. ...................... .. .
Interest income . . . . . . . . . . . . . . . . . . . . . . . ..... .
Miscellaneous income (expense), net . ...... . ... ... .
Income (Loss) Before Income Taxes and Cumulative
Effect of Accounting Changes . . . . . . . . . . . . . . . . . . . . .
Income Taxes (Provided) Credited, Net ............... .
Income (Loss) Before Cumulative Effect of Accounting Changes .
Cumulative Effect of Accounting Changes, Net of Tax ...... .
Net Income (Loss) ............................. .
Preferred Stock Dividends . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income (Loss)Attributable to Common Stockholders ...
Primary Income (Loss) Per Common Share:
Before cumulative effect of accounting changes. . . . . . . . .
Cumulative effect of accounting changes ............ .
Fully Diluted Income (Loss) Per Common Share:
Before cumulative effect of accounting changes ........ .
Cumulative effect of accounting changes ............ .
The accompanying notes are an integral part of these consolidated statements.
$11 ,616
521
318
12,455
4,206
1,464
1,042
704
634
594
555
379
376
368
248
829
593
11 ,992
463
(269)
26
86
(30)
(187)
276
(120)
156
156
(82)
$ 74
$ 1.42
$ 1.42
$ 1.42
$ 1.42
$11 ,3 19 $11 ,269
565 551
310 257
12,194 12,077
4,354 4,589
1,370 1,411
I, 195 1,255
556 457
622 678
618 614
671 732
436 380
430 418
443 522
266 261
526
572 681
11,533 12,524
661 (447)
(292) (304)
30 33
95 57
( 167) (213)
494 (660)
(200) 251
294 (409)
114
408 (409)
(88) ( I I 0)
$ 320 $ (519)
$ 4.07 $ ( I 0.32)
2.25
$ 6.32 $(10.32)
$ 4.01 $ ( I 0.32)
1.42
$ 5.43 $ (10.32)
CONSOLIDATED STATEMENTS of cash .flows
Fortheyearsendedjune30, /996, /995and /994
1996 1995 1994
Cash Flows From OperatingActivities:
(In Millions)
Net income (loss) . . . . ..... .. ....... . ......... $ 156 $ 408 $ (409)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Cumulative effect of accounting changes ....... . .. ( I 14)
Restructuring and other non-recurring charges .. : . . 829 526
Depreciation and amortization. . . . . . . . . . . . . . . . 634 622 678
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . (57) 96 (242)
Amortization of deferred gain on sale and
leaseback transactions. . . . . . . . . . . . . . ...... (58) (63) (62)
Rental expense in excess of rent payments . . . . .... 26 54 134
Postemployment benefits expense less than payments . . (6) (22)
Pension expense less than payments . . . . . . . . . . . . ( 141) (89) (45)
Compensation under ESOP .................. 37 38 29
Other postretirement expense in excess of payments . 56 73 66
Changes in certain assets and liabilities:
Decrease (increase) in accounts receivable ........ (213) 131 169
Decrease (increase) in prepaid expenses and other
current assets ......................... (47) 28 123
Increase (decrease) in airtraffic liability ........... 271 (I 04) 57
Increase in accounts payable and
miscellaneous accrued liabilities .............. 67 26 207
Decrease in other payables and
accrued expenses. . . . . . . . . . . . . . . . . . . . . . . (57) (31) (34)
Increase (decrease) in othernoncurrent liabilities .... (48) 64
Other; net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58) 61 63
Net cash provided by operating activities ...... 1,391 1,114 1,324
Cash Flows From lnvestingActivities:
Property and equipment additions:
Flight equipment, including advance payments ...... (639) (458) (1,032)
Ground property and equipment .............. (297) ( 168) ( 173)
Decrease (increase) in short-term investments, net ...... 22 ( 121) (408)
Proceeds from sale of flight equipment .............. 26 137 103
Debtor-in-possession loan repayment. . . . . . . . . . . . . . . 115
Net cash used in investing activities .......... (888) (495) (1,510)
Cash Flows From FinancingActivities:
Payments on long-term debt and capital lease obligations ... (440) (572) (547)
Cash dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (120) (120) ( 120)
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . 35 4 I
Proceeds from sale and leaseback transactions . . . . . . . . . 748
Issuance of long-term obligations .................. 226
Repurchase of common stock. . . . . . . . . . . . . . . . . . . . (66)
Net cash provided by ( used in) financing activities. (591) (688) 308
Net Increase (Decrease) in Cash and Cash Equivalents . ..... (88) (69) 122
Cash and cash equivalents at beginning of period . . . . . . . . . . . 1,233 1,302 1,180
Cash and Cash Equivalents at End of Period. . . . . . . . . . . . . . $ 1,145 $ 1,233 $ 1,302
The accompanying notes are an integral part of these consolidated statements.
C O N S O L I D AT E D S TAT E M E N T S of s t o c 1~ h o I d c r s ' c Cf u i l y
For the years ended June 30, /996, /995 and /994
Unrealized
Additional Retained Gain (Loss)
Common Paid-In Earnings on Equity Treasury
Stock Capital (Deficit) Securities Stock Total
Balance atJune 30, 1993 .. . ...... . .... ... .............. $ 163 $ 2,012
(In Millions, Except Share Amounts)
$ 36 $ ( I) $ (297) $1,91 3
FiscalYear 1994:
Net loss . . ... . ... ..... . .......... . ......... . ... . . (409) (409)
Dividends on Series C Convertible Preferred Stock (80) (80)
Dividends on common stock ($0.20 per share) .... ( I 0) ( I 0)
Dividends on Series B ESOP Convertible
Preferred Stock, net of tax benefit of$8 ... (22) (22)
Issuance of 17,140 shares of common stock
under dividend reinvestment and stock
purchase plan ($50.38 per share) ............
Transfer of 370,226 net shares of common
stock from treasury under ESOP and
stock incentive plan ($67.75 per share) .... . ..... (5) 25 20
Net unrealized gain on marketable
equity securities .......... .. '
.. '
... '
. .. ... .. . . 54 54
Balance at June 30, 1994 . . . .. . .. .. . . . ' '
... ' ' '
.. ' '
. . '
... 163 2,013 (490) 53 (272) 1,467
FiscalYear 1995:
Net income . .. .... . . ... . . . . . .. . ... . ............. 408 408
Dividends on Series C Convertible Preferred Stock (80) (80)
Dividends on common stock ($0.20 per share) ... . ( I 0) ( I 0)
Dividends on Series B ESOP Convertible
Preferred Stock allocated shares . . .. . . .. .. . .. . .. (8) (8)
Issuance of 67,612 shares of common stock
under dividend reinvestment and stock
purchase plan, stock options and Series C
Preferred Stock conversions ($56.13 per share) . 3 4
Transferof295,126 net shares of common stock
from treasury under ESOP and
stock incentive plan ($6 7.75 per share) . . ... . .. .. (4) 20 16
Net unrealized gain on marketable
equity securities . .... . . . ... ... .. ...... . ........ 30 30
Balance at June 30, 1995 . .... .. . .. ..... . .. . . . .. ... ... 164 2,016 (184) 83 (252) 1,827
FiscalYear 1996:
Net income . . . .... .... . . . . . .. ... . . . . .. .. .... . .. . 156 156
Dividends on Series C Convertible Preferred Stock (74) (74)
Dividends on common stock ($0.20 per share) . ... ( I 0) ( I 0)
Dividends on Series B ESOP Convertible
Preferred Stock allocated shares . . . . .... . . . .... . (8) (8)
Issuance of 719,562 shares of common stock under
dividend reinvestment and stock purchase
plan and stock options ($58.15 per share) ...... . 2 40 (5) 37
Issuance of 6,861,377 shares of common stock on
conversions of Series C Preferred Stock
($64.37 per share) .. . ....... .... .. ............ 21 (21)
Issuance of 10,147,952 shares of common stock on
conversions of 3.23% Convertible
Subordinated Notes ($61.17 per share) .. . ...... 30 592 622
Transfer of 176,794 net shares of common stock
from treasury under ESOP and
stock incentive plan ($67.77 per share) . .. . ...... 12 13
Repurchase of821,300 common shares
($80.00 per share) .............. . . . ... .. . . . . .. (66) (66)
Net unrealized gain on marketable
equity securities ....... . .. ... .. . . . ............ . 43 43
--- ---
Balance at June 30, 1996 . . ............... . ... . ... .. .... $ 217 $2,627 $ (119) $ 126 $ (311) $2,540
---
The accompanying notes are an integral part of these consolidated statements.
N OT E s TO C O N s O L I DAT E D / I II (/ 11 ( I (I
I \ I (/ l C Ill (' II I \
June 30, 1
996, 1
995 and 1
994
1 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business - Delta Air Lines, Inc. is a major air carrier providing scheduled air transportation for passengers, freight and
mail over a network of routes throughout the United States and abroad. At August 16, 1
996, Delta Air Lines served 153 domestic cities in
43 states, the District of Columbia, Puerto Rico and the U.S.Virgin Islands as well as 44 cities in 25 foreign countries.
Basis of Presentation - The consolidated financial statements include the accounts of Delta Air Lines, Inc. and its wholly owned
subsidiaries (Delta or the Company). All significant intercompany accounts and transactions have been eliminated. Certain prior year
amounts have been reclassified to conform with the current financial statement presentation.
Use of Estimates - The Company follows generally accepted accounting principles (GAAP).The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from those estimates.
Investments in Associated Companies - The Company's investments in the following companies are accounted for under the
equity method:TransQuest Information Solutions (TransQuest), an information technology joint venture;WORLDSPAN, L.P.
