Delta Air Lines annual report 1997

1997 Annual Report
_....... elta's 1997

earnings were
the highes .
in Compan-y
history . .
BUSINESS DESCRIPTION
Dita
Air Lines, Inc. provides scheduled air transportation over an extensive route network.
Based on calendar 1996 data, Delta is the largest U.S. airline based on aircraft departures and pas-
sengers enplaned, and the third largest U.S. airline as measured by operating revenues and revenue
passenger miles flown. Internationally, Delta is the leader across the North Atlantic, offering the most
daily flight departures, serving the largest number of nonstop origin-destination markets, and carrying
the most passengers of any U.S. airline.
As of August 15, 1997, Delta provided scheduled air service to 149 cities in 42 states, the
District of Columbia, Puerto Rico, and the U.S. Virgin Islands, and service to 41 cities in 25 foreign
countries. Including flights operated with code-share partners, Delta's international route network
covers 68 cities in 38 foreign countries. In addition to scheduled passenger service, Delta provides
air freight, mail and related aviation services.
Delta is incorporated under the laws of the state of Delaware and is subject to government reg-
ulation under the Federal Aviation Act of 1958, as amended, as well as many other federal, state and
foreign laws and regulations. Delta Air Lines' corporate headquarters is in Atlanta, Georgia.
TABLE OF CONTENTS
A Message from Leo F. Mullin
Operational Review
Route System
Directors and Officers
Financial Review
Report of Independent
Public Accountants
Shareholder Information
Delta Air Lines At - A-Glance
page 9
p age I 0
page 16
page 2 0
page 2 I
page 4 9
page 52
page 53
I Net Income Operating Income
Data excludes restructuring and other non-recurring charges
and the cumulative effect of an accounting change.
1
1997 ANNUAL REPORT
1,600
1,200
800
400
0
-400
94 95 96 91
Financial Highlights
FI SCAL Y EA R E ND IN G J U N E 30 , 199 7
Dollar amounts in millions, except per share data.
Operating data excludes restructuring and other non-recurring charges and the cumulative effect of an accounting change.
1997
Operating Revenues $ 13,590
Operating Expenses $ 12,008
Operating Income $ 1,582
Operating Margin 11.6%
Net Income $ 886
Primary Income Per Common Share $ 11.72
Fully Diluted Income Per Common Share $ 11.42
Dividends Declared on Common Stock $ 15
Dividends Per Common Share $ 0.20
Common Shares Issued and Outstanding at Year End 73,695,987
Debt-to-Equity Position
Passenger Mile Yield
Operating Revenue Per Available Seat Mile
Operating Cost Per Available Seat Mile
Operating Revenue Per
Available Seat Mile
In Cents
94 95 96 97
Unit revenue improved as
a result of record passenger
traffic and growth in other
operating revenues.
10.00
9.50
9. 00
8.50
8. 00
Operating Cost Per
Available Seat Mile
In Cents
10.00
9.50
9. 00
8.50
8.00
94 95 96 97
A slight increase in unit cost
resulted from Delta's invest-
ments in customer service and
increased fuel costs. However,
Delta remains the lowest cost
maj or network carrier.
41 %/59%
12.79
9.93
8.78
$
$
$
$
$
$
$
$
1996
12,455
11,163
1,292
10.4%
662
11.13
8.49
10
0.20
67,778,106
47%/53%
13.lO<t
9.53
8.54
Fully Diluted Income
Per Common Share
In Dollars
94 95 96 97
Change
+ 9%
+ 8%
+ 22%
+ 1.2 pts.
+ 34%
+ 5%
+ 35%
+ 50%
+ 9%
- 2%
+ 4%
+ 3%
12. 00
8.00
4.00
0.00
-4. 00
A balanced strategy that
emphasizes both cost reduc-
tion and revenue growth
produced record earnings.
Operating Highlights
FIS C AL Y EAR ENDIN G J UN E 3 0 , 1997
Operating data excludes restructuring and other non-recurring charges and the cumulative effect of an accounting change.
Revenue Passengers Enplaned (Thousands)
Revenue Passenger Miles (Millions)
Available Seat Miles (Millions)
Passenger Load Factor
Breakeven Passenger Load Factor
Cargo Ton Miles (Millions)
Cargo Ton Mile Yield
Fuel Gallons Consumed (Millions)
Average Fuel Price Per Gallon
Number of Aircraft in Fleet at Year End
Average Age of Aircraft Fleet at Year End (Years)
Stage 3 Aircraft at Year End (/ls a Percent of Total Aircraft)
Average Seats Per Aircraft Mile
Average Passenger Trip Length (Miles)
Average Aircraft Flight Length (Miles)
Average Aircraft Utilization (Hours per Day)
Full-Time Equivalent Delta Employees at Year End
Passenger Load
Factor
Percent
94 95 96 97
Delta carried more passen-
gers in fiscal 1997 than any
other US. airline and filled
the most seats in its history.
72.0
69.5
67. 0
64.5
62.0
Average Aircraft
UtiliZ11tion
Hours Per Day
94 95 96 97
9.00
8.75
8.50
8.25
8.00
A continued focus on operating
efficiencies and reallocating
aircraft has yielded a higher
utilization of aircraft assets.
1997
101,147
97,758
136,821
71.4%
62.4%
1,532
36.14
2,599
66.28
553
11.8
71%
181
966
789
8.6
63,441
1996 Change
91,341 + 11%
88,673 + 10%
130,75 1 + 5%
67.8% +3.6 pts.
60.3% +2.1 pts.
1,368 + 12%
38.08 - 5%
2,500 + 4%
58.53 + 13%
539 + 3%
11.2 +0.6 yrs.
68% +3.0 pts.
181 -
971 - 1%
772 + 2%
8.3 + 4%
60,289 + 5%
Full-Time Equivalent
Employees
In Thousands
70.0
65.0
60.0
55. 0
50.0
94 95 96 97
As passenger volume grew,
staffing levels were increased
to ensure a consistent high
level of service.
Source: U.S. Departmento/Transportation (DOT) data.for the 12 momhs ended DL COM UA NW US
June 30, 1997. adjusted to exclude transport-related expenses as defined by DOT
and restructuring and other non-recurring charges as reported by each company.
2
DELTA AIR LINES
12.00
11.00
10.00
9.00
8.00
Source: US. DepartmentofTransportation data for the 12 months DL NWCO AA US UA
ended June 30, I 997, adjusted to exclude restructuring and other
non-recurring charges as reported by each company.
___....... elta's 1997

operating margin
was the highest
of the major .S.
network carriers.
3 .
1 9 9 7 ANNUAL REP RT
___........ elta has
strengthened its
balance sheet by
reducing debt.
Debt includes long-term debt and capital lease 94 95 96 97
obligations (including current maturities).
4
DELTA AIR L I NES
Source: US. Department of Transportation data far the 12 months ended June 30, 1997.
5
199 7 ANNUAL REPORT
96 97 I Delta + Code-Share Alliances* I Delta Air Lines 96 97
*Includes Delta Connection carriers. Data as of August 15, 1997.
6
DELTA AIR !INES
1.20
0.90
0.60
0.30
.________ 0
I Delta Rate I Industry Rate 91
96 12/96 3197 6/97
Source: U.S. Department of Transportation data for the 12 months
ended June 30, 1997. Industry data excludes Delta.
___..... elta's strategic

investments in

customer service
are beginning to
produce results.
7
1 99 7 ANNUAL REP RT
8
DELTA AIR LINES
A MESSAGE FROM
Leo F Mullin
President and Chief Executive Officer
To Delta's Shareholders, People, Customers and Communities:
It is a privilege to become associated with one of the great com-
panies in America and one of the great airlines of the world.
Delta Air Lines has a history of superb commitment to cus-
tomer service and performance. That tradition speaks directly to
the quality of the people of Delta. I look forward to working
with such a dedicated group of professionals in helping to move
Delta to an even greater level of success.
This company has an excellent financial foundation. Dur-
ing the past few years, there have been significant improvements
in financial performance and operational efficiency. This Annual
Report documents that fiscal 1997 was the best financial year in
Delta's history. Operating and net profits set records. Costs were
the lowest among network airlines, making productivity the high-
est among our peers. Delta's balance sheet is one of the strongest
of the major U.S. network carriers. The Company has leading
competitive positions in the United States and across the North
Atlantic, and is expanding in Latin America and Asia.
9
L E 0 F . MULLIN
This financial and competitive recovery from the different
challenges of earlier years is a tremendous achievement, and we
will move forward from this strong base. Delta has created a
powerful competitive advantage as the most efficient major net-
work carrier. The crucial ingredient in efficiency is to continue
to pursue the competitive advantage that has been achieved.
We will do that starting now.
We also will renew Delta's commitment to customer service
excellence. Any company that faces up to financial difficulties as
Delta has must make tough decisions. Sometimes, under those
conditions, companies suffer an erosion in customer service,
and some of the statistics indicate that that did happen at
Delta. People at this company created a powerful reputation for
service. Working together, we will regain that reputation.
There is no contradiction or tradeoff in this commitment
to customer service and efficiency. Both can be achieved
simultaneously. Great companies do that everyday, and Delta
is a great company.
This combination of focus on customer service and on
operational efficiency means our shareholders should expect
superior financial returns. It is the function of any business orga-
nization to produce value that yields these superior returns for
shareholders. All of us at Delta will remtlin highly cognizant of
that goal as we move forward. The critical task is to increase pos-
itive momentum and build a winning organization - superior
in all the respects to which we aspire.
Thank you for your support in this early, invigorating period
of my association with Delta ..
Leo F. Mullin
Preside n t a n d Chief Exec u ti v e Officer
August 15, 1997
199 7 ANNUAL R E P O R T
OPERATIONAL REVIEW
The Story Behind
the Numbers
During the fiscal year ended June 30, 1997, Delta Air Lines generated outstanding results.
Strong financial performance, competitive costs, an industry-leading profit margin and a
record level of shareholders' equity combined to make 1997 a banner year for the Company.
Financial Achievements
Fiscal year 1997 operating income of $1.6 billion and net income
of $886 million were the highest in Company history and repre-
sented records for the second consecutive year. Fully diluted income
per common share grew 35% to $11.42. These results exclude
restructuring and other non-recurring charges.