(WORLDS PAN), a computer reservations system partnership; Atlantic Southeast Airlines, Inc. (ASA); Comair Holdings, Inc. (Comair),
the parent of Comair; Inc.; and SkyWest, Inc. (SkyWest), the parent of SkyWest Airlines, Inc. ASA, Comair; Inc., and SkyWest Airlines, Inc.
are participants in the Delta Connection program. (See Note 3.)
Accounting Changes - During fiscal 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SF
AS 121 ). (See Note 1
7.) During fiscal 1
995,
the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits"
(SFAS 112), and American Institute of Certified Public Accountants Statement of Position 93-6, "Employers' Accounting for Employee
Stock Ownership Plans" (SOP 93-6). (See Notes 1
0 and 15, respectively.)
Cash and Cash Equivalents - Investments with an original maturity of three months or less are classified as cash and cash equivalents.
These investments are stated at cost, which approximates fair value.
Short-Term Investments - Cash in excess of operating requirements is invested in short-term, highly liquid investments.These
investments are classified as available-for-sale under Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SF
AS 11 5) and are stated at fair value. (See Note 2.)
Cost in Excess of Net Assets Acquired - The cost in excess of net assets acquired (goodwill), which is being amortized over 40
years, is related to the Company's acquisition of Western Air Lines, Inc. on December 18, 1986. The Company periodically reviews the
value assigned to goodwill to determine whether there exists any impairment, as defined by SFAS 1
21. Management believes that good-
will is appropriately valued.
Leasehold and Operating Rights- Costs assigned to the purchase of leasehold rights and landing slots are amortized over the lives
of the respective leases atthe associated airports. Purchased international route authorities are amortized over the lives of the authorities
as determined by their expiration dates. Permanent route authorities with no stated expiration dates are amortized over 40 years. The
Company periodically reviews the value assigned to leasehold rights, landing slots and route authorities to determine whether:there exists
any impairment, as defined by SFAS 1
21. Management believes that leas~hold rights, landing slots and route authorities are appropriately valued.
DELTA AIR LINES , INC .
Deferred Gains on Sale and Leaseback Transactions - Gains on the sale and leaseback of property and equipment under
operating leases are deferred and amortized over the lives of the respective leases as a reduction in rent expense. Gains on the sale and
leaseback of property under capital leases are credited directly to the carrying value of the related asset.
Manufacturers' Credits - In connection with the acquisition of certain aircraft and engines, the Company receives various credits.
These credits are deferred until the aircraft and engines are delivered, at which time the credits are applied on a pro rata basis as a
reduction of the acquisition cost of the related equipment.
Frequent Flyer Program - The Company accrues the estimated incremental cost of providing free travel awards earned under its
SkyMiles
frequent flyer program when free travel award levels are achieved.The accrued incremental cost is included in accounts payable
and miscellaneous accrued liabilities in the Company's Consolidated Balance Sheets.
The Company also sells mileage credits to participating partners in the SkyMiles program, such as hotels, car rental agencies and
credit card companies. The resulting revenue, net of the estimated incremental cost of the credits sold, is recorded as other operating
revenue in the Company's Consolidated Statements of Operations during the period in which the credits are sold.
Passenger and Cargo Revenues - Passenger ticket sales are recorded as air traffic liability in the Company's Consolidated Balance
Sheets. Passenger and cargo revenues are recognized when the transportation is provided, reducing the air traffic liability. Due to interline
agreements throughout the industry, certain _
amounts are recognized in revenue using estimates regarding the amount of revenue to be
recognized and the timing of recognition. Actual results could differ from those estimates.
Delta is a party to code sharing agreements with certain foreign airlines. Under these agreements, the Company purchases seats
from and sells seats to these airlines, with each airline separately marketing its resp.ective seats.The revenue from Delta's sale of code
sharing seats purchased from and flown by other airlines is reported in the Company's Consolidated Statements of Operations as other
operating revenue, offset by the cost of acquiring these code sharing seats and other direct costs incurred in operating the code sharing
flights. The revenue generated from Delta's sale of code sharing seats to other airlines is reported as passenger revenue in the Company's
Consolidated Statements of Operations.
Depreciation and Amortization - Flight equipment is depreciated on a straight-line basis to residual values (5% of cost) over a 20-
year period from the dates placed in service (unless earlier retirement of the aircraft is planned). Flight equipment under capital leases is
amortized on a straight-line basis over the term of the respective leases, which range from 6 to 12 years. Ground property and equipment
are depreciated on a straight-line basis over their estimated service lives, which range from 3 to 30 years. Due to the Company's decision
to accelerate the replacement of its L- 1
011 fleet (see Note 17), the remaining depreciable lives of these aircraft have been adjusted.
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 weighted 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.
Earnings (Loss) Per Share - Primary earnings (loss) per common share is computed by dividing net income (loss) attributable to
common stockholders by the weighted average number of shares of Delta common stock (Common Stock) and, if dilutive, Common
Stock equivalents outstanding during the year. Common Stock equivalents consist of the shares issuable upon exercise of outstanding
stock options, less the number of shares deemed to be repurchased under application of the treasury stock method. The weighted
average number of shares of Common Stock and dilutive Common Stock equivalents outstanding was 52,101,152 for fiscal 1996,
50,657,613 for fiscal 1995, and 50,257,721 forfiscal 1
994.
DELTA AIR LINES, INC.
The computation of fully diluted earnings (loss) per common share assumes that the Series C Convertible Preferred Stock (Series
C Preferred Stock), all allocated shares of Series B ESOP Convertible Preferred Stock (ESOP Preferred Stock), the 3.23% Convertible
Subordinated Notes due 2003 and Common Stock equivalents were converted, if dilutive, into Common Stock at the beginning of the
fiscal year. The weighted average number of shares of Common Stock used to compute fully diluted earnings (loss) per common share
was 52,101,152 for fiscal 1996, 80,118,720 for fiscal 1995, and 50,257,721 for fiscal 1994. In addition, fully diluted earnings (loss) per common
share amounts refiect the adjustment of net income or loss for the additional contribution that would have been required to service the
ESOP's long-term debt if the ESOP Preferred Stock were converted into Common Stock and for the interest expense that would have
been avoided if the 3.23% Convertible Subordinated Notes due 2003 had been converted into Common Stock at the beginning of the
fiscal year. (See Notes 7, 12, 13, 14 and 15.)
Foreign Currency Translation -Assets and liabilities denominated in foreign currencies are translated generally at exchange rates
in effect at the balance sheet date, except that fixed assets are translated at exchange rates in effect when these assets were acquired.
Revenues and expenses of foreign operations are translated at average monthly exchange rates prevailing during the year, except that
depreciation and amortization charges are translated at the exchange rates in effect when the related assets were acquired. The resulting
foreign exchange gains and losses are recognized as incurred.
2. INVESTMENTS IN DEBT AND E UITY SECURITIES:
The Company's investments in Singapore Airlines Limited (Singapore Airlines) and Swissair, Swiss Air Transport Company Ltd.
(Swissair), which are accounted for under the cost method, are classified as available-for-sale and are carried at aggregate market value. At
June 30, 1996 and 1995, the gross unrealized gain on the Company's investment in Singapore Airlines was $190 million and $143 million,
respectively.The gross unrealized gain on the Company's investment in Swissairwas $16 million at June 30, 1996, compared to a $12 million
gross unrealized loss at June 30, 1995.The $126 million and $83 million unrealized gains, net of the related deferred tax provision, on
these combined investments at June 30, 1996 and 1995, respectively, are refiected in stockholders' equity. Delta's rights to vote, transfer
or acquire additional shares of the stock of Singapore Airlines and Swissair are subject to certain restrictions.
During fiscal years 1996 and 1995, the proceeds from sales of available-for-sale securities were $626 million and $926 million,
respectively, which resulted in realized losses of
$1 million and $4 million, respectively.The unrealized
gains (losses) on these investments were less than
$1 million and were refiected in stockholders' equity
at June 30, 1996 and 1995. Interest income was
$33 million and $31 million from these investments
for fiscal years 1996 and 1995, respectively.
Delta's other investments in available-for-sale securities were recorded as short-term investments
in the Company's Consolidated Balance Sheets.These investments atjune 30, l996 and 1995
were as follows:
Type
Government
agency debt .... ... ... .
Corporate debt
securities .......... .. .
DELTA AIR LINES , INC .
Percentage
1996 1995
25%
75
36%
64
Average
Stated
Maturity
(Months)
199~ 1995
8
19
12
s
r 3. INVESTMENTS IN ASSOCIATED COMPANIES:
l During the December 1994 quarter, Delta and AT&T Global Information Solutions Company formedTransQuest, an equally owned
joint venture partnership, to provide information technology services to Delta and others in the travel and transportation industries. On
June 26,1996, Delta and NCR Corporation (formerly
The Company's percentage ownership in associated companies at June 30, 1996 and equity earn-
ings (losses) for fiscal 1996, 1995 and 1994 were as follows:
Percent Eguity Earnings (Losses)
Investment Ownership 1996 1995 1994
(In Millions)
TransQuest .......... 50% $(8) $(3) $-
WORLDSPAN ... .... 38 (5) (4) I
ASA .. ....... .. .. .. ... 26 13 12 12
Comair ... .. .. ... .... 21 13 6 6
SkyWest. .. ... .. ...... 15 I 2 2
AT&T Global Information Solutions Company)
announced an agreement to discontinue the TransQuest
partnership. Effective July I, 1996, the partnership
ended andTransQuest, Inc. was formed as a wholly
owned subsidiary of Delta.TransQuest, Inc. will
provide information technology services to Delta and
others in the travel and transportation industries.
WORLDSPAN provides certain computer
reservations services to Delta and Delta provides certain communications, information processing and administrative services to
WORLDS PAN. (See Note I for additional information regarding investments in associated companies.)