Delta's performance exceeded industry averages as well. Delta
achieved a unit cost for the fiscal year of 8.78 cents, excluding
restructuring and other non-recurring charges, which represent-
ed the lowest unit cost of any large U.S. network airline for the
12 months ended June 30, 1997. This low-cost leadership position,
combined with a strong revenue performance, generated a fiscal
1997 operating margin of 11.6%, up from 10.4% in fiscal 1996,
excluding restructuring and other non-recurring charges. Delta's
operating margin led the major U.S. network carriers for the 12
months ended June 30, 1997.
This year's success can be attributed to several factors. Cost-
reduction and revenue-enhancing programs, improved asset uti-
lization and favorable economic conditions all contributed to the
record results.
Three years ago, Delta initiated Leadership 7.5, a plan to sig-
nificantly improve Delta's competitiveness through a concentrat-
ed focus on reduction of total operating expenses and unit costs.
As a result of its success in reducing costs, a continued strong
economy and favorable airline industry conditions, Delta moved
away from a strict focus on operating cost reduction toward a more
balanced approach emphasizing both cost reduction and revenue
improvement. Delta appropriately named this new approach the
JO
Balanced Strategy and set a new operating margin goal of 12%
to be achieved by the end of fiscal 1999. Although this goal is
aggressive and carries no guarantee of success, Delta is pursuing
this objective as vigorously as it pursued its cost reduction plan
m previous years.
Delta's exceptional financial performance in fiscal 1997 fur-
ther improved the Company's balance sheet. Driven by record
earnings, cash flow from operations exceeded $2.0 billion in fiscal
1997. Total long-term debt, including capital lease obligations,
Operating Income Shareholders' Equity
In Millions of Dollars In Millions of Dollars
2,000 ,---,---,---,---,___, 3, 000
I
94
1,500
1,000
500
0
95 96 97 94 95 96
Operating income data excludes restructuring and other non-recurring
charges and the cumulative effect of an alcounting change.
2,500
2,000
1,500
1,000
97
DELTA AIR LINE S
declined to $2. l billion at June 30, 1997 from $2.3 billion at
June 30, 1996. Interest expense decreased $62 million over the
same period. Shareholders' equity increased co a record $3 billion
from $2.5 billion in fiscal 1996.
The record earnings performance reported for the fiscal year
and significant improvement in Delta's financial condition mark
continued progress toward returning co solid investment grade
status. Delta's long-term debt is currently one level below invest-
ment grade status with Standard & Poor's (BB+) and has been
investment grade with Moody's (Baa3) since April 1996.
Maximizing Delta 's Assets
A key to consistently generating superior financial returns is
improving asset utilization. Over the past several years, the Com-
pany has achieved substantial improvements in system profitabil-
ity by reallocating assets to more profitable opportunities across
the Delea system. As a result of these efforts, the financial perfor-
mance of Delta's network is now better balanced than ever before.
During fiscal 199? and 1996, Delea realigned domestic
resources to enhance revenue opportunities and system profitabili-
ty. Flights were increased at major hubs in Atlanta, Cincinnati and
Sale Lake City. Smaller markets were transferred to Delea Connection
carriers. Certain less profitable transatlantic and transpacific flights
were discontinued. Significant capacity was shifted from Dallas-
Fort Worth to Delta's second largest hub in Cincinnati. The
remaining Dallas-Fort Worth operations were realigned to focus
on ease-west connecting traffic. These moves paid off, with per-
formance improving at all of Delta's hubs during fiscal 1996.
In fiscal 1997, strategic moves capitalized on Delta's strengths
in North America, particularly in the Southeast and Florida. Delea
leveraged its Southeast leadership position by shifting assets from
lower-yielding point-to-point markets to higher-yielding business
markets from its hubs. Delea improved its ability to attract business
passengers in key markets by increasing frequencies to business
destinations, commencing new nonstop services to important West
Coast destinations and introducing hourly flights to Chicago and
Washington-National from Atlanta.
Delea Express was launched in October 1996 to build on
Delta's leading position in Florida. This highly productive low-cost
operation preserves Delta's market position in one of the la~gesc
revenue-producing segments of the system. The produce allows
Delea to compete effectively with the large number of low-cost
11
DISTRIBUTION OF OPERATING REVENUE AND EXPENSES
Operating Revenue For Fiscal Year Ending June 30, 1997
In cernacional
Passenger 17%
Ocher 4% Cargo 4%
Domestic Passenger 75%
Operating Expenses For Fiscal Year Ending June 30, 1997
Ocher Selling All Ocher 13%
Expenses 6%
Depreciation and
Amortization 6%
o&l
Contracted Services 6% - - - - - -
Passenger
Commissions 8%
Rentals and Landing Fees l 0%
Salaries and
Related Coses 37%
Aircraft Fuel 14%
Data excludes restnicturing and other non-recurring charges.
earners servmg Florida and to capture a leading share of the
rapid growth in leisure traffic (see Delea Express essay, page 15).
Delea cook steps to build on its leading international position
at New York-Kennedy and on its number one position across the
North Atlantic during fiscal 1997. Delea offers nonstop service from
the U.S. to the largest number of European destinations of any
airline. Delea also offers the most daily d~partures and carries the
most passengers between the U.S. and Europe of any U.S. carrier.
The fiscal 1997 realignment of Delta's transatlantic operations
continued the Company's strategy of ensuring chat every Delea air-
craft is as productive as possible. Aircraft previously flying intra-
European service through Fra!1kfurt were redeployed co the U.S.
domestic system to increase feed traffic to Delta's international
gateway at New York-Kennedy. In addition, the Company's least
profitable point-to-point services between the U.S. and Frankfurt
were discontinued.
Transatlantic service was strengthened by increased frequen-
cies in several markets and new nonstop service to four European
destinations from Delta's hubs. Total transatlantic service from the
New York-Kennedy, Atlanta and Cincinnati hubs was expanded
to 245 weekly transatlantic flights to 26 European cities as of
August 15, 1997.
1 99 7 ANNUA L R E P R T
OPERATIONAL
(continued)
REVIEW
Delta's success in turning around the financial performance
of the transatlantic operation is reflected in the consistent improve-
ment in operating profits in the Company's Atlantic entity since
fiscal 1993, excluding restructuring and other non-recurring charges.
These results are based on allocations performed in accordance with
requirements established by the U.S. Department ofTransportation.
Delta is building a global network which combines Delta
international services and alliance partner services to link Europe,
Asia, Africa and Latin America with the Company's strong North
Alliances also complement Delta's efforts to extend its reach
in the fast-growing regions of Latin America and Asia. During fiscal
1997, Delta established routes into South America with service
from Atlanta and Cincinnati to Sao Paulo and Rio de Janeiro, Brazil.
Delta's recently announced alliance agreement with Transbrasil
will provide access to other major Brazilian cities, pending gov-
ernment approvals. Delta extended its code-sharing agreement with
Aeromexico during fiscal 1997, replacing certain Delta nonstop
services to Mexico with expanded code-share services from Los
Angeles, Dallas-Fort Worth and Atlanta.
American operations. Worldwide alliances allow
Delta to provide service in strategically impor-
tant and financially valuable markets which
would otherwise not be economically viable, or
where prohibitive regulatory barriers exist. These
arrangements maximize the use of Delta's assets
by allocating Delta aircraft to the markets
which can be served most profitably, while pro-
viding an expanded scope of service through
alliance partners.
Transatlantic Delta continues to pursue additional author-
ities to serve Japan, but is impeded by the highly
restrictive aviation agreement between the U.S.
and Japan. Delta's limited Japan services will be
supplemented by additional service to Asia
through code-sharing arrangements with China
Southern and Korean Air (pending govern-
ment approvals).
Operating Results
12-Monch Moving Toca!
(In Millions of Dollars)
300
150
0
Aircraft Fleet
-150
-300
-450
-600
93 97
Delta's Atlantic Excellence alliance with
partners Swissair, Austrian Airlines and Sabena
received antitrust immunity from the U.S.
Department of Transportation in fiscal 1996.
Antitrust immunity allows the four carriers to
provide seamless service to customers worldwide
by synchronizing flight schedules, offering joint
marketing programs, coordinating pricing and
integrating frequent flyer programs. This far-
reaching, highly integrated alliance expands
Delta's presence in key markets in Europe, Africa
and the Middle East.
As reported to DOT excluding
Delta's aircraft fleet is a cornerstone of the
Company's business. Delta has long main-
tained one of the youngest and most techno-
logically advanced fleets in the U.S. airline
industry. In March 1997, Delta reached an
understanding with The Boeing Company for
firm orders, options and rolling options to pur-
chase certain aircraft. The understanding
includes 106 firm aircraft orders through fis-
cal 2007, with an additional 124 options and
restructuring and other
non-rernrring charges.
Delta's strategic alliances with other quality European carri-
ers further extend the airline's scope of European services. Delta's
recently announced code-sharing arrangement with Air France will
provide the Company with increased access to France, the third
largest transatlantic aviation market. This arrangement is pend-
ing government approval and the negotiation of a new aviation
agreement between the two countries.
12
414 rolling options through fiscal 2018.
Options have scheduled delivery slots while rolling options
replace options and are assigned delivery slots as options exp~re
or are exercised. The new Boeing understanding also contem-
plates the termination of existing options, the cancellation of
Delta's remaining MD-90 orders and the advancement of certain
of Delta's existing orders. The understanding is subject to certain
conditions, including the negotiation of mutually acceptable
DELTA AIR LINES
AIRCRAFT FLEET AT JUNE 30, 1997
Type of Average Age
Aircraft (Years) Owned Leased
B-727-200 20.3 115 14
B-737-200 12.6 53
B-737-300 11.3 13
B-757-200 8.5 50 41
B-767-200 14.1 15
B-767-300 8.1 2 24
B-767-300ER 4.6 20 7
L-1011-1 19.6 24
L-1011-200 19.0 1
L-1011-250 14.7 6
L-1011-500 16.4 17
MD-11 3.7 7 7
MD-88 7.0 63 57
MD-90 1.6 16
Total 11.8 337 216
AIRCRAFT DELIVERY SCHEDULES
Aircraft on Firm Order at June 30, 1997 (excludes new Boeing understanding)
Delivery in Year Ending June 30:
After
Orders 1998 1999 2000 2001 2001
B-757-200 3
B-767-300 2
B-767-300ER 9
MD-11
MD-90 5 5 3 2
Total 10 7 6 6 2
Aircraft on Firm Order Pursuant to New Boeing Understanding
Delivery in Year Ending June 30:
After
Orders* 1998 1999 2000 2001 2001
B-737-600/700/800 7 63
B-757-200 5
B-767-300ER 9
B-767-400 2 19
Total 21 2 19 63
* Subject to definitive purchase agreements.
Total
129
54
13
91
15
26
27
24
1
6
17
14
120
16
553
Total
4
2
9
1
15
31
Total
70
5
10
21
106
13
definitive purchase agreements with Boeing. See Note 9 of Notes
to Consolidated Financial Statements.
In conjunction with the understanding, Delta announced a
20-year aircraft acquisition plan. This long-range plan supports
Delta's goals for fleet replacement and rationalization and creates the
opportunity for disciplined internal growth. Furthermore, it helps
ensure the Company is ready with the right aircraft at the right
time and at the right price to build on Delta's market strengths -
even if the competitive landscape changes in unanticipated ways.
The Company's understanding with Boeing includes long-
term price controls and risk sharing and gives Delta flexibility to
adjust to changing circumstances. Subject to certain conditions,
the Company will have the flexibility to adjust scheduled aircraft
deliveries as well as to substitute between aircraft models and air-
craft types. Delta's long-term plan is to simplify its fleet by reduc-
ing aircraft family types from six to three, while replacing older
aircraft types with newer Boeing 767 and 737 aircraft over several
years. The increased efficiencies are expected to result in signifi-
cant long-term cost savings in areas such as maintenance, spare
parts inventories, scheduling and training.
Structured to focus on shareholder value, the plan is intended
to maintain Delta's ability to pay for the aircraft with internally
generated funds, while enabling the Company to continue to make
progress toward achieving financial goals for operating margin,
return on investment and a return to investment grade status.
The majority of the aircraft under firm order in Delta's fleet
plan will be used to replace older aircraft, primarily the L-1011
and B-727 aircraft. J:ts previously anq.ounced, the Company plans
to remove all L-1011 aircraft from transatlantic service by the end
of fiscal 1998 and retire all L-1011 aircraft from the fleet within
the next several years. The L-1011 aircraft will be replaced pri-
marily with Boeing 767 aircraft. The B-727 aircraft eventually
will be retired and replaced primarily with new generation Boeing
737 aircraft.
1 99 7 ANNUAL REPORT
OPERATIONAL
(continued)
REVIEW
In addition to new aircraft deliveries in fiscal 1997, Delta
announced its intent to acquire six B-767-300ER aircraft from
another carrier. The Company took delivery of five of the air-
craft during fiscal 1997, and the remaining aircraft was deliv-
ered during early fiscal 1998. Including these deliveries, Delta
accepted delivery of 21 aircraft during fiscal 1997, comprising
five B-757-200 aircraft, ten B-767-300ER aircraft, four MD-90
aircraft and two MD-11 aircraft.
This improvement compares to the Company's seventh place
ranking for the same period in 1996.
Investing in Delta's People
A business works best when employee and shareholder interests
are aligned. During fiscal 1997, several initiatives were imple-
mented to link personnel objectives more closely with the goals
of shareholders. For the fiscal year, Delta people earned a record
With fleet refinement actions taken dur-
ing the fiscal year and the recently announced
long-term fleet plan, Delta continues to make
progress toward its goals of improved .opera-
tional flexibility, management of capital
spending and simplification of the Com-
pany's aircraft fleet.
Capital Expenditures
(In Millions of Dollars)
profit-sharing payment of $145 million based
on the Company's financial performance.
Investments in Delta's Product
A key component of Delta's Balanced Strategy
is targeted investment throughout the Com-
pany to ensure the consistent delivery of high-
quality customer service. Fiscal 1997 investments
included matching staffing levels to increased
passenger volumes, making compensation more
competitive, improving information technol-
ogy and enhancing Delta's service and product. 88 97
2,500
2,000
1,500
1,000
500
0
In addition, in fiscal 1997 Delta imple-
mented two broad-based stock option plans
for Delta employees providing for the issuance
in three equal annual installments of non-
qualified stock options to purchase a total of
24.7 million shares of Common Stock. These
plans help provide employees with a sense of
shared purpose and ownership in the Company.
Realigning Staff
I Flight Equipment
Including Leased Aircraft
Transforming Information Technology
Delta launched a companywide Information
Technology (IT) Transformation process during
fiscal 1997 to enable Delta's future technology
to support its business goals. The initiative will
centralize information and reengineer technol-
ogy and decision-making processes around four
application portfolios: customer, operations,
revenue and business support. The goal is to
Delta increased staffing and improved processes
to provide a consistently high level of service.
I Ground Property and
Equipment
Approximately 1,000 flight attendants, 700 airport customer
service agents and 500 reservation agents were added during the
year to manage a 10% increase in passenger volume, as measured
by revenue passenger miles. U.S. Department ofTransportation
data available for January through June 1997 reflects that
Delta's passenger complaints per 100,000 passengers boarded
were the third lowest among all major U.S. carriers.
14
simplify the technological infrastructure,
improve efficiency and deliver state-of-the-art solutions for
Delta's business needs. An IT board will oversee implementation
of this strategy, coordinating among Delta IT personnel,
TransQuest (Delta's wholly owned technology subsidiary),
WORLDSPAN (a computer reservations system partnership),
and the Company's business, operating and staff units.
DELTA A I R L I NE
Positioning the New Delta
As Delta enters the most dynamic period in its history, the Com-
pany will stay ahead of global market trends with new approaches
to positioning services and products for aviation consumers.
Delta has created a new look for its aircraft - a contemporary
design that retains the symbols of Delta's tradition and heritage.
The colors are strong, and the design is clean. The paint scheme
is not the only change planned for Delta's aircraft. The new look
extends to aircraft interiors with new fabric colors throughout.
Changes will be phased in over the next three years as aircraft are
scheduled for normal repainting and maintenance procedures.
Business class comfort is increasingly a purchase-decision
driver for transatlantic passengers. Delta has enhanced its busi-
ness class product co provide passengers a comfortable and busi-
ness-friendly environment. Increased leg room, greater recline,
on-board power for laptop computers, an improved entertain-
ment system and unsurpassed food and wine selections are among
the investments to enhance Delta's competitive strength in the
North Atlantic.
Delta is reaching more passengers than ever through the
Internet. The Delea Web Site, SkyLinks (www.delca-air.com),
provides yet another way for customers to work with Delea. Options
for customers include instant enrollment in Delta's SkyMiles fre-
quent flyer program, electronic ticketing via SkyLinks, the abil-
ity to obtain frequent flyer account updates and real-time flight
schedules, fares and availability. The Company expects continued
strong growth of chis distribution channel.
This past March, Delea established a new advertising approach
chat will emphasize integrated global business communications. The
first of Delta's new advertising campaigns was launched chis spring,
highlighting the Company's redesigned transatlantic business class.
Ronald W Allen Retirement
Effective July 31, 1997, Ronald W Allen retired as
Chairman of the Board, President and Chief Executive
Officer of the Company. The Company acknowledges his
many contributions during his ten-year tenure as Chairman
and Chief Executive Officer and during his 34 years with
Delea Air Lines.
15
1 99 7 A NN UAL R E P O R T
Delta Express
On October 1, 1996, Delta launched Delta
Express, a low-fare, leisure-oriented operation
which provides travelers from the Northeast
and Midwest with increased travel options to
Orlando and four other Florida cities. In less
than six months of operations, Delta Express
boarded its millionth passenger.
Delta Express offers the benefits of low
advance purchase and walkup fares while still
retaining high-quality service: assigned seat
selection, nonstop flights, and participation in
the SkyMiles frequent flyer program. The 25
dedicated B-737-2OO aircraft are maintained
and serviced by Delta mechanics, and flown by
Delta pilots with Delta in-flight personnel pro-
viding cabin service to customers.
Effective October 1, 1997, Delta Express
will offer 126 daily nonstop flights to 16 cities
(Islip, New York and Raleigh-Durham, North
Carolina will be added effective October 1).
For added convenience, Delta
Express fares are published
on the Internet in real time.
Delta Express cities served
as of October I, 1997
16
DE L TA A I R L I N E S
Northeast
Delta's position in the Northeast was
enhanced this year by the inauguration of
hourly services between Atlanta and
Washington-National, expanded service
from Delta's European gateway at New
York-Kennedy and the superior performance
of the Delta Shuttle.
DELTA'S GLOBAL REACH:
NORTH AMERICA
In the North American air travel market,
Delta sees potential for growth by build-
ing on its key competitive strength: an
integrated network of geographically bal-
anced hubs. Hub operations in Atlanta,
Cincinnati, Salt Lake City, Dallas-Fort
Worth and New York-Kennedy Inter-
national Airport offer customers the most
efficient connections across an extensive
route system, and are a major contribut-
ing factor to Delta's leadership position
as the largest U.S. airline as measured by
passengers enplaned.
As of August 15, 1997, Delea offers
611 daily Bights to 117 destinations from
Atlanta, the world's largest aviation hub.
Delta's expanded services support
Atlanta's emergence as a preeminent
global air transportation center. In June
1997, Delta set a record in commercial
aviation history in Atlanta. More cus-
tomers were boarded on Delta Bights -
over 2.3 million passengers - than have
ever been boarded by any airline at a
single airport in any one month.
Specialized segments of the aviation
market are also a priority at Delea. Business
travelers within the Northeast corridor
are served by the Delea Shuttle. The Delea
Shuttle achieved boarding and on-time
records during fiscal 1997, and achieved
record financial performance. The highly-
competi tive, leisure-oriented travel mar-
ket to Florida is served by Delta's low-fare
operation, Delta Express. Delta Express
completed its first nine months of oper-
ations with a strong 71 % load factor.
DELTA'S GLOBAL REACH: TODAY AND TOMORROW
Served by Delta
Served by Worldwide Partners
Served by Delta and Worldwide Partners
North American cities represent international gateway cities.
North Atlantic
Delta enhanced transatlantic service to
Europe from hubs at New York-Kennedy and
Atlanta and redeployed assets from the
former Frankfurt hub to increase domestic
feed traffic to New York-Kennedy. These
actions fortified Delta's position as the lead-
ing carrier in the world's largest interna-
tional aviation market, the U.S. to Europe.
18
Latin America
New routes to Brazil, an expanded code-
sharing arrangement with Aeromexico and
a new code-sharing arrangement with
Transbrasil will allow Delta to penetrate the
market of over 13 million passengers trav-
eling between the U.S. and Latin America
each year.