4. FINANCIAL INSTRUMENTS AND OFF-BALANCE SHEET RISK:
Balance Sheet Financial Instruments: Fair Values - The carrying amounts reported in the Company's Consolidated Balance Sheets
for cash and cash equivalents approximate fair values at June 30, 1996 and 1995. Short-term investments classified as available-for-sale are
recorded at fair value in accordance with SFAS 115.
These values are based on quoted market prices,
where available, or on the estimated current rates
offered to the Company for debt of the same remaining
maturities. The carrying values of all other financial
instruments approximate their fair values.
The fair values and carrying values of long-term deb~ including current maturities, at June 30,
1996 and 1995 were as follows:
1996 1995
(In Billions)
Fair value ... .... .. .... . ... .. .......... . .. . $2.0 $3.0
Carrying value ...... ... ...... .. ... .. .. ... . 1.8 2.8
Off-Balance Sheet Financial Instruments: Risks and Fair Values - During fiscal 1996, Delta initiated a fuel hedging program under
which the Company may enter into certain contracts with counterparties, not to exceed one year in duration, to manage the Company's
exposure to jet fuel price volatility. Gains and losses resulting from fuel hedging transactions are recognized as a component of fuel
expense when the underlying fuel being hedged is used. Any premiums paid to enter into hedging contracts are recorded as a prepaid
expense and are amortized to fuel expense over the respective contract periods. At June 30, 1996, Delta had contracted for
approximately 200 million gallons of its projected fiscal 1997 fuel requirements. At June 30, 1996, the fair value of option contracts used
for purchases of jet fuel at fixed average prices was immaterial. The Company is exposed to fuel hedging transaction losses in the event of
nonperformance by counterparties, but management does not expect any counterpartyto fail to meet its obligations.To manage its
credit risk, the Company selects counterparties based on their credit ratings, limits its exposure to any one counterparty under defined
guidelines and monitors the market position of the program and its relative market position with each counterparty.
The Company has entered into certain foreign exchange forward contracts, all with maturities of less than two months, to manage
risks associated with foreign currency exchange rate and interest rate volatility. The aggregate face amount of such contracts was
DELTA AIR LINES, INC .
approximately $40 million at June 30, 1996. The related realized and unrealized gains and losses for such contracts were not material for
any of the years presented.
Financial Guarantees - Certain municipalities and airport authorities have issued special facility revenue bonds to build or improve
airport terminal and maintenance facilities that Delta leases under operating leases. Under these lease agreements, the Company is
required to make rental payments sufficient to pay principal and interest on the bonds as they become due (see Note 8).
Concentration of Credit Risk - Delta's accounts receivable are generated primarily from airline ticket and cargo service sales
to individuals and various commercial enterprises that are economically and geographically dispersed, and the accounts receivable are
generally short-term in duration. Accordingly, Delta does not believe that it is subject to any significant concentration of credit risk.
r 5. SALE OF RECEIVABLES:
i
In June 1994, Delta entered into a revolving accounts receivable facility (Facility) providing for the sale of a defined pool of accounts
receivable (Receivables) through a wholly owned subsidiary to a trust in exchange for a senior certificate in the principal amount of
$300 million (Senior Certificate) and a subordinate certificate in the principal amount of$189 million (Subordinate Certificate).The
subsidiary retained the Subordinate Certificate, and the Company received $300 million in cash from the sale of the Senior Certificate
to a third party. At June 30, 1995, the principal amount of the Senior Certificate was $229 million and was recorded as a reduction in
accounts receivable in the Company's Consolidated Balance Sheets.The principal amount of the Subordinate Certificate at June 30, 1995
was $190 million and was included in accounts receivable on the Company's Consolidated Balance Sheets.
In fiscal 1995, the Company paid $19 million in fees underthe Facility These fees are included in miscellaneous income (expense),
net in the Company's Consolidated Statements of Operations. During fiscal 1995, Delta elected to pay down the Facility, and the Senior
Certificate was reduced to $0 on August 14, 1995.
In March 1996, Delta reactivated the Facility on a reserve basis. At June 30, 1996, no Receivables had been sold under the Facility.
While the Facility is in reserve, the Company is obligated to pay commitment fees. For fiscal 1996, these fees were immaterial.
r 6. SHORT-TERM BORROWINGS:
i
During fiscal 1996 and 1995, the Company had no commercial paper or short-term bank borrowings.The maximum and average
outstanding balances of the Company's short-term bank borrowings during fiscal 1994 were $164 million and $2 million, respectively The
weighted average interest rate of these borrowings during fiscal 1994 was 5.03%.
r 7. LONG-TERM DEBT:
i
During fiscal 1
996 and 1995, the Company voluntarily repurchased and retired $224 million and $534 million, respectively, principal
amount of its long-term debt. As a result of these transactions, the Company recognized net pretax losses of $18 million and $4 million
in fiscal 1996 and 1995, respectively, which are included in miscellaneous income (expense), net in the Company's Consolidated Statements
of Operations.
On June 24, 1993, the Company issued $800 million principal amount at stated maturity of3.23% Convertible Subordinated Notes
due June 15, 2003 (Notes).The Notes were issued at an original issue discount of28.2% from the principal amount at stated ~aturity,
were convertible by the holders thereof into shares of Common Stock at a conversion rate of 12.68 shares per $1,000 principal amount
at stated maturity of the Notes, and were redeemable by the Company on or after June 15, 1996 at a price for each Note equal to the
issue price plus accrued original issue discount to the redemption date, together with accrued and unpaid interest to the redemption
DELTA AIR LINES , INC .
date. On May 15, 1996, the Company gave notice that it elected to redeem effective June 15, 1996, all outstanding Notes. Substantially all
outstanding Notes were then converted by the holders thereof into approximately IO million shares of Common Stock, and the Company
redeemed the remaining outstanding Notes. As a result of the conversion of substantially all the Notes, long-term debt declined by
At June 30, /996 and /995, the Company's long-term debt (including current maturities) was as follows:
1996 1995
(In Millions)
8.10% Series C Guaranteed Serial ESOP Notes, unsecured, payable in installments
between 2002 and 2009 ...... . .... ...................... ... ... .. . . .. ... . . ..... . .. ... .. .... . $ 290 $ 290
9 % Debentures, unsecured, due May 15, 2021 ... ... ... . .... . ... .... .. ....... .... ..... . . .. .. . 251 271
9 %Notes, unsecured, due January I, 1998 .. .. ................ . .. ... .... ... ....... .. . ... .. . . 220 225
Medium-Term Notes, Series A and B, unsecured, interest rates ranging from 7.55% to 9.15%
and with maturities ranging from 1997 to 2007 .. .... ... . . .. .... ..... .... . . . . ....... .... .. . . . 196 235
10 % Debentures, unsecured, due February I, 2011 ... .. ... .. .. ... .... . ...... .. ..... . ... .... . 176 176
9 % Notes, unsecured, due May 15, 2000 ....... .. . ....... .. ... ... ... . . . ..... . ..... . .. ...... . 142 165
9% Debentures, unsecured, due May 15, 2016 ... .. ... ........ . ......... .......... ...... .... .. . 126 135
9 % Debentures, unsecured, due March 15, 2022 ..... . .... .... . .... .. . .... ..... .... ... . ... . . 116 184
101/s % Debentures, unsecured, due May 15, 2010 ...... . ...... ..... .. .... ....... .. .... ... . . . .. . 113 113
8 %Notes, unsecured, due March 15, 2002 ... .......... .. ... .. .. ..... ....... .......... .. . . . . 71 96
10 % Debentures, unsecured, due December 15, 2022 ..... ... .... ........ ......... . .. .. .. .. . 66 66
DevelopmentAuthority of Clayton County, 7 % unsecured loan agreement, repayable
on January I, 2020 .. .. . .... .. . ... .. ...... ................... .......... .. . ....... .. ..... ... . 45 45
DevelopmentAuthority of Fulton County, unsecured loan agreement, repayable
$10 million on November I, 2007 and $20 million on November I, 2012. Interest ranges
from 6.85% to 6. 95% over the life of the loan .. .. ........................ .. ........ . . . ... . .. . 30 30
3.23% Convertible Subordinated Notes, unsecured, due June 15, 2003, net of unamortized
discount of $0 and $179 million at June 30, 1996 and 1995, respectively ......... .......... .. . 0 621
8 % Notes, unsecured, due May 15, 1996 ...... .. ......... ... ............. . ... ..... ......... . 0 150
DevelopmentAuthority of Clayton County, 6 % unsecured loan agreement, repayable
in installments beginning in 2000, with the remaining balance payable in 2011 ................ .
Other, net .......................................... . ........................... .
$626 million and stockholders' equity increased by approximately the same amount in the Company's Consolidated Balance Sheet.This
transaction was treated as a noncash transaction in the Company's Consolidated Statement of Cash Flows for the year ended June 30, 1996.
On September 27, 1995, the Company and a group of banks entered into the 1995 Bank Credit Agreement, an amendment and
restatement of the 1992 Bank Credit Agreement.The 1995 Bank Credit Agreement provides for unsecured borrowings by the Company
of up to $1.25 billion on a revolving basis until September 26, 2000. Up to $500 million of this facility may be used for the issuance of letters
of credit.The interest rate under this facility is, at the Company's option, the LIBOR or the prime rate, in each case plus a margin which is
subject to adjustment based on certain changes in the
credit ratings of the Company's long-term senior
unsecured debt. The Company also has the option to
obtain loans through a competitive bid procedure. The
1995 B
ank Credit Agreement contains certain negative
covenants that restrict the Company's ability to grant
liens, incur or guarantee debt and enter into flight
At June 30, 199 6, the annual scheduled maturities of long-term debt during the next five fiscal
years were as follows:
Years Ending June 30
1997 ... .. ......... ... ....... ........... .... ....... .
1998 ...... .... ......... .... ............... ........ .
1999 .............................................. .
2000 .............................................. .