DFlTA AIR LIN E
Asia/ Pacific
Asian and transpacific service will be enhanced
through an expanded code-sharing arrange-
ment with Korean Air, pending government
approval. Delta has also filed an application
to code-share with China Southern. If approved,
these arrangements will provide Delta with
expanded access to Seoul and other interior
points in Asia .
DELTA'S GLOBAL REACH:
TODAY AND TOMORROW
Delea is the number one airline in the
world's two largest aviation markets,
North America and the North Atlantic.
During fiscal 1997, Delea continued co
build on these market strengths and
extend its reach to the fast-growing Asian
and Latin American markets.
Fiscal 1997 strategic actions (see
page 11) improved the airline's transat-
lantic performance and strengthened
Delta's leadership position. The Atlantic
Excellence alliance (with Swissair, Austrian
Airlines and Sabena) provides greater
European access for Delea customers and,
coupled with partnerships with other qual-
ity airlines, provides Delea with the most
comprehensive network of alliances in
the world.
Atlanta's geographic location and
strong A.ow traffic provide an ideal gateway
for Delea to serve Latin America_ Delta's
new Brazilian services (initiated June 1997)
and planned service to Caracas, Venezuela
and Santiago, Chile (pending government
approvals) will provide the foundation for
Delta's entry into the region.
Delta's services co Japan were strong
performers during fiscal 1997. Delta con-
tinues co promote liberalization of restric-
tive aviation agreement between che
U.S. and Japan to allow fair opportuni-
ties for U.S. carriers co expand Japanese
services. Delta's Japan routes will be sup-
plemented by code-share arrangements
with Asian carriers, including hina
Southern and Korean Air (pending gov-
ernment approvals).
Board of Directors
EDWIN L. ARTZT
Chairman of the Executive
Committee of the Board of
Directors, The Procter & Gamble
Company; Retired Chairman of
the Board and Chief Executive
Officer, The Procter & Gamble
Company, Cincinnati, Ohio
HENRY A. BIEDENHARN, III
Retired Chairman of the Board,
President and Chief Executive
Officer, Ouachita Coca-Cola
Bottling Company, Inc.,
Monroe, Louisiana
JAMESL. BROADHEAD
Chairman of the Board and
Chief Executive Officer,
FPL Group, Inc.;
Chairman of the Board and
Chief Executive Officer,
Florida Power
& Light Company,
Juno Beach, Florida
EDWARD H. BUDD
Retired Chairman of the Board
and Chief Executive Officer,
The Travelers Corporation,
Hartford, Connecticut
GEORGE D. BUSBEE
Of counsel to the law firm of
King & Spalding, Atlanta, Georgi.a;
former Governor of Georgia
Officers
LEO F. MULLIN
President and
Chief Executive Officer
MAURICE W WORTH
Chief Operating Officer
HARRY C. ALGER
Executive Vice President -
Operations
ROBERT W COGGIN
Executive Vice President -
Marketing
ROBERT G. ADAMS
Senior Vice President - Personnel
VINCENT F. CAMINITI
Senior Vice President -
Sales and International
WE. DOLL
Senior Vice President - Cargo
VICKI B. EscARRA
Senior Vice President -
Airport Customer Service
ROBERT S. HARKEY
Senior Vice President - General
Counsel and Secretary
R. EUGENE CARTLEDGE
Chairman of the Board, Savannah
Foods & Industries, Inc.,
Savannah, Georgia;
Retired Chairman of the Board
and Chief Executive Officer,
Union Camp Corporation,
Wayne, New jersey
MARY JOHNSTON EVANS
Director of various corporations
GERALD GRINSTEIN
Non-Executive Chairman of the
Board, Delta Air Lines, Inc.;
Retired Chairman, Burlington
Northern Santa Fe Corporation;
Retired Chairman and Chief
Executive Officer, Burlington
Northern Inc., Fort Worth, Texas;
former Chief Executive Officer,
Western Air Lines, Inc.
JESSE HILL, JR.
Retired Chairman of the Board,
Atlanta Life Insurance Company,
Atlanta, Georgi.a
LEO F. MULLIN
President and Chief Executive
Officer, Delta Air Lines, Inc.;
Former Vice Chairman, Unicom
Corporation and Commonwealth
Edison Company; former President
and Chief Operating Officer,
First Chicago Corporation,
Chicago, Illinois
PAUL G. MATSEN
Senior Vice President -
Corporate Planning and
Information Technologies
JENNY R. POOLE
Senior Vice President -
In-Flight Service
THOMAS J. ROECK, JR.
Senior Vice President - Finance
and Chief Financial Officer
THOMAS J. SLOCUM
Senior Vice President -
Corporate Communications
RAYVALEIKA
Senior Vice President -
Technical Operations
D. ScorrYOHE
Senior Vice President -
Government Affairs
MALCOLM B. ARMSTRONG
Vice President - Corporate Safety
and Compliance
W E. "SKIP" BARNETTE
Vice President - Delta Express
PETER D. SUTHERLAND
Chairman and Managi,ng Director,
Goldman Sachs International,
London, England, and a General
Partner of The Goldman Sachs
Group, L.P. and Goldman, Sachs
& Co., New York, New York;
Non-Executive Chairman, The
British Petroleum Company pie.
ANDREW J. YOUNG
Co-Chairman and Senior
Partner, Goodworks International,
Inc., Atlanta, Georgia; former
Mayor of Atlanta
Audit Committee
JESSE HILL, JR., Chairman
HENRY A. BIEDENHARN, III
JAMESL.BROADHEAD
MARY JOHNSTON EVANS
PETER D. SUTHERLAND
Benefit Funds
Investment Committee
EDWARD H. BUDD, Chairman
EDWIN L. ARTZT
HENRY A. BIEDENHARN, III
JESSE HILL, JR.
ANDREW J. YOUNG
HAROLD L. BEVIS
Vice President - Public Affairs
JOHN W BOATRIGHT
Vice President - Properties
and Facilities
GAYLE M. BOCK
Vice President -
Consumer Marketing
W MARTIN BRAHAM
Vice President -
Delta Staffing Services Business
Unit Development
RICHARD E. COLBY
Vice President - Flight Operations
HIRAM A. Cox
Controller
MARK A. P. DRUSCH
Vice President -
Marketing Development
STEPHAN J. EGLI
Vice President -
Atlantic/Pacific Business Unit
20
DELTA AIR LINES
Corporate
Governance Committee
MARY JOHNSTON EVANS,
Chairman
JAMESL. BROADHEAD
GERALD GRINSTEIN
ANDREW J. YOUNG
Executive Committee
MARY JOHNSTON EVANS,
Chairman
EDWARD H. BUDD
R. EUGENE CARTLEDGE
GERALD GRINSTEIN
JESSE HILL, JR.
LEO F. MULLIN
Finance Committee
R. EUGENE CARTLEDGE,
Chairman
EDWIN L. ARTZT
EDWARD H. BUDD
GEORGE D. BUSBEE
GERALD GRINSTEIN
Personnel and
Compensation Committee
GERALD GRINSTEIN, Chairman
JAMESL. BROADHEAD
R. EUGENE CARTLEDGE
MARY JOHNSTON EVANS
MICHAELS. ELLENBURG
Vice President -
Maintenance: Aircraft
TERRY M. ERSKINE
Vice President - Personnel Relations
LEE A. MACENZAK
Vice President - Reservation Sales
and Distribution Planning
HAROLD G. McDONALD
Vice President - Maintenance:
Engine and Component
LEON A. PIPER
Vice President - Personnel Benefits
EDWARD H. W EST
Vice President - Financial
Planning and Analysis
MICHAEL M. YOUNG
Vt'ce President - Community Affairs
DEAN C. ARVIDSON
Assistant Secretary
SUSAN T. HUDSON
Assistant Secretary
LESLIE P. KLEMPERER
Assistant Secretary
Management's Discussion and Analysis of Financial Condition and Results of Operations
D ELTA AIR LINES, INC.
Results of Operations -
Fiscal 1997 Compared With Fiscal 1996
For fiscal 1997, Delta recorded net income of $854 million
($11.30 primary and $11.01 fully diluted income per com-
mon share) and operating income of $1.5 billion. In fiscal
1996, Delta recorded net income of $156 million ($1.42
primary and fully diluted income per common share), and
operating income of $463 million.
Financial Results Summary
(In Millions, Except Share Amounts) 1997 1996 Change
Operating Revenues $13,590 $12,455 + 9%
Operating Expenses 12,060 11,992 + 1
Operating Income 1,530 463 *
O ther Expense, Net 115 187 -39
Income Before Income Taxes 1,415 276 *
Income Taxes Provided, Net 561 120 *
Net Income 854 156 *
Preferred Srock Dividends 9 82 -89
Net Income Available to
Common Shareholders $ 845 $ 74 *
Primary Income Per
Common Share: $ 11.30 $ 1.42 *
Fully Diluted Income
Per Common Share: $ 11.01
,
$ 1.42 *
Number of Shares Used to
Compute Income Per
Common Share:
Primary 74,786,517 52,101 ,152 NIA
Fully Diluted 77,087,619 52,101,152 NIA
* Exceeds I 00%
Fiscal 1997 results include pretax restructuring and other
non-recurring charges totaling $52 million ($32 million
after-tax or $0.42 primary and $0.41 fully diluted income
per common share) related to the realignment of the Com-
pany's transatlantic and European operations. 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 L-1011
fleet and the continuation of the Company's Leadership 7.5
cost reduction program. See Note 16 of Notes to Consoli-
dated Financial Statements.
Excluding the restructuring and other non-recurring
charges in fiscal 1997 and 1996, net income for fiscal 1997
totaled $886 million ($11.72 primary and $11.42 fully
diluted income per common share) and operating income
was $1 .6 billion, compared to net income of $662 million
( $11.13 primary and $8. 49 fully diluted income per common
share) and operating income of $1 .3 billion in fiscal 1996.
Operating Revenue Detail
(In Millions) 1997 1996 Change
Passenger $12,505 $11,616 + 8%
Cargo 554 521 + 6
Other, Net 531 318 +67
Total $13,590 $12,455 + 9%
Operating revenues for fiscal 1997 were $13.6 billion,
up 9% from $12.5 billion in fiscal 1996. Passenger revenue
increased 8%, reflecting a 10% increase in revenue passenger
miles, partially offset by a 2 % decline in passenger mile yield.
Domestic load factor increased four points to 70%, as domes-
tic revenue passenger miles and domestic capacity rose 13%
and 6%, respectively. The increase in domestic passenger
traffic is due to the Company's realignment of its domestic
route system on December 1, 1995, which increased the
Company's operations at its Atlanta and Cincinnati hubs;
improved asset utilization; reduced operations by a low-cost,
low-fare competitor; and favorable economic conditions.