Amount
(In Millions)
$ 40
249
67
142
0
DELTA AIR LINES , INC .
equipment leases. I
t also provides that if there is a change of control (as defined) of the Company, the banks' obligation to extend credit
terminates, any amounts outstanding become immediately due and payable and the Company will immediately deposit cash collateral
with the banks in an amount equal to all outstanding letters of credit At June 30, 1
996, no borrowings or letters of credit were outstanding
under the 1995 Bank Credit Agreement.
At August 16, 1996, there were outstanding $290 million principal amount of the Delta Family-Care Savings Plan's Series C Guaranteed
Serial ESOP Notes (Series C ESOP Notes) which are guaranteed by Delta.The Series C ESOP Notes, which were issued pursuant to
certain note purchase agreements, are payable in installments between July I, 2002 and January I, 2009.The note purchase agreements
require Delta to purchase the Series C ESOP Notes at the option of the holders thereof (Noteholders) if the credit rating of Delta's
long-term senior unsecured debt falls below Baa3 by Moody's and BBB- by Standard & Poor's (Purchase Event) provided that Delta has no
obligation to purchase the Series C ESOP Notes under the note purchase agreements so long as it obtains, within 127 days of a Purchase
Event, certain credit enhancements (Approved Credit Enhancement) that result in the Series C ESOP Notes being rated A3 or higher by
Moody's and A- or higher by Standard & Poor's (Required Ratings). If De!ta is required to purchase the Series C ESOP Notes because of
the occurrence of a Purchase Event, such purchase would be made at a price (Purchase Price) equal to the outstanding principal amount
of the Series C ESOP Notes being purchased, together with accrued interest and a Make Whole Premium Amount.The Make Whole
Premium Amount for the Series C ESOP Notes is based on, among other factors, the yield to maturity of U.S.Treasury notes having matur-
ities equal to the remaining average life to maturity of the Series C ESOP Notes as of the date Delta purchases the Series C ESOP Notes.
As a result of Moody's rating action on May 11, 1993, a Purchase Event occurred, and Delta became obligated to purchase on
September 15, 1993, any Series C ESOP Notes properly tendered to it Prior to September 15, 1993, Delta obtained an Approved Credit
Enhancement in the form of a letter of credit to credit enhance the Series C ESOP Notes.This letter of credit was issued in favor of
Wilmington Trust Company, as trustee (Trustee), under Delta's 1992 Bank Credit Agreement (which, as discussed above, was amended
and restated as the 1995 Bank Credit Agreement). Due to the issuance of this letter of credit, the Series C ESOP Notes received the
Required Ratings, and Delta no longer had an obligation to purchase the Series C ESOP Notes as a result of the Purchase Event that
occurred on May 11, 1993.
On June 6, 1996, the Company entered into a credit agreement with ABN AMRO Bank, N.V. and a group of banks (Letter of Credit
Facility) providing for the issuance of letters of credit for up to $550 million in stated amount to credit enhance the Series C ESOP Notes.
The Letter of Credit Facility contains negative covenants and a change of control provision that are substantially similar to those contained
in the 1995 Bank Credit Agreement. In the event of any drawing under the Letter of Credit Facility, Delta is required, at its election, (I) to
immediately repay the amount drawn or (2) to convert its reimbursement obligation to a loan for a period not to exceed one year at
varying rates of interest. On June 6, 1996, Delta obtained a letter of credit under the Letter of Credit Facility to replace the letter of credit
issued under the 1995 Bank Credit Agreement to credit enhance the Series C ESOP Notes.The Letter of Credit Facility expires June 6, 1999.
At August 16, 1996, the face amount of the letter of credit under the Letter of Credit Facility was $470 million. It covers the
$290 million outstanding principal amount of the Series C ESOP Notes, up to $148 million of Make Whole Premium Amount and
approximately one year of interest on the Series C ESOP Notes.
An Indenture ofTrust (Indenture), dated August I, 1993, among Delta, the Trustee and Fidelity ManagementTrust Co_
mpany, as
ESOP trustee, contains certain terms and conditions relating to any letter of credit used to credit enhance the Series C ESOP Notes. The
Indenture requires the Trustee to draw under the letter of credit to make regularly scheduled payments of principal and interest on the
Series C ESOP Notes. The Indenture also requires the Trustee to draw under the letter of credit to purchase the Series C ESOP Notes in
certain circumstances in which Delta would not be required to purchase the Series C ESOP Notes under the note purchase agreements.
DELTA AIR LINES , INC .
Subject to certain conditions, the Indenture requires the Trustee to purchase the Series C ESOP Notes at the Purchase Price at the option
of the Noteholders in the event that (I) the Required Ratings on the Series C ESOP Notes are not maintained; (2) the letter of credit is not
extended 20 days before its scheduled expiration date; (3) Delta elects to terminate the letter of credit; or ( 4) the Trustee receives notice
that there has occurred an event of default under the credit agreement relating to the letter of credit; unless, generally within ten days of
any such event, the Series C ESOP Notes receive the Required Ratings due to Delta's obtaining a substitute credit enhancement or otherwise.
The Required Ratings on the Series C ESOP Notes are subject to reconsideration at any time, and to annual confirmation, by
Moody's and Standard & Poor's. Circumstances that might cause either rating agency to lower or fail to confirm its rating include, without
limitation, a downgrading of the deposits of the letter of credit issuer below A3 by Moody's or A- by Standard & Poor's or a determination
that the Make Whole Premium Amount covered by the letter of credit is insufficient.
Subject to certain conditions, the Indenture does not permit the Trustee to purchase the Series C ESOP Notes at the option of the
Noteholders if the Series C ESOP Notes receive the Required Ratings without the benefit of a credit enhancement.The Series C ESOP
Notes are not likely to receive the Required Ratings absent a credit enhancement unless Delta's long-term senior unsecured debt is rated
at leastA3 by Moody's and A- by Standard & Poor's. On August 16, 1996, Delta's long-term senior unsecured debt was rated Baa3 by
Moody's and BB+ by Standard & Poor's.
The Company's debt agreements contain certain restrictive covenants but do not limit the payment of dividends on the Company's
capital stock. The terms of the ESOP Preferred Stock limit the Company's ability to pay cash dividends on Common Stock in certain
circumstances.
Cash payments of interest including that on Series C ESOP Notes and net of interest capitalized totaled $232 million in fiscal 1996,
$238 million in fiscal 1995, and $265 million in fiscal 1994.
{ 8. LEASE OBLIGATIONS:
i
The Company leases certain aircraft, airport terminal and maintenance facilities, ticket offices and other property and equipment.
Rent expense is generally recorded on a straight-line basis over the lease term. Amounts charged to rental expense for operating leases
At June 30, /996, the Company's minimum rental commitments under capital leases and non-
conce/able operating /eases with initial or remaining terms of more than one year were as follows:
Years Ending
June 30
1997 .... ... ..... .. ...... .... . .. .. .. ..... .
1998 . .... ... . .. . .. .. .. ..... .. ..... .. .... .
1999 .. .... . .. . .. .. .. ... .. ... ... ... ...... .
2000 .. .. .... ... .. . ... .. .... ..... ... ..... .
2001 .... .. ... .. . .. .. ... ..... . ... .. ... .. . .
After2001 .. .. ... . ..... . ... ... ........ .. .
Total minimum lease payments . ..... .
Less: Amounts representing interest .. ... .
Present value of future minimum
Capital Operating
Leases Leases
(In Millions)
$101 $ 871
863
868
842
823
97
96
65
55
166
580
146
10,800
$15,067
capital lease payments . . . . . . . . . . . . . . . . . 434
Less: Current obligations under
capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Long-term capital lease obligations. . . . . . . . $376
DELTA AIR LINES , INC .
were $0.9 billion in fiscal 1996 and $1.1 billion in fiscal
years 1995 and 1994.
During the June 1995 quarter; the Company
extended the lease terms for40 B-737-200 aircraft,
which, for accounting purposes, resulted in the
reclassification of these leases from operating leases
to capital leases.This reclassification resulted in an
increase of $385 million, net of deferred rent credits,
in fiight equipment under capital leases and an increase
of$415 million in capital lease obligations in the
Company's Consolidated Balance Sheet at June 30,
1995.This transaction was treated as a noncash
transaction in the Company's Consolidated Statement
of Cash Flows for the year ended June 30, 1995.
( 9. PURCHASE COMMITMENTS:
i
Subsequent to June 30, 1996, Delta entered into a definitive agreement with the Nordam Group, Inc. to purchase, between fiscal
1997 and 2000, 25 shipsets of Stage 3 engine hushkits for B-737-200 aircraft, with an option to purchase an additional 30 shipsets.
In addition, atAugust 16, 1996, the Company had
authorized capital expenditures of approximately
$250 million for fiscal 1997 for improvement of airport
and office facilities, various ground equipment and
other assets.
The Company expects to finance its aircraft,
engine and engine hushkit commitments as well as
other authorized capital expenditures using available
cash, short-term investments and internally generated
funds, supplemented as necessary by debt financings
and proceeds from sale and leaseback transactions.
Future expenditures for aircraft, engines and engine hushkits on (,rm order as of August 16,
1996 are estimated to be $2.4 billion, excluding aircro~ orders subject to reconfirmation by Delta,
as follows:
Years EndingJune 30
1997 .... ..... .. . .... .. .... ....... .. .... .... ..... .. .
1998 .... .. ... . .. .... .... . . ... . .... .......
1999 .. . ... ... . ... .. ... .. ....... . . ... .. . ........ ... .
2000 .. . .. .... .... . . . .. . .. . . . .. . . .. . . ... . . . . ...... . .
2001 ..... . . .. ..... . . ... .. .... .... ...... . . .. ....... .
After 2001 . ... . . ..... . . .. ...... ..... ............ . . .
Total: ............... ....... ... ..... .... ........... .
Amount
(In Millions)
$ 800
700
330
250
210
70
$2,360
The Company has entered into code sharing agreements under which it has agreed to purchase seats at established prices from
specific foreign airlines, subject to certain conditions. Nor)e of these agreements has noncancelable terms in excess of one year:
( 10. EMPLOYEE BENEFIT PLANS:
i
Substantially all of the Company's employees are covered under various defined benefit pension plans, medical plans and disability and
survivorship plans, and certain employees meeting service requirements are eligible to participate in the Savings Plan discussed in Note 15.
Defined Benefit Pension Plans - The Company's primary retirement plans consist of defined benefit pension plans.The Company
has reserved the right to modify these plans to the
extent permitted by the Internal Revenue Code
and ERISA.
The weighted average discount rate and rate
of increase in future compensation levels used in
determining the actuarial present value of the
projected benefit obligation were 7.75% and 4.7%,
respectively, at June 30, 1996 and 8.0% and 4.7%,
respectively, at June 30, 1995.The expected long-term
rate ofreturn on assets was 10% at June 30, 1996
and 1995.
Included in the restructuring charges described
in Note 17 are aggregate related charges of$298 million
and $108 million for fiscal 1996 and 1994, respectively.
The following table sets forth the defined benefit pension plans' funded status and amounts
recognized in Delta's Consolidated Balance Sheets as ofjune 30, 1996 and 1995:
1996 1995
(In Millions)
Actuarial present value of benefit
obligations:
Accumulated benefit obligation 1 $6,186 $5,293
Projected benefit obligation .... ... .. . $7,420 $6,532
Plan assets at fair value2 . ..... ... . ... . . . ... . 7,222 6,108
Projected benefit obligation in
excess of plan assets . . ... .. ... ...... . . . . 198 424
Unrecognized net gain (loss) ............. . 195 , (196)
Unrecognized transition obligation ....... . (64) (67)
Unrecognized prior service cost . ..... ... . . _Q_!_) ___QQ)
Accrued pension cost recognized in
the consolidated balance sheets ........ . $ 298 $ 141
1 Substantially all of the accumulated benefit obligation is vested.
2Plan assets were invested at J
une 30, 1996, approximately as follows:
cash equivalents (7%), government and corporate bonds and notes ( 18%),
common stock and other equity-oriented investments (71%) and real
estate and other investments (%).
DELTA AIR LINES, INC .
The net periodic cost of defined benefit pension plans for fiscal 1996, 1995 and 1994 included the
following components:
These charges represent costs primarily associated
with special termination benefits and curtailment
losses related to the defined benefit pension plans as a
result of workforce reductions.
1996 1995
(In Millions)
Service cost - benefits earned
during the year . . . ..... . . . ... .... . . . $ 225 $221
Interest cost on projected
benefit obligation . . . ... . . . . . . .. ... .. 526 489
Actual return on plan assets . . ..... . . .. (1,194) (795)
Net amortization and deferral . ..... ... 612 266
Net periodic pension cost .......... . .. $ 169 $181
1994
$248
466
(355)
J.!..!!)
$2'40
Postretirement Benefits Other Than Pensions -
Delta's medical plans provide medical and dental
benefits to substantially all retirees and their eligible
dependents. Benefits are funded from general assets
on a current basis, although amounts sufficient to pay
claims incurred but not yet paid are held in trust. Plan benefits are subject to co-payments, deductibles and certain other limits
described in the plans and are reduced once a retiree
is eligible for Medicare.The Company has reserved the
right to modify or terminate the medical plans for both
current and future retirees.
The weighted average discount rate used to
estimate the accumulated postretirement benefit
obligation (APBO) was 7.75% at June 30, 1996, and
8.0% at June 30, 1995.The assumed health care cost
trend rate used in measuring the APBO was 8.0% in
fiscal 1996 and 8.5% in fiscal 1995, declining gradually
Net periodic postretirement benefit cost for fiscal 1996, 1995 and 1994 included the following
components:
1996 1995 1994
(In Millions)
Service cost - benefits earned
during the year . ... ... .. ... .. . .. . . $ 32 $ 32 $ 35
Interest cost on accumulated post-
retirement benefit obligation .... . . 118 118 IOI
Amortization of prior service cost . . . (3 I) (29) (31)
Amortization of accumulated losses . 4 4 6
Net periodic postretirernent
benefit~ ... .. . ... .
to 4.25% by June 30, 2002, and remaining level thereafter. Increasing the assumed health care cost trend rate annually by 1
% for all future
years would increase the APBO as of June 30, 1996 by approximately $132 million and the net periodic postretirement benefit cost by
The accumulated postretirement benefit obligation (APBO) at June 30, 1996 and 1995 consisted
of the following components:
Retirees and dependents ........... . .
Fully eligible participants ... . .. .. ... . .
Other active participants .. ... . .... .. .
Total accumulated postretirement
benefit obligation . .. ..... .. .. ..... .
Unamortized prior service cost
(from plan changes) . .... ..... .. ... .
Unrecognized net loss ... ... ...... ... .
Accrued postretirement benefit cost
recognized in the consolidated
balance sheets. . . . . . ..... ... ..... .
1996 1995
(In Millions)
$ 928 $ 879
323 333
254 271
1,505 1,483
464 396
____(!g) --1!.Q!)
$19 million for fiscal 1996.
Included in the restructuring charges described
in Note 17 are aggregate charges of $32 million and
$203 million for fiscal 1996 and 1994, respectively.
These charges represent costs primarily associated
with special termination benefits and curtailment
losses related to the postretirement benefits other
than pensions as a result of workforce reductions.
Postemployment Benefits - The Company
provides certain welfare benefits to its former
or inactive employees after employment but before
retirement. Such benefits primarily include those
related to disability and survivorship plans. The Company has reserved the right to modify or terminate these plans at any time
for all participants.
Effective July I, 1994, Delta adopted SFAS 112, which requires recognition of the liability for postemployment benefits during the
period of employment.The adoption ofSFAS 112 resulted in a cumulative after-tax transition benefit of$114 million in fiscal 1995,
DELTA AIR LINES , INC .
primarily due to the net overfunded status of the Company's disability and survivorship plans.The Company's postemployment benefit
expense for fiscal years 1996 and 1995 was $78 million and $85 million, respectively.The amount funded in excess of the liability is included
in other noncurrent assets in the Company's Consolidated Balance Sheets. Future period expenses will vary based on actual claims
experience and the return on plan assets.
Gains and losses that occur because actual experience differs from that assumed will be amortized over the average future
service period of employees. Amounts allocable to prior service for amendments to retiree and inactive insurance plans are amortized
in a similar manner.
The Company continues to evaluate ways in which it can better manage employee benefits and control costs. Any changes in the
plan or revisions to assumptions that affect the amount of expected future benefits may have a significant effect on the amount of the
reported obligation and future annual expense.
r 11. CONTINGENCIES:
i
The Company is a defendant in certain legal actions relating to alleged employment discrimination practices, antitrust matters,
environmental issues and other matters concerning the Company's business. Although the ultimate outcome of these matters cannot be
predicted with certainty and could have a material adverse effect on Delta's consolidated financial condition, results of operations or
liquidity, management presently believes that the resolution of these actions is not likely to have a material adverse effect on Delta's
consolidated financial condition, results of operations or liquidity.
During fiscal 1996, the Company renewed its aircraft hull and general liability insurance policies (Policies). Beginning December 18,
1
995, Delta's captive insurance subsidiary agreed to reimburse the primary insurers for losses under the Policies in an amount not to
exceed $100 million per occurrence and $118 million in the aggregate for each policy year. The obligations of the primary insurers to the
insureds under the Policies are not limited or reduced in any way by this reimbursement obligation.
The reimbursement obligation of Delta's captive insurance subsidiary to the primary insurers is supported by letters of credit. The
letters of credit have an aggregate stated amount equal to the maximum reimbursement obligation.To the extent the primary insurers
make a draw under a letter of credit, Delta is required to reimburse the issuer of the letter of credit. Delta accrues amounts estimated to
be payable for probable losses under the reimbursement agreements with the primary insurers, as incurred.The methods of making such
estimates and establishing the resulting accrued liabilities are periodically reviewed and adjusted as required.
r 12. COMMON AND PREFERRED STOCK:
i
At June 30, 1996, 5,116,097 shares of Common Stock were reserved for issuance under the 1989 Stock Incentive Plan, 5,780,491
shares of Common Stock were reserved for conversion of the ESOP Preferred Stock and I 0,629,285 shares of Common Stock were
reserved for conversion of the Series C Preferred Stock.
Each outstanding share of Common Stock is accompanied by a preferred stock purchase right which entitles the holder to
purchase from the Company I/ I 00 of a share of Series A Junior Participating Preferred Stock for $200, subject to adjustment in certain
circumstances.The rights become exercisable only after a person or group acquires beneficial ownership of 20% or more of the
Common Stock or commences a tender or exchange offer that would result in such person or group beneficially owning 30% or more
of the Common Stock. The rights expire on November 4, 1996, and may be redeemed by Delta for $0.05 per right until 15 days following
the announcement that a person or group beneficially owns 20% or more of the Common Stock. Subject to certain conditions, if a
person or group becomes the beneficial owner of 30% or more of the Common Stock or a person or group beneficially owning 20% or
DELTA AIR LINES , INC .
more of the Common Stock receives compensation from Delta other than compensation for full-time employment as a regular
employee, each right will entitle its holder (other than certain acquiring persons) to receive, upon exercise, Common Stock having a
value equal to two times the right's exercise price. In addition, subject to certain conditions, if Delta is involved in a merger or certain
other business combination transactions, each right will entitle its holder ( other than certain acquiring persons) to receive, upon exercise,
common stock of the acquiring company having a value equal to two times the right's exercise price.