Domestic passenger mile yield decreased 3%, reflecting the
Company's use of more competitive pricing strategies; the
continued presence of low-cost, low-fare carriers in domes-
tic markets served by Delta; and the March }, 1997 reim-
position of the U.S. transportation excise tax. International
load factor increased three points to 76%, as international
revenue passenger miles increased 3%, while operating
capacity decreased 1 %. The increase in international traffic
is primarily due to improved asset utilization and favorable
economic conditions, while the decline in international
capacity is mainly due to the cancellation of service on cer-
tain international routes. The international passenger mile
yield decreased 2%, due to the Company's use of more
competitive pricing strategies.
Cargo revenues in fiscal 1997 increased 6% to $554 mil-
lion. Cargo ton miles increased 12%, while the cargo ton
mile yield declined 5%, primarily due to the Company's uti-
lization of more competitive pricing strategies and an increase
in the average stage length related to freight shipments.
All other revenues were up 67% to $531 million, mainly
due to the expansion of joint marketing programs associ-
ated with the Company's SkyMiles frequent flyer progr~rri
and improved results from code-share arrangements.
21
1 99 7 ANNUAL RE P O R T
Management's Discussion and Analysis of Financial Condition and Results of Operations continued
DELTA AIR LINES, INC.
Revenue-Related Statistics
1997 1996 Change
Revenue Passengers
Enplaned (Thousands) 101,147 91,341 + 11 %
Revenue Passenger
Miles (Millions) 97,758 88,673 + 10%
Passenger Load Factor 71.4% 67.8% +3.6 pts.
Passenger Mile Yield 12.79 13. l0<t - 2%
Cargo Ton Miles (Millions) 1,532 1,368 + 12%
Cargo Ton Mile Yield 36.14 38.08 - 5%
Operating Revenue Per
Available Seat Mile 9.93<t 9.53<t + 4%
Operating expenses in fiscal 1997 totaled $12.1 billion,
up 1 % from $12.0 billion in fiscal 1996. Operating capac-
ity increased 5% to 136.8 billion available seat miles, and
operating cost per available seat mile decreased 4% to 8.81 .
Excluding restructuring and other non-recurring charges
in fiscal 1997 and 1996, operating expenses were up 8%, and
operating cost per available seat mile increased 3%. The
increase in operating expenses is primarily due to higher
salaries and related costs, aircraft fuel expense and certain
traffic-related costs.
Operating Expense Detail
(In Millions) 1997 1996 Change
Salaries and Related Costs $ 4,444 $ 4,206 + 6%
Aircraft Fuel 1,723 1,464 +18
Passenger Commissions 1,016 1,042 - 2
Contracted Services 751 704 + 7
Depreciation and Amortization 710 634 +12
Other Selling Expenses 677 594 +14
Aircraft Rent 547 555 - 1
Aircraft Maintenance Materials
and Outside Repairs 434 376 +15
Passenger Service 389 368 + 6
Facilities and Other Rent 386 379 + 2
Landing Fees 256 248 + 3
Restructuring and Other
Non-Recurring Charges 52 829 *
Other Operating 675 593 +14
Total $12,060 $11,992 + 1%
* Exceeds 100%
Salaries and related costs increased 6%, primarily due to
a 5% increase in full-time equivalent employees to handle
higher passenger traffic and improve customer service, as well
as higher costs associated with certain employee compensa-
tion plans. Aircraft fuel expense increased 18%, as the aver-
age fuel price per gallon rose 13% to 66.28, and fuel gallons
22
consumed increased 4%. Passenger commissions expense
decreased 2%, reflecting lower expenses for certain travel
agent incentive programs which were partially offset by higher
commission costs associated with increased passenger traffic.
Contracted services expense rose 7%, the result of increased
outsourcing of certain airport functions and higher informa-
tion technology costs. Depreciation and amortization expense
increased 12%, due to the acquisition of 12 new aircraft and
18 used aircraft, including the purchase of nine B-727-200
aircraft which the Company had previously been operating
under operating leases, additional ground equipment acqui-
sitions and the amortization of software development costs.
Other selling expenses increased 14%, due to higher booking
fee payments to computer reservation system providers related
to higher passenger traffic, higher credit card processing charges
and increased advertising costs. Aircraft maintenance mate-
rials and outside repairs expense increased 15%, reflecting
higher usage of airframe and engine materials related to
increased scheduled maintenance visits and non-recurring
credits received from certain engine and brake manufactur-
ers in fiscal 1996. Passenger service expense increased 6%
due to increased passenger traffic. Other operating expenses
increased 14%, due to higher insurance expense, higher fre-
quent flyer expense related to the expansion of the Company's
joint marketing programs, increased usage of miscellaneous
supplies and higher fuel taxes resulting from the October 1,
1995 expiration of the exemption from the 4.3 cents per gal-
lon federal tax on commercial aviation jet fuel used in domes-
tic operations, partially offset by increased services provided
to outside parties.
Operating Statistics
1997 1996 Change
Available Seat Miles (Millions) 136,821 130,751 + 5%
Available Ton Miles (Millions) 18,984 18,084 + 5%
Fuel Gallons
Consumed (Millions) 2,599 2,500 + 4%
Average Fuel Price Per Gallon 66.28<t 58.53 + 13%
Breakeven Passenger Load Factor:
Including Restructuring and
Other Non-Recurring Charges 62.7% 65.1 % -2.4 pts.
Excluding Restructuring and
Other Non-Recurring Charges 62.4% 60.3% +2.1 pts.
Operating Cost Per
Available Seat Mile:
Including Restructuring and
Other Non-Recurring Charges 8.81<t 9.17 - 4%
Excluding Restructuring and
Other Non-Recurring Charges 8.78<t 8.54<t + 3%
DELTA AIR LINE S
Nonoperating expense for fiscal 1997 totaled $115 mil-
lion, compared to $187 million in fiscal 1996. Interest expense
decreased 23%, due to a lower average level of debt outstand-
ing. Interest capitalized on funds advanced for the purchase of
flight equipment and construction of facilities increased 24%,
primarily resulting from a higher average balance of outstand-
ing advance payments for equipment. Interest income declined
29% to $61 million, due to a lower average level of short-term
investments and a slight decline in interest rates during fiscal
1997. Miscellaneous expense, net decreased 93% to $2 mil-
lion due to increased income from associated companies and
reduced voluntary debt retirement and foreign exchange losses,
partially offset by Delta's $20 million payment to settle cer-
tain class action antitrust lawsuits filed by travel agents.
Results of Operations -
Fiscal 1996 Compared With Fiscal 1995
For fiscal 1996, Delta recorded net income of $156 mil-
lion ($1.42 primary and fully diluted income per common
share) and operating income of $463 million. In fiscal 1995,
Delta recorded net income of $408 million ($6.32 primary
and $5.43 fully diluted income per common share) and oper-
ating income of $661 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) as discussed above.
See Note 16 of Notes to Consolidated Financial Statements.
Fiscal 1995 results include a one-time $114 million after-tax
benefit ($2.25 primary and $1.42 fully diluted benefit per
common share) related to the adoption of Statement of Finan-
cial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits" (SFAS 112). See Note 10 of
Notes to Consolidated Financial Statements.
Excluding the restructuring and other non-recurring
charges in fiscal 1996 and the cumulative effect of the adop-
tion of SFAS 112 in fiscal 1995, net income for fiscal 1996
totaled $662 million ($11.13 primary and $8.49 fully
diluted income per common share) and operating income
was $1.3 billion, compared to net income of $294 million
($4.07 primary and $4.01 fully diluted income per common
share) and operating income of $661 million in fiscal 1995.
The improvement in financial results for fiscal 1996
(excluding restructuring and other non-recurring charges) as
compared to fiscal 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.
Operating revenues for fiscal 1996 were $12.5 billion,
up 2% from $12.2 billion in fiscal 1995. Passenger revenue
increased $297 million, or 3%, due to increased traffic stimu-
lated by competitive pricing actions, the expiration of the
U.S. transportation excise tax and general improvements in
economies worldwide. The passenger mile yield was virtu-
ally unchanged. Domestic load factor increased two points
to 66%, as domestic revenue passenger miles and domestic
capacity rose 6% and 3%, respectively. The domestic pas-
senger mile yield decreased 1 %, the result of discount fare
promotions and the continued presence oflow-cost, low-fare
carriers in markets served by Delta. International load factor
increased one point to 73%, as international revenue pas-
senger miles decreased 7% while operating capacity
decreased 8%. The decline in international capacity is
mainly due to the cancellation of service on certain interna-
tional 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 mil-
lion, 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 was 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
SkyMiles frequent flyer prograrri.
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 Q.on-recurring
charges in fiscal 1996, operating expenses were down 3%,
and operating cost per available seat mile decreased 3%.
Nonoperating expense for fiscal 1996 totaled $187 mil-
lion, compared to $167 million in fiscal 1995. Interest expense
decreased 8%, primarily due to a lower average level of out-
standing debt, partially offset by an increase in interest related
to the extension and reclassification of 40 B--737-200 aircraft
leases. Interest capitalized on funds advanced for the purchase
of flight equipment and construction of facilities decreased
13%, primarily resulting from a lower average balance of out-
standing 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 rate dur-
ing the year. Miscellaneous expens , net rose to $30 million
for fiscal 1996 compared to le s than $ 1 million for I
fiscal
23
199 7 ANNUAL REPORT
Management's Discussion and Analysis of Financial Condition and Results of Operations continued
D ELTA AIR LINES, INC.
1995 primarily due to costs associated with the repurchase
and retirement of long-term debt and foreign exchange losses.
Capitalization, Financing and Liquidity - Fiscal Year 1997
Cash and cash equivalents and short-term investments totaled
$1.2 billion at June 30, 1997, compared to $1.7 billion at
June 30, 1996. The principal source of funds during fiscal
1997 was $2.0 billion of cash from operations.
During fiscal 1997, Delta invested $1.6 billion in flight
equipment and $350 million in ground property and
equipment. The Company also made payments of $196 mil-
lion on long-term debt and capital lease obligations, includ-
ing Delta's voluntary repurchase and retirement of $88
million principal amount oflong-term debt. The Company
also paid $379 million to repurchase 5,378,700 common
shares under its Common Stock repurchase program dis-
cussed in the Other Matters section below. In addition, the
Company paid cash dividends of $29 million on its Series B
ESOP Convertible Preferred Stock and $15 million on its
Common Stock. The Company may repurchase additional
long-term debt and Common Stock from time to time.
As ofJune 30, 1997, the Company had negative working
capital of $1.2 billion, compared to negative working capital
of $356 million at June 30, 1996. 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 invest-
ments and internally generated funds, supplemented as nec-
essary by debt financing and proceeds from sale and leaseback
transactions. At.August 15, 1997, the Company had $1.25 bil-
lion of credit available under its 1997 Bank Credit Agreement,
subject to compliance with certain conditions. See Note 7
of Notes to Consolidated Financial Statements.
Long-term debt and capital lease obligations, includ-
ing current maturities, totaled $2.1 billion at June 30, 1997,
compared to $2.3 billion at June 30, 1996. Shareholders'
equity was $3.0 billion at June 30, 1997, compared to
$2.5 billion at June 30, 1996. The Company's debt-to-
equity position, including current maturities, was 41 % debt
and 59% equity at June 30, 1997, compared to 47% debt
and 53% equity at June 30, 1996.
At August 15, 1997, there was outstanding $290 mil-
lion 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 enhance-
ment in the form of a letter of credit in the amount of
$450 million under Delta's credit agreement with a group
24
of banks. Delta is required to purchase the Series C ESOP
Notes in certain circumstances. See Note 7 of Notes to
Consolidated Financial Statements.
Fiscal Year 1996
In fiscal 1996, the principal sources of funds were $1.4 bil-
lion 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 mil-
lion in flight equipment and $297 million in ground prop-
erty and equipment. The Company also made payments of
$440 million on long-term debt and capital lease obliga-
tions, including Delta's voluntary repurchase and retire-
ment of $224 million principal amount oflong-term debt.
The Company paid cash dividends of $80 million on its
Series C Convertible Preferred Stock, $30 million on its
Series B ESO P Convertible Preferred Stock, and $10 million
on its Common Stock. In addition, Delta paid $66 million
to repurchase 821,300 common shares under its Common
Stock repurchase program.
Fiscal Year 1995
In fiscal 199 5, the principal sources of funds were $1.1 billion
of cash from operations; $139 million from the repayment to
Delta 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
oflong-term debt. In addition, the Company paid cash div-
idends of $80 million on its Series C Convertible Preferred
Stock, $30 million on its Series B ESOP Convertible Pre-
ferred Stock, and $10 million on its Common Stock.
Commitments
Future expenditures for aircraft, engines and engine hush.-
kits on firm order as ofJune 30, 1997 are estimated to be
$1.6 billion.
In March 1997, Delta and The Boeing Company (Boeing)
reached an understanding which provides for Delta placing
orders to purchase, and obtaining options and rolling options
to purchase, certain aircraft. This understanding, which would
also accelerate the delivery dates for certain of Delta's existing
orders, terminate all of Delta's existing options and cancel
DELTA A IR LINES
Delta's remaining MD-90 orders, is subject to certain con-
ditions, including the negotiation of mutually acceptable
definitive purchase agreements between Delta and Boeing.
Future expenditures for aircraft, engines and engine hush-
kits on firm order as ofJune 30, 1997 (as modified by the
accelerated delivery dates for, and the cancellation of, cer-
tain of these orders as provided for under Delta's under-
standing with Boeing), and the aircraft orders provided for
under Delta's understanding with Boeing, are estimated to
be $5.9 billion.
The Company expects to finance its commitments using
available cash, short-term investments and internally gener-
ated 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 Notes 8 and 9 of Notes to Con-
solidated Financial Statements for additional information
on the Company's commitments.
Market Risks Associated With Financial Instruments
The Company's results of operations are significantly impacted
by the price of jet fuel. Based on the Company's jet fuel con-
sumption for fiscal 1997, a one-cent change in the average
annual price per gallon of jet fuel will impact Delta's air-
craft fuel expense by approximately $26 million. The fol-
lowing table shows Delta's jet fuel consumption and costs
for fiscal 1997, 1996 and 1995.
Gallons Aircraft Fuel
Consumed Expense Average Price
Year (In Millions) (In Millions) Per Gallon
I 1997 2,599 $1,723 66.28
1996 2,500 1,464 58.53
1995 2,533 1,370 54.09
During fiscal 1996, Delta initiated a fuel hedging pro-
gram under which the Company may enter into certain con-
tracts 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. Gains resulting from
the fuel hedging program for fiscal 1997 and 1996 were
immaterial to Delta's total aircraft fuel expense. See Note 4
of Notes to Consolidated Financial Statements.
Delta's equity investments in Singapore Airlines and
Swissair are considered "available for sale" for accounting
purposes, and any unrealized gain or loss is deferred as a
component of shareholders' equity. See Note 2 of Notes to
Consolidated Financial Statements. The following table
summarizes the cost basis and fair value of these invest-
ments at June 30, 1997, together with the high, low and
average fair values (in millions) of each investment based on
valuations performed at each month end during the past
three fiscal years.
Fiscal 1995 Through 1997
Historical Fair Value at Fair Value Data
Investee Cost Basis June 30, 1997 High Low Average
Singapore $181 $315 $373 $282 $333
Swissair 85 117 117 58 82
Total $266 $432
Other Matters
Change in Management
Effective July 31, 1997, Ronald W Allen retired as the Com-
pany's Chairman of the Board, President and Chief Executive
Officer, and resigned from the Board of Directors.
Effective August 14, 1997, the Board of Directors (Board)
elected Leo F. Mullin as the Company's President and Chief
Executive Officer and a member of the Board. Mr. Mullin
comes to Delta from Unicom Corporation and Common-
wealth Edison Company, where he most recently served as
Vice Chairman. The Board also elected Gerald Grinstein, a
current member of the Board and former Chairman of
Burlington Northern Santa Fe CorporatiQn and Western
Air Lines, Inc., as Non-Executive Chairman of the Board;
Maurice W. Worth, a Delta veteran of 36 years, as Chief
Operating Officer; and Mary Johnston Evans, who had been
serving as Non-Executive Acting Chairman of the Board
since Mr. Allen's resignation, as Chairman of the Executive
Committee of the Board.
Deferred Tax Assets
At June 30, 1997, Delta had net cumulative deferred tax assets
of $516 million, which consisted of $2.133 billion of deferred
tax assets, offset by $1.617 billion of deferred tax liabilities.
Included in the deferred tax assets are, all?-ong other items,
$7 41 million related to obligations for postretirement bene-
fits and $216 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 existing
taxable _
temporary differences with similar reversal patterns.
To realize the benefits of the remaining deferred ta-XJassets,
25
199 7 ANNUAL REP RT
Management 's Discussion and Analysis of Financial Condition and Results of Operations continued
DELTA Am LINES, INC.
excluding AMT credits, Delta needs to generate approxi-
mately $800 million in future taxable income.
Following is a summary of Delta's pretax book income
and taxable income for the last three fiscal years, prior to net
operating loss carrybacks:
(In Millions)
Pretax Book Income
Taxable Income
1997
$1,415
$1,246
1996
$276
$635
1995
$494
$282
Delta's ability to generate sufficient future taxable income
to fully utilize its existing deferred tax assets is dependent upon
various factors, many of which are beyond management's con-
trol. Accordingly, there can be no assurance that Delta will meet
its expectations of future taxable income. However, based on
Delta's earnings history, expectations of 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 future
taxable income will be sufficient to fully utilize the deferred
tax assets which existed at June 30, 1997. See Note 6 of Notes
to Consolidated Financial Statements.
Broad-Based Stock Option Plans
During fiscal 1997, the Company's shareholders approved
two plans providing for the issuance of non-qualified stock
options to substantially all of Delta's non-officer personnel in
their individual capacity to purchase a total of 24.7 million
shares of Common Stock. The plans provide for grants in three
equal annual installments at an exercise price equal to the
opening price of the Common Stock on the New York Stock
Exchange on the grant date. On October 30, 1996, Delta
granted eligible personnel non-qualified stock options to pur-
chase a total of 8.2 million shares of Common Stock at an
exercise price of $69 per share. The second and third grant
dates under the plans are scheduled to occur on October 30,
1997 and 1998, respectively. For additional information, see
Note 14 of Notes to Consolidated Financial Statements.
Stock Repurchase Authorization
Delta's Board of Directors has authorized the Company to
repurchase up to 24.7 million shares of Common Stock and
Common Stock equivalents. Under this authorization, the
Company may repurchase up to 6.2 million of these shares
before October 30, 1997 - the date the initial stock option
grants under the broad-based stock option plans become
exercisable - and repurchase the remaining shares as Delta
personnel exercise their stock options under these plans.
26
Repurchases are subject to market conditions and may be
made on the open market or in privately negotiated trans-
actions. Through June 30, 1997, the Company repurchased
6.2 million shares of Common Stock for $445 million
under this authorization. For additional information, see
Note 15 of Notes to Consolidated Financial Statements.
Compensation and Benefits Enhancement
The Company has announced compensation and benefit
enhancements for its non-contract domestic employees,
effective July 1, 1997. These changes are expected to increase
Delta's salary and related expense by approximately $180 mil-
lion in fiscal 1998. This estimate is a forward-looking state-
ment that involves a number of risks and uncertainties that
could cause the actual results to differ materially from the
projected results. See Forward-Looking Information below.
Year 2000 Computer Issue
Many computer systems in use today were designed and devel-
oped using two digits, rather than four, to specify the year. As
a result, such systems will recognize the year 2000 as "00'.' This
could cause many computer applications to fail completely or
to create erroneous results unless corrective measures are taken.
The Company utilizes software and related computer
technologies essential to its operations that will be affected
by the Year 2000 issue. Delea is studying what actions will
be necessary to make its computer systems Year 2000 com-
pliant. The expense associated with these actions cannot
presently be determined, but could be material.
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 traf-
fic that improve the passenger mile yield, Delta's operating
results will be adversely affected.
Transportation Excise Taxes
Effective October 1, 1997, the Taxpayer Relief Ace imposes
certain new taxes and modifies certain existing taxes on the
aviation industry. Among other things, the new law ( 1)
imposes a new $1 per passenger per domestic flight segment
tax, which increases in stages to $3 by January 1, 2002 and is
indexed to changes in the Consumer Price Index beginning
January 1, 2003; (2) increases the existing $6 per passenger
international departure tax to $ 12 per passenger ( which is
indexed to changes in the Consumer Price Index beginning
January 1, 1999) for each international arrival and departure;
DELTA AIR LI NES
(3) imposes a new 7. 5 % tax on payments to air carriers for fre-
quent flyer miles; and ( 4) reduces the passenger ticket tax on
domestic air transportation from the current 10% to 9%,
which declines to 7.5% by October 1, 1999. The impact of
these modifications on Delta cannot presently be determined.