Each share of ESOP Preferred Stock has a stated value of $72; bears an annual cumulative cash dividend of 6%, or $4.32; is convertible
into 0.8578 share of Common Stock (a conversion price of $83.94), subject to adjustment in certain circumstances; has a liquidation
preference of $72, plus any accrued and unpaid dividends; generally votes together as a single class with the Common Stock on matters
upon which the Common Stock is entitled to vote; and has one vote, subject to adjustment in certain circumstances.The ESOP Preferred
Stock is redeemable at Delta's option at specified redemption prices payable, at Delta's election, in cash or Common Stock. If full cumula-
tive dividends on the ESOP Preferred Stock have not been paid when due, Delta may not pay cash dividends on the Common Stock.
On July I, 1992, the Company issued 23 million Depositary Shares, each representing I/ 1,000 of a share of Series C Preferred Stock.
Each share of Series C Preferred Stock bore annual cumulative cash dividends of $3,500 ( equivalent to $3.50 per annum per Depositary
Share), had a liquidation preference of $50,000 (equivalent to $50 per Depositary Share) plus accrued and unpaid dividends, was
convertible by the holder into shares of Common Stock at a conversion price of $65.75 per share of Common Stock ( equivalent to a
conversion rate of0.7605 share of Common Stock per Depositary Share), and was redeemable by Delta in certain circumstances for
such number of shares of Common Stock as equaled the liquidation preference of the Series C Preferred Stock being redeemed divided
by the conversion price (equivalent to a conversion rate of 0.7605 share of Common Stock for each Depositary Share). On June 11, 1996,
Delta gave notice that it elected to redeem the Series C Preferred Stock and the related Depositary Shares on July 11, 1996. Subsequent
to this notice, all the outstanding Series C Preferred Stock and related Depositary Shares were converted or redeemed for a total of
approximately 17.5 million shares of Common Stock. All conversions of Series C Preferred Stock and the related Depositary Shares were
treated as noncash transactions in the Company's Consolidated Statement of Cash Flows.
r 13. STOCK OPTIONS AND AWARDS:
i
Under the Company's stock option plan for key
employees, selected employees have received awards
of stock options and, prior to fiscal 1993, tandem stock
appreciation rights.
Transactions involving stock options and tandem stock appreciation rights during fiscal /994,
/995 and /996 were as follows:
The exercise price for all stock options, and
the base upon which stock appreciation rights are
measured, is the fair market value of Common Stock
on the date of grant Awards exercised as stock
appreciation rights are payable in a combination of
cash and Common Stock.
Subject to certain exceptions, stock options and
tandem stock appreciation rights, if any, are generally
exercisable between one and ten years after the date
of award.
Balance June 30, 1993 .. . .....
Fiscal 1994:
Granted .. ...... ...... ....
Exercised ............. .. .
Expired ... ..... . ... . .....
Forfeited ...... ... ... .....
Balance June 30, 1994 .. .... ..
Fiscal 1995:
Granted ... ..... .... .... ..
Exercised ... ... .. ........
Expired ........ ..........
Forfeited .................
Balance June 30, 1995 ........
Fiscal 1996:
Granted ..................
Exercised ................
Forfeited .................
Balance J
une 30, 1996 ........
DELTA AIR LINES, INC.
Awards
2,447,950
650,200
(47,400)
(9,000)
{27,000)
3,014,750
718,750
(78,900)
(257,750)
{10,700)
3,386,150
643,500
(1 ,653,765)
(43,700)
2,332,185
Award Price Range
$54.00-$73.125
$54.375
$54.00
$54.00
$68.375- $73.125
$54.00-$73.125
$52.00
$54.00- $68.375
$67.375
$52.00- $73.125
$52.00-$73.125
$71.00
$52.00- $73.125
$52.00- $73.125
$52.00-$73.125
Substantially all awards of stock options with tandem stock appreciation rights have been exercised as stock appreciation rights. In
fiscal 1996, the Company issued 711,830 shares of Common Stock, at an average price of$57.96 per share, in connection with the exercise
of stock options and tandem stock appreciation rights.
On April 24, 1996, Delta's Board of Directors
adopted, subject to stockholder approval at Delta's
1996 Annual Meeting of Stockholders, two broad-
based, non-qualified stock option plans for Delta
personnel providing for the issuance of stock options
to purchase 24.7 million shares of Common Stock. The
plans are intended to cover substantially all of Delta's
non-officer personnel. One plan is for approximately
47,000 Delta employees who are not pilots.The
second plan is for approximately 8,000 Delta pilots.
Awards outstanding as ofjune 30, /996 and the exercise prices of those awards were as follows:
Date of Award
January 26, 1989 .. .. .. .... ..
January 25, 1990 .. ........ ..
January 24, 1991 .... ... .. .. . .
January 23, 1992 .. .... .. .. ..
January 27, 1994 .... .... .. .. .
January 26, 1995 .. .... .. .. ..
January 25, 1996 ........... .
Awards Outstanding
1,000
134,500
247,050
548,750
335,210
431 ,975
633,700
2,332,185
Award Price
$54.00
$67.375
$68.375
$73.125
$54.375
$52.00
$71.00
$52.00-$73.125
The non-pilot and pilot plans involve stock options to purchase 14.7 million and IO million shares of Common Stock, respectively.
Both plans provide for grants of non-qualified stock options in three equal annual installments at a stock option exercise price equal to
the opening price of the Common Stock on the New York Stock Exchange on the applicable grant date. Stock options awarded under
these plans will generally be exercisable beginning one year and ending ten years after their grant dates, and will not be transferable other
than upon the death of the person granted the option.The non-pilot and pilot plans are being presented to stockholders as one proposal.
The pilot stock option plan is an integral part of the new collective bargaining agreement between the Company and the Air Line Pilots
Association, International (ALPA), which represents Delta's pilots ( 13% of Delta's employees). ALPA has the right to reopen the new
collective bargaining agreement in its entirety if any required stockholder approval of the pilot stock option plan is not obtained, and
Delta and ALPA are unable to reach agreement within 30 days on providing pilots with equivalent value to the pilot stock option plan.
r 14. STOCK REPURCHASE AUTHORIZATION:
i
On April 24, 1996, Delta's Board of Directors authorized the Company to repurchase up to 24.7 million shares of its Common
Stock and Common Stock equivalents. Under this authorization, the Company may repurchase up to 6.2 million of these shares before
the initial stock option grants become exercisable under the two broad-based, non-qualified stock option plans and repurchase the
remaining shares as Delta personnel exercise their stock options under those plans. Repurchases are subject to market conditions and
may be made on the open market or in privately negotiated transactions. During fiscal 1996, the Company repurchased 821,300 shares of
Common Stock for $66 million under this authorization.
r 15. EMPLOYEE STOCK OWNERSHIP PLAN:
i
The Company sponsors the Savings Plan, a qualified defined contribution pension plan under which eligible Delta personnel may
contribute a portion of their earnings. The Savings Plan includes an employee stock ownership plan (ESOP) feature. Subject to certain
conditions, the Company contributes to the ESOP 50% of a participant's contributions to the Savings Plan, up to a maximum employer
contribution of 2% of a participant's earnings. The Company's con~ribution is made quarterly through the allocation of the ESOP
Preferred Stock, Common Stock or cash.
DELTA AIR LINES , INC .
In connection with the adoption of the ESOP. the Company sold 6,944,450 shares of ESOP Preferred Stock to the Savings Plan for
approximately $500 million.The Company has recorded unearned compensation to refiect the value of ESOP Preferred Stock sold to the
ESOP but not yet allocated to participants' accounts. As shares of the ESOP Preferred Stock are allocated to participants, compensation
expense is recorded and unearned compensation is reduced. Dividends on unallocated shares of ESOP Preferred Stock are used by the
ESOP for debt service on the Series C ESOP Notes and are not considered dividends for financial reporting purposes. Dividends on
allocated shares of ESOP Preferred Stock are paid to participants and are considered dividends for financial reporting purposes.
Effective July I, 1994, Delta adopted SOP 93-6. Under SOP 93-6, the compensation and interest components of ESOP costs are
reduced by the amount of dividends accrued on the allocated ESOP Preferred Stock, and only the allocated ESOP Preferred Stock is
considered outstanding in computing primary and fully diluted earnings per common share. Prior to adoption of SOP 93-6, the
compensation and interest components of ESOP costs were reduced by the amount of dividends accrued on all ESOP Preferred
Stock, and all ESOP Preferred Stock was considered outstanding for primary and fully diluted earnings per common share calculations.
The adoption of SOP 93-6 increased reported net income attributable to common stockholders shown in the Company's Consolidated
Statement of Operations by $8 million for fiscal 1995 and increased primary and fully diluted earnings per common share for that period
by $0.16 and $0.28, respectively.The provisions of SOP 93-6 require that it be adopted prospectively.
r 16 . INCOME TAXES :
i
Deferred income taxes refiect the net tax effect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for
income tax purposes.
The alternative minimum tax credit carryforwards do not
expire.The net operating loss carryforwards will generally expire
in 2008 and 2009 ifnot utilized prior to thattime.
Management believes, based on the Company's earnings
history, the actions the Company has taken and will continue to
take to improve its financial performance, expectations of future
taxable income, and other relevant considerations, that it is more
likely than not that future taxable income will be sufficient to fully
utilize the deferred tax assets which existed at June 30, 1996.
Significant components of the Company's deferred tax assets and liabilities as of
June 30, 1996 and 1995 are a result of temporary differences related to the items
described as follows:
Deferred Tax Assets:
Postretirement benefits . . .. . . . . .
Alternative minimum tax credit
carryforwards . . .. ... . . .. . .. . .
Gains on sale and leaseback
transactions (net) . ..... ... . .. .
Other employee benefits . ...... .
Rent expense ....... . ... . ...... .
Spare parts repair expense ..... .
Tax accruals ... ....... ... . ... . . . .
Frequent flyer expense ......... .
Accrued compensation expense.
Net operating loss carryforwards
Other . . . . .. ....... .. ... .... . . . .
Total DeferredTaxAssets .... .
DeferredTax Liabilities:
Depreciation and amortization ..
Postemployment benefits .. .. .. .
Marketable equity securities .... .
Software development costs .. . .
Other ..... .
1btal
1996 1995
(In Millions)
$ 724 $ 655
354 284
336 344
232 161
202 174
114 97
43 33
40 37
l6 42
5 122
93 134
$2,179 $2,083
$1,084
89
49
35
DELTA AIR LINES , INC .
Income taxes (provided) credited in (,seal 1
996, 1
995 and 1
994 consisted of:
1996 1995 1994
(In Millions)
Current taxes .... .. .... ......... $( 177) $(104) $ 8
Deferred taxes .............. .. . . 54 (99) 227
Increase in corporate
statutory rate .. .. . . . . . . . .. . . . 13
Tax benefit of dividends on
allocated ESOP
Preferred Stock ..... . .. . ..... 3 3 2
(120) (200) 250
Amortization of investment
tax credits . ...... ....... .. .... I
Income taxes (provided) credited $(1
20) $(200) $ 251
The Company made income tax payments,
net of income tax refunds, of$192 million in fiscal 1996
and $25 million in fiscal 1995 and received income
tax refunds, net of cash income tax payments, of
$13 million in fiscal 1994.
The income tax (provisions) credit generated for (,seal 1996, 199 5 and I 994 differ from amounts
which would result from applying the federal statutory tax rate to pretax income (loss), as follows:
1996 1995 1994
(In Millions)
Income (loss) before income
taxes .... ... .. . .. . . .. . . . .. .. $ 276 $ 494 $ (660)
Items not deductible for tax
purposes:
Meals and entertainment .... . . 36 41 16
Amortization . ... . .. . . . ... . . .. 9 9 9
Other, net . . . .. .. .... ....... ... ~) 3
Adjusted pretax income (loss) . 313 547 (635)
Federal statutory tax rate . . ... . 35% 35% 35%
Income tax (provision) credit at
statutory rate ..... . ...... . . . (110) (191) 222
State and other income taxes,
net of federal income tax
(provision) credit .......... . (10) (9) 15
Benefit due to increase in
corporate statutory tax rate 13
Amortization of investment
tax credits ...... . . . ...... . .. I
Income taxes (provided) credited $ (120) $ (200) $ 251
17 . RESTRUCTURING AND OTHER NON-RECURRING CHARGES :
During fiscal years 1994 and 1996, the Company recorded pretax restructuring and other non-recurring charges of$526 million
and $829 million, respectively. The $526 million pretax restructuring charge recorded in fiscal 1994 included a $112 million charge
primarily for special termination benefits relating to an early retirement program under which approximately 1
,500 employees elected
to retire effective November I, 1993 and a $438 million charge for the Company's Leadership 7.5 cost reduction program, partially offset
by a $24 million reversal related to the fleet simplification charge recorded in fiscal 1993.
The $4 38 million charge for the Leadership 7.5 program included $280 million for workforce reductions of approximately 8,700
employees expected to occur during fiscal 1995. During fiscal 1995 and 1996, the Company reduced its staffing by approximately 9,200
and 1,200 personnel, respectively. Cash payments in fiscal 1995 and 1996 for workforce reductions totaled approximately $30 million and
DELTA AIR LINES , INC .
Fiscal 1996 and 1994 pretax restructuring and other non-recurring charges are summarized in
the table below:
Charges (Credits)
1996 1994 Total
Fleet Simplification . . ..... . .. .. . $ - $ (24) $ (24)
Early Retirement Program .... .. 112 112
Leadership 7.5 ...... .. .. ... .. ... 104 438 542
Pilot Special Early Retirement
Program .. ... ... .. ........ ... 273 273
Lockheed L-1011 fleet early
retirement . ... . . ........ .... 452 452
Totals ..................... $ 829 $ 526 $1 ,355
$9 million, respectively, primarily for severance
payments, with an additional $5 million expected to
be paid during fiscal 1997. Payments associated with
the curtailment loss and special termination benefits
will be expended as required for funding appropriate
pension and other postretirement plans in future years.
The $438 million charge for the Leadership 7.5
program also included $158 million for cash and
noncash costs associated with reductions in inventory
levels, the suspension of service in certain transatlantic
markets and lease termination costs for facilities to be abandoned.Through fiscal 1996, the Company incurred cash costs of approximately
$57 million for these initiatives and expects to incur additional cash costs of $16 million related to this program in future years. During
fiscal 1996, approximately $8 million of the fiscal 1994 restructuring charge was reversed due to changes in estimates associated with
lease terminations and abandoned facilities. The remaining $77 million represents non cash costs.
The $829 million pretax charge for restructuring and other non-recurring charges recorded in fiscal 1996 includes a $452 million
write-down of Delta's Lockheed L-1011 fleet and related assets. In connection with its decision to accelerate the replacement of its 55
L-1011 aircraft fleet, the Company performed an evaluation to determine, in accordance with SFAS 121 (see Note I), whether future
cash flows (undiscounted and without interest charges) expected to result from the use and the eventual disposition of the L-1011 fleet
will be less than the aggregate carrying amount of the L-1011 aircraft and related assets. As a result of the evaluation, management deter-
mined that the estimated future cash flows expected to be generated by L-1011 assets will be less than their carrying amount, and there-
fore, the L-1011 assets are impaired as defined by SFAS 121. Consequently, the original cost basis of the L-1011 fleet was reduced to reflect
the fair market value at the time of the evaluation, resulting in a $452 million non-recurring charge. In determining the fair market value
of L-1011 assets, the Company considered recent transactions involving sales of L-1011 aircraft and market trends in aircraft dispositions.
The $829 million pretax charge for restructuring and other non-recurring charges also included $273 million related to the special
early retirement program for approximately 500 pilots expected to retire during fiscal 1997. Actual timing of the retirements is dependent
upon the Company's operational needs. Payments associated with the curtailment loss and special termination benefits will be expended
as required for funding appropriate pension and other postretirement plans in future years.
Also included in the fiscal 1996 charge is $65 million (net of reversals of $36 million related to the Company's $526 million
restructuring charge recorded in fiscal 1994) for previously announced non-pilot workforce reductions, including pension plan curtailment
losses and special termination benefits of $62 million, post-retirement medical plan curtailment gains and special termination benefits of
$16 million (for approximately 525 employees) and severance payments and related costs of $23 million.
The remaining $39 million of the $829 million charge for fiscal 1996 represents cash and noncash costs related to lease terminations
and other costs associated with discontinued routes and abandoned facilities.The charge includes (net of reversals of $8 million related to
the Company's $526 million restructuring charge recorded in fiscal 1994) $37 million for lease termination costs for abandoned facilities
and $10 million noncash costs related to routes discontinued as a result of the restructuring. Actual cash costs associated with lease
terminations and abandoned facilities are expected to be approximately $4 million in fiscal 1997.
DELTA AIR LINES, INC .
Actual costs incurred for certain amounts accrued, realization on the sales of excess inventories and costs associated with lease
terminations and abandoned facilities may vary from current estimates.The appropriate accrued liability will be adjusted upon completion
of these activities.
r 18. FOREIGN OPERATIONS:
i
Delta conducts operations in various foreign countries, principally in North America, Europe, the Middle East and Asia. Operating
revenues from foreign operations were approximately $2.7 billion in fiscal 1996, $2.6 billion in fiscal 1995 and $2.5 billion in fiscal 1994.
UARTERLY FINANCIAL DATA (Unaudited :
Operating expenses for the March 1996 quarter include $556 million pretax restructuring and other non-recurring charges related
to the write-down of the Company's Lockheed L
-1011 fieet and related assets and the continuation of the Company's Leadership 7.5 cost
reduction program. Operating expenses for the June 1996 quarter include a $273 million pretax restructuring charge for costs associated
with a special early retirement program under which approximately 500 pilots are expected to retire during fiscal 1997. (See Note 17.)
The following is a summary of the unaudited quarterly results of operations for (,seal 1996 and 199 5 (in millions, except per shore data):
Fiscal 1996
Operating revenues . .. .... .. . .. . . . . . .... . .. . .... . . .... . .. . .. . . .
Operating income (loss) . . .. . . . . .. ......... . .. . .... . ... ... . . .. . .
Net income (loss) ... .. .. . .... . .. .. . . ... . . . . .. . ... .. ... . .... . .. .
Primary income (loss) per common share . .. . .. . . . . .. ... .. . . . . .. .
Fully diluted income (loss) per common share .. . . . ...... .... . . .. .
Fiscal 1995
Operating revenues . . . . .. .. . . . ...... . ... . . .... . . ... .. . . .. ... .. .
Operating income . . .. . ... . . ... . . ....... .. . .. .. . . ... . .. . ... . . .. .
Income (loss) before cumulative effect of accounting changes .... . .
Cumulative effect of accounting changes, net of tax . .. . .. . ..... . . . .
Net income (loss) .... . . . . ... ....... . . . .. . .. . ... ... . . . . ....... . .
Primary income (loss) per common share:
Before cumulative effect of accounting changes . . .. .. ... ... . .. . .
Cumulative effect of accounting changes . . . ...... . . . . .. ... ....... .
Fully diluted income (loss) per common share:
Before cumulative effect of accounting changes .... . ........... .
Cumulative effect of accounting changes . . ... .. ... . ............. . .
$3,188
$ 386
$ 201
$ 3.47
$ 2.57
$3,157
$ 154
$ 72
114
$ 186
$ 1.00
2.25
$ 3.25
$ 0.99
1.43
$ 2.42
DELTA AIR LINES , INC .