Environmental and Legal Contingencies
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 finan-
cial 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 consoli-
dated financial condition, results of operations or liquidity.
For additional information, see Note 12 of Notes to Con-
solidated Financial Statements.
Realignment of Delta's Transatlantic
and European Operations
During fiscal 1997, the Company implemented a series of
actions to strengthen its transatlantic and European oper-
ations. These actions included increasing the Company's
operations at New York-Kennedy International Airport and
decreasing its operations at Frankfurt, Germany. The Com-
pany recorded pretax restructuring and other non-recurring
charges of $52 million during the March 1997 quarter related
to this realignment. See Note 16 of Notes to Consolidated
Financial Statements. Delta expects these actions will improve
its system operating income by approximately $62 million
a year. The projected improvement in system operating
income is a forward-looking statement that involves a num-
ber of risks and uncertainties that could cause the actual
results to differ materially from the projected results. See
Forward-Looking Information below.
Forward-Looking Information
Delta and its representatives may make forward-looking state-
ments about the Company and its business from time to time,
either orally or in writing. These forward-looking statements
involve a number of risks and uncertainties that could cause
the actual results to differ materially from the projected
results. It is not possible to list all of the many factors and
events that could cause the actual results to differ materially
from the projected results. Such factors and events may
include, but are not limited to, (1) competitive factors such as
the airline pricing environment and the capacity decisions of
other airlines; (2) general economic conditions; (3) changes in
jet fuel prices; (4) fluctuations in foreign currency exchange
rates; (5) actions by the United States and foreign govern-
ments; and ( 6) the willingness of customers to travel.
New Accounting Standards
Effective July 1, 1996, Delta adopted the disclosure require-
ments of Statement of Financial Accounting Standards
No. 123, "Accounting for Srock-Based Compensation"
(SFAS 123). SFAS 123 encourages, but does not require,
the use of a fair value based method of accounting for stock-
based compensation plans under which the fair value of stock
options is determined on the date of grant and expensed over
the vesting period. Delta has elected to continue to measure
compensation expense for stock-based compensation plans
as prescribed under Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25).
Companies that continue to apply APB 25 are required to
include in the notes to financial statements pro forma disclo-
sure of net income and income per share as if the fair value
method prescribed under SFAS 123 had been applied. See
Note 14 of Notes to Consolidated Financial Statements.
In March 1997, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Stan-
dards No. 128, "Earnings per Share" (SFAS 128), which estab-
lishes new standards for computing and presenting income
per share data. SFAS 128, which is effective for financial
statements issued for periods ending aft-er December 15,
1997, requires restatement of all prior-period income per
share data presented. The adoption of SFAS 128 is not
expected to have a material impact on the Company's income
per share data.
In June 1997, the FASB issued State~ent of Financial
Accounting Standards No. 130; "Reporting Comprehensive
Income" (SFAS 130), which establishes standards for display-
ing comprehensive income and its components in a full set
of general-purpose financial statements. SFAS 130 is effective
for fiscal years beginning after December 15, 1997.
Also in June 1997, the FASB issued Statement of Finan-
cial Accounting Standards No. 131, "Disclosures about Seg-
ments of an Enterprise and Related Information" (SFAS 131).
SFAS 131 establishes standards for reporting information
about operating segments in annual financial statements
and requires reporting selected information about operat-
ing segments in interim financial reports issued to .
share-
holders. SFAS 131 is effective for fiscal years beginning
afterDecember 15, 1997.
27
1 99 7 A NNU AL R E P O R T
Consolidated Balance Sheets
JUNE 30, 1997 AND 1996
D ELTA AIR LINES, INC.
Assets
(In Millions)
Current Assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance for uncollectible accbunts of
$48 at June 30, 1997 and $44 at June 30, 1996
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
Total property and 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
$92 at June 30, 1997 and $84 at June 30, 1996
Leasehold and operating rights, net of accumulated amortization of
$199 at June 30, 1997 and $183 at June 30, 1996
Other
Total other assets
Total assets
28
DELTA A IR LI NES
1997 1996
$ 662 $ 1,145
508 507
943 968
413 352
341 310
2,867 3,282
9,619 8,202
3,510 3,235
6,109 4,967
523 515
176 127
347 388
3,032 2,697
1,758 1,532
1,274 1,165
312 275
8,042 6,795
432 473
103 415
317 266
257 265
134 140
589 590
1,832 2,149
$12,741 $12,226
Liabilities and Shareholders' Equity 1997 1996
(In Millions, Except Share Data)
Current Liabilities:
Current maturities of long-term debt $ 236 $ 40
Current obligations under capital leases 62 58
Accounts payable and miscellaneous accrued liabilities 1,691 1,540
Air traffic liability 1,418 1,414
Accrued rent 213 201
Accrued salaries and vacation pay 463 385
Total current liabilities 4,083 3,638
Noncurrent Liabilities:
Long-term debt 1,475 1,799
Postretirement benefits 1,839 1,796
Accrued rent 602 616
Capital leases 322 376
Other 406 425
Total noncurrent liabilities 4,644 5,012
Deferred Credits:
Deferred gain on sale and leaseback transactions 746 802
Manufacturers' and other credits 105 96
851 898
Commitments and Contingencies (Notes 7, 8, 9 and 12)
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 6,668,248 shares at June 30, 1997
and 6,738,740 shares at June 30, 1996 480 485
Unearned compensation under employee stock ownership plan (324) (347)
156 138
Shareholders' Equity:
Series C Convertible Preferred Stock, $1.00 par value, $50,000 liquidation
preference; issued and outstanding 13,978 shares at June 30, 1996 - -
Common Stock, $3.00 par value; authorized 150,000,000 shares; issued
83,645,047 shares at June 30, 1997 and 72,265,994 shares at June 30, 1996 251 217
Additional paid-in capital 2,645 ' 2,627
Retained earnings (accumulated deficit) 711 (119)
Net unrealized gain on noncurrent marketable equity securities 101 126
Treasury stock at cost, 9,949,060 shares at June 30, 1997 and
4,487,888 shares at June 30, 1996 (701) (311)
Total shareholders' equity 3,007 2,540
Total liabilities and shareholders' equity $12,741 $12,226
The accompanying notes are an integral part of these Consolidated Balance Sheets.
29
1 99 7 ANNUAL R E P RT
Consolidated Statements of Operations
FOR THE YEARS ENDED J UNE 30, 1997, 1996 AND 1995
D ELTA AIR LINES, INC.
(In Millions, Except Per Share Data)
Operating Revenues:
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
Aircraft maintenance materials and outside repairs
Passenger service
Facilities and other rent
Landing fees
Restructuring and other non-recurring charges
Other
Total operating expenses
Operating Income
Other Income (Expense):
Interest expense
Interest capitalized
Interest income
Miscellaneous expense, net
Income Before Income Taxes and Cumulative Effect of Accounting Change
Income Taxes Provided, Net
Income Before Cumulative Effect of Accounting Change
Cumulative Effect of Accounting Change, Net of Tax
Net Income
Preferred Stock Dividends
Net Income Available To Common Shareholders
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
The accompanying notes are an integral part of these consolidated statements.
30
D E L T A A IR LI N ES
1997
$12,505
554
531
13,590
4,444
1,723
1,016
751
710
677
547
434
389
386
256
52
675
12,060
1,530
(207)
33
61
(2)
(115)
1,415
(561)
854
-
854
(9)
$ 845
$ 11.30
-
$ 11.30
$ 11.01
-
$ 11.01
1996 1995
$11,616 $11,319
521 565
318 310
-
12,455 12,194
4,206 4,354
1,464 1,370
1,042 1,195
704 556
634 622
594 618
555 671
376 430
368 443
379 436
248 266
829 -
593 572
11,992 11,533
463 661
(269) (292)
26 30
86 95
(30) -
(187) (167)
276 494
(120) (200)
156 294
- 114
156 408
(82) (88)
$ 74 $ 320
$ 1.42 $ 4.07
- 2.25
$ 1.42 $ 6.32'
$ 1.42 $ 4.01
- 1.42
- -
$ 1.42 $ 5.43
Consolidated Statements of Cash Flows
FOR THE YEARS ENDED J UNE 30, 1997, 1996 AND 1995
D ELTA A.IR LINES, INC.
(In M illions)
Cash Flows From Operating Activities:
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Cumulative effect of accounting change
Restructuring and other non-recurring charges
Depreciation and amortization
Deferred income taxes
Rental expense less than rent payments
Pension, postretirement and postemployment expense in excess
of (less than) payments
Changes in certain current assets and liabilities:
Decrease (increase) in accounts receivable
Decrease (increase) in prepaid expenses and other current assets
Increase (decrease) in air traffic liability
Increase (decrease) in other payables and accrued expenses
Other, net
Net cash provided by operating activities
Cash Flows From Investing Activities:
Property and equipment additions:
Flight equipment, including advance payments
Ground property and equipment
Decrease (increase) in short-term investments, net
Proceeds from sale of flight equipment
Debtor-in-possession loan repayment
Net cash used in investing activities
Cash Flows From Financing Activities:
Payments on long-term debt and capital lease obligations
Cash dividends
Issuance of Common Stock
Repurchase of Common Stock
Net cash used in financing activities
Net Decrease In Cash and Cash Equivalents
Cash and cash equivalents at beginning of fiscal year
Cash and cash equivalents at end of fiscal year
The accompanying notes are an integral part of these consolidated statements.
31
1 99 7 ANNUAL REPORT
$
$
1997 1996 1995
854 $ 156 $ 408
- - (114)
52 829 -
710 634 622
240 (57) 96
(58) (32) (9)
92 (67) -
25 (213) 131
(31) (47) 28
4 271 (104)
186 (91) (20)
(35) 8 76
2,039 1,391 1,114
(1,598) (639) (458)
(350) (297) (168)
(1) 22 (121)
8 26 137
- - 115
(1,941) (888) (495)
(196) (440) (572)
(44) (120) (120)
38 35- 4
(379) (66) -
(581) (591) (688)
(483) (88) (69)
1,145 l,_
233 1,302
662 $1,145 , $1,233
Consolidated Statements of Shareholders' Equity
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
D ELTA AIR LINES, INC.