Three Months Ended
Dec.31 Mar.31
$2,944
$ 169
!.....lQ.
$ 0.93
$ 0.93
$2,919
$ 18
$ (18)
$(0.79)
$(0.79)
$2,964
$ (387)
$ (276)
$(5.77)
$(5.77)
$2,902
~
$ (11)
$(0.66)
$(0.66)
$3,359
$ 295
!__!!!
$ 2.69
$ 2.08
$3,216
$ 449
$ 251
$ 4.49
$ 3.21
C O N s O L I D AT E D s u M M A Ry () J () p C I (l I i O 11 ~
(In Millions, Except Per Share Data)
For the years ended June 30
19961 19952
Operating revenues ................ . . .... $ 12,455 $ 12,194
Operating expenses ............... . . . . . . 11,992 11 ,533
Operating income (loss) .... ........ . . . .. . 463 66 1
Interest expense, net . .. ....... .. . .. .. . . . . (243) (262)
Gain (loss) on disposition offtight equipment ... . 2
Miscellaneous income, net5
. .
54 95
Income (loss) before income taxes . ..... . .... 276 494
Income taxes (provided) credited . . .. ... . .. .. (120) (200)
Amortization of investment tax credits .... ....
Net income (loss) .. ... . ..... . ........... 156 294
Preferred stock dividends .. .. .. ....... ... . . (82) (88)
Net income (loss) attributable to common
stockholders .. .. .. . ..... .. . .. .. .... . . $ 74 $ 206
Net income (loss) per common share:
Primary .......... . .. . .. . . .. ... $ 1.42 $ 4.07
Fully diluted . .. .... .... .. ... .. .. $ 1.42 $ 4.01
Dividends declared on common stock . . .. .... $ 10 $ 10
Dividends declared per common share . .. .. . . . $ 0.20 $ 0.20
0 T H E R F I N A N C I A L (I 11 d s I (I I i s t i C (l I cl (I I Cl
(Dollars In Millions, Except Share Data)
For the years ended June 30
1996'
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,226
Long-term debt and capital leases ( excluding
current maturities) . .. .. . .... . .... ... . . .
Stockholders' equity . .. .......... . ....... .
Shares of common stock outstanding at year end. . . .
Revenue passengers enplaned (thousands) . . . . . .
Available seat miles (millions) .. . . .. . .... ... . .
Revenue passenger miles (millions) .. ..... .. . .
Operating revenue per available seat mile . . . .. . .
Passenger mile yield . . . .. ..... . .. . . ... ... .
Operating cost per available seat mile .. . .. .... .
Passenger load factor . . . . . . . . . . . . . . . . . . . . .
Breakeven passenger load factor . . . . . . . . . . . . .
Available ton miles (millions) . . . .. . .. . .. .... .
Revenue ton miles (millions) . . ........... . . .
Operating cost per available ton mile . . .. . .. . . .
'Summary of operations and other financial and statistical
data include $829 million in pretax restructuring and other
non-recurring charges ($9.71 per common share).
2summary of operations excludes $114 million after-tax
cumulative effect of change in accounting standards ($2.25
primary and $1.42 fully diluted earnings per common share).
3Summary of operations and other financial and statistical data
include $526 million in pretax restructuring charges
($6.59 after-tax per common share).
summary of operations and other financial and statistical data
include $82 million pretax restructuring charge ($I.OS after-tax
$ 2,175
$ 2,540
67,778,106
91,341
130,751
88,673
9.53
13.10
9.17
67.82%
65.12%
18,084
10,235
66.31
per common share). Summary of operations excludes $587 million
after-tax cumulative effect of changes in accounting standards
($11.78 after-tax per common share).
5lncludes interest income.
19952
$ 12,143
$ 3,121
$ 1,827
50,816,0 I 0
88,893
130,645
86,417
9.33
13.10
8.83
66.15%
62.28%
18,150
10,142
63.55
19943
$ 12,077
12,524
(447)
(27 1
)
2
56
(660)
250
I
(409)
( I I 0)
$ (519)
$ (I 0.32)
$ ( I 0.32)
$ 10
$ 0.20
19943
$ 11,896
$ 3,228
$ 1,467
50,453,272
87,399
131,906
85,268
9.16
13.23
9.49
64.64%
67.21%
18,302
9,911
68.43
19934 1
992 1
99 1
$ 11 ,657 $ 10,837 $ 9,171
12,232 11 ,5 12 9,621
(575) (675) (450)
( 177) ( 151 ) (97)
65 35 17
36 5 30
(651) (786) (500)
233 271 163
3 9 13
(415) (506) (324)
( I I 0) ~ 19) ~ 19)
$ (525) $ ~525) $ p43)
$ ( I 0.54) $ ( I 0.60) $ (7.73)
$ ( I 0.54) $ ( I 0.60) $ (7.73)
$ 35 $ 59 $ 54
$ 0.70 $ 1.20 $ 1.20
1993 1992 1991
$ 11,871 $ 10,162 $ 8,411
$ 3,716 $ 2,833 $ 2,059
$ 1,913 $ 1,894 $ 2,457
50,063,841 49,699,098 49,401,779
85,085 77,038 69,127
132,282 123,102 104,328
82,406 72,693 62,086
8.81 8.80 8.79
13.23 13.91 13.80
9.25 9.35 9.22
62.30% 59.05% 59.51%
65.58% 62.99% 62.64%
18,182 16,625 13,825
9,503 8,361 7,104
67.27 69.24 69.59
1990 1
989 1988 1987 1986
$ 8,583 $ 8,089 $ 6,915 $ 5,318 $ 4,460
8,163 7,411 6,418 4,913 4,426
420 678 497 405 34
(27) (39) (65) (62) (55)
18 17 (I) 96 16
57 55 25 8 8
468 711 456 447 3
(187) (279) ( 181) (2 19) 2
22 29 32 36 42
303 461 307 264 47
~ 18)
$ 285 $ 461 $ 307 $ 264 $ 47
$ 5.79 $ 9.37 $ 6.30 $ 5.90 $ 1.18
$ 5.28 $ 9.37 $ 6.30 $ 5.90 $ 1.18
$ 85 $ 59 $ 59 $ 44 $ 40
$ 1.70 $ 1.20 $ 1.20 $ 1.00 $ 1
.00
1990 1989 1988 1987 1986
$ 7,227 $ 6,484 $ 5,748 $ 5,342 $ 3,785
$ 1,315 $ 703 $ 729 $ 1,018 $ 869
$ 2,596 $ 2,620 $ 2,209 $ 1,938 $ 1,302
46,086,110 49,265,884 49,101,271 48,639,469 40, I 16,383
67,240 64,242 58,565 48,173 39,582
96,463 90,742 85,834 69,014 53,336
58,987 55,904 49,009 38,415 30,123
8.90 8.91 8.06 7.71 8.36
13.63 13.56 13.15 12.81 13.72
8.46 8.17 7.48 7.12 8.30
61.15% 61.61% 57.10% 55.66% 56.48%
57.96% 56.09% 52.69% 51.09% 56.01%
12,500 11,725 11,250 9,000 6,934
6,694 6,338 5,557 4,327 3,372
65.30 63.21 57.05 54.60 63.82
STOCKHOLDER i11fo1matio11
TRANSFERAGENT, REGISTRARAND DIVIDEND
PAYING AGENT FOR COMMON STOCK
Registered stockholder inquiries regarding stock
transfers, address changes, lost stock certificates,
dividend payments, or account consolidations should
be directed to:
First Chicago Trust Company of New York
P 0. Box 2500
Jersey City, New Jersey 07303-2500
Telephone (20 I) 324- 1
225
DIVIDEND REINVESTMENT AND STOCK
PURCHASE PLAN
Registered holders of Common Stock may purchase
additional shares of such stock through automatic
dividend reinvestment or cash contributions under the
Company's Dividend Reinvestment and Stock Purchase
Plan. Inquiries, notices, requests a_
nd other communica-
tions regarding participation in the plan should be
directed to:
First Chicago Trust Company of New York
P 0. Box 2598
Jersey City, New Jersey 07303-2598
Telephone (20 I) 324- 1225
INDEPENDENT PUBLICACCOUNTANTS
Arthur Andersen LLP
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
ANNUAL MEETING
The Annual Meeting of Stockholders will be held on
Thursday, October 24, 1
996, at 9:00 a.m., local time,
in the Holiday Inn Professional Centre/Atrium,
200 I Louisville Avenue, Monroe, Louisiana 7120 I
AVAILABILITY OF FORM 10-KAND OTHER
FINANCIAL INFORMATION
A copy of the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1
996, will be provided
without charge upon written request Requests for other
financial documents may also be directed to:
Delta Air Lines, Inc.
Investor Relations, Department 829
P 0. Box 20706
Atlanta, Georgia 30320-600 I
Telephone (404) 715-2391
Telephone inquiries related to financial information,
other than requests for financial documents, may be
directed to Delta Investor Relations at (404) 715-6679.
COMMON STOCK
Listed on the New York Stock Exchange under the ticker
symbol DAL.
NUMBER OF STOCKHOLDERS
As of August 1
6, 1
996, there were 24,1
57 registered
holders of Common Stock.
MARKET PRICESAND DIVIDENDS
Market Closing Price Range Cash
of Common Stock on Dividends Per
Fisca/Year /996 NewYork Stock Exchange Common Share
Quarter Ended: High Low
September 30. $80 $66 $0.05
December31 79 64 0.05
March 31. 82 67 3/s 0.05
June 30. .. . ... .. . . . . . . .. 86 77 0.05
Fisca/Year 1995
Quarter Ended: High Low
September 30. $49 $43 $0.05
December 31 52 43 0.05
March 31 64 5 1 0.05
June 30. 75 58 0.05
DELTA AIR LINES, INC.