Common
(In Millions, Except Share Data) Stock
Balance at June 30, 1994 $163
Fiscal Year 1995:
Net income
Dividends on Series C Convertible Preferred Stock
Dividends on Common Stock ($0.20 per share)
Dividends on Series B ESOP Convertible
Preferred Stock allocated shares
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) 1
Transfer of 295,126 net shares of Common Stock
from treasury under ESOP and stock incentive
plan ($67.75 per share)
Net unrealized gain on marketable equity securities
Balance at June 30, 1995 164
Fiscal Year 1996:
Net income
Dividends on Series C Convertible Preferred Stock
Dividends on Common Stock ($0.20 per share)
Dividends on Series B ESOP Convertible
Preferred Stock allocated shares
Issuance of 719,562 shares of Common Stock under
dividend reinvestment and stock purchase plan
and stock options ($58.15 per share) 2
Issuance of 6,861,377 shares of Common Stock on
conversions of Series C Preferred Stock ($64.37 per share) 21
Issuance of 10,147,952 shares of Common Stock on
conversions of 3.23% Convertible
Subordinated Notes ($61.17 per share) 30
Transfer of 176,794 net shares of Common Stock
from treasury under ESOP and stock incentive
plan ($67.77 per share)
Repurchase of 821,300 common shares ($80.00 per share)
Net unrealized gain on marketable equity securities and other
Balance at June 30, 1996 217
Fiscal Year 1997:
Net income
Dividends on Common Stock ($0.20 per share)
Dividends on Series B ESOP Convertible
Preferred Stock allocated shares
Issuance of 748,492 shares of Common Stock under
dividend reinvestment and stock purchase plan
and stock options ($65.22 per share) 2
Issuance of 10,629,465 shares of Common Stock on
conversions of Series C Preferred Stock ($64.38 per share) 32
Repurchase of 5,378,700 common shares ($70.53 per share)
Net unrealized loss on marketable equity securities and other
Balance at June 30, 1997 $251
Additional
Paid-In
Capital
$2,013
3
2,016
40
(21)
592
2,627
47
(32)
3
$2,645
The accompanying notes are an integral part of these consolidated statements.
32
DELTA A[R L I NE S
Unrealized
Retained Gain (Loss)
Earnings on Equity Treasury
(Deficit) Securities Stock Total
$(490) $ 53 $(272) $1,467
408 408
(80) .(80)
(10) (10)
(8) (8)
4
(4) 20 16
30 30
(184) 83 (252) 1,827
156 156
(74) (74)
(10) (10)
(8) (8)
(5) 37
622
1 12 13
(66) (66)
43 43
(119) 126 (311) 2,540
854 854
(15) (15)
(9) (9)
(7) 42
(379) (379)
(25) (4) (26)
$ 711 $101 $(701) $3,007
Notes to Consolidated Financial Statements
JUNE 30, 1997, 1996 AND 1995
D ELTA AIR LINES, INC.
1. Summary of Significant Accounting Policies
Nature of Business - Delta Air Lines, Inc. (a Delaware cor-
poration) is a major air carrier providing scheduled air trans-
portation for passengers, freight and mail over a network
of routes throughout the United States and abroad. At
August 15, 1997, Delta served 149 domestic cities in 42
states, the District of Columbia, Puerto Rico and the U.S.
Virgin Islands, as well as 41 cities in 25 foreign countries.
Basis of Presentation - The consolidated financial state-
ments 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 year financial
statement presentation.
Use of Estimates - The Company follows generally accepted
accounting principles ( GAAP). The preparation of finan-
cial statements in conformity with GAAP requires man-
agement 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 invest-
ments in the following companies are accounted for under the
equity method: WORLDSPAN, LP. (WORLDSPAN), a
computer reservations system partnership; ASA Holdings, Inc.
(ASA), the parent of Atlantic Southeast Airlines, Inc.; Comair
Holdings, Inc. (Comair), the parent of Comair, Inc.; and
SkyWest, Inc. (SkyWest), the parent of SkyWest Airlines, Inc.
Atlantic Southeast Airlines, Inc., Comair, Inc., and SkyWest
Airlines, Inc. are participants in the Delta Connection pro-
gram. (See Note 3.)
Accounting Changes - During fiscal 1997, the Company
adopted the disclosure requirements of Statement of Finan-
cial Accounting Standards No. 123, ''Accounting for Stock-
Based Compensation" (SFAS 123). (See Note 14.) During
fiscal 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, ''Accounting for the Impair-
ment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" (SFAS 121). (See Note 16.) During fiscal 1995,
the Company adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemploy-
ment Benefits" (SFAS 112). (See Note 10.)
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 invest-
ments. These investments are classified as available-for-sale
under Statement of Financial Accounting Standards No. 115,
''Accounting for Certain Investments in Debt and Equity Secu-
rities" (SFAS 115), 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. in December 1986. The Company
periodically reviews the value assigned to goodwill to determine
whether there exists any impairment, as defined by SFAS 121.
Management believes that goodwiU is appropriately valued.
Leasehold and Operating Rights - Costs assigned to the
purchase of leasehold rights and landing slots are amor-
tized over the lives of the respective leases at the 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 lease-
hold rights, landing slots and route authorities to deter-
mine if there exists any impairment, as defined by SFAS
121. Management believes that leasehold rights, landing
slots and route authorities are appropriately valued.
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.
33
1 997 ANNUAL R E PORT
N o t es to C o n so I i d ate d Fi n a n c i a I St ate m e n ts continued
JUNE 30, 1997, 1996 AND 1995
D ELTA AIR LINES, INC.
Manufacturers' Credits - In connection with the acquisition
of certain aircraft and engines, the Company receives cer-
tain 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 flight equipment.
Frequent Flyer Program - The Company accrues the esti-
mated 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 participat-
ing partners in the SkyMiles program such as hotels, car
rental agencies and credit card companies. The resulting rev-
enue 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 Consoli-
dated Balance Sheets. Passenger and cargo revenues are
recognized when the transportation is provided, reducing
the air traffic liability. Due to interline agreements through-
out the industry, certain amounts are recognized in rev-
enue 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 pur-
chases seats from and sells seats to these airlines, with each
airline separately marketing its respective seats. The revenue
from Delta's sale of code-sharing seats purchased from and
flown by other airlines is reported in the Company's Con-
solidated Statements of Operations as other operating rev-
enue, 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-shar-
ing 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 ser-
vice ( unless earlier retirement of the aircraft is planned).
34
Flight equipment under capital leases is amortized on a
straight-line basis over the term of the respective leases,
which range from 4 to 11 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-1011 fleet (see Note 16), the remaining deprecia-
ble lives of these aircraft have been adjusted.
Interest Capitalized - Interest attributable to funds used
to finance the acquisition of new aircraft and construc-
tion of major ground facilities is capitalized as an addi-
tional 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.
Income Per Share - Primary income per common share is
computed by dividing net income available to common
shareholders by the weighted average number of shares of
Delta Common Stock (Common Stock) and, if dilutive, Com-
mon Stock equivalents outstanding during the year. Common
Stock equivalents consist of the shares issuable upon exer-
cise of outstanding stock options less the number of shares
deemed to be repurchased under application of the trea-
sury stock method. The weighted average number of shares
of Common Stock and dilutive Common Stock equivalents
outstanding used to compute primary income per com-
mon share was 74,786,5 17 for fiscal 1997; 52, 101,152 for
fiscal 1996; and 50,657,613 for fiscal 1995.
Fully diluted income per common share is computed
by dividing net income available to common shareholders
(adjusted for conversion of any Convertible Preferred Stock
and convertible debt instruments outstanding during the
year) by the weighted average number of shares of Common
Stock, Common Stock equivalents outstanding during the
year (if dilutive) and Common Stock that would be issued
upon the conversion of any Convertible Preferred Stock and
convertible debt instruments outstanding during the year.
The weighted average number of shares of Common Stock
used to compute fully diluted income per common share was
77,087,619 for fiscal 1997; 52,101,152 for fiscal 1996; and
80,118,720 for fiscal 1995. (See Notes 11, 13, 14 and 15.)
D E LTA A I R LI NES
Foreign Currency Translation -Assets and liabilities denomi-
nated in foreign currencies are translated generally at exchange
rates in effect at the balance sheet date, except fixed assets which
are translated at exchange rates in effect when these assets are
acquired. The resulting foreign exchange gains and losses are
recognized as a component of miscellaneous income (expense).
Revenues and expenses of foreign operations are translated at
average monthly exchange rates prevailing during the year,
except depreciation and amortization charges are translated at
the exchange rates in effect when the related assets were acquired.
Stock-Based Compensation- The Company accounts for its
stock-based compensation plans in accordance with Account-
ing Principles Board Opinion No. 25, ''Accounting for Stock
Issued to Employees" (APB 25). Under APB 25, no compen-
sation expense is recognized for a stock option grant if the
exercise price of the stock option at measurement date is equal
to or greater than the fair market value of the Common Stock
on the date of grant. (See Note 14.)
Advertising Costs - Advertising costs are expensed when
incurred and are included as a component of other selling
expense. Advertising expense for fiscal 1997, 1996 and 1995
was $121 million, $109 million and $178 million, respectively.
2. Investments in Debt and Equity 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 under
SFAS 115, and are recorded at aggregate market value. At
June 30, 1997 and 1996, the gross unrealized gain on the
Company's investment in Singapore Airlines was $134 mil-
lion and $190 million, respectively, and the gross unrealized
gain on the Company's investment in Swissair was $32 mil-
lion and $16 million, respectively. The $101 million and
$126 million unrealized gains, net of the related deferred tax
provision, on these combined investments at June 30, 1997
and 1996, respectively, are reflected in shareholder/ equity.
Delta's right to vote, to transfer or to acquire additional
shares of the stock of Singapore Airlines and Swissair is sub-
ject to certain restrictions.
Delta's other investments in available-for-sale securities
are recorded as short-term investments in the Company's
Consolidated Balance Sheets. At June 30, 1997, these
investments consisted of government agency debt (23%)
and corporate debt securities (77%) with average stated
maturities of 4 months and 6 months, respectively.
During fiscal 1997, 1996 and 1995, the proceeds from
sales of available-for-sale securities were $610 million,
$626 million and $926 million, respectively, which resulted
in a realized gain of less than $1 million for fiscal 1997, and
realized losses of $1 million and $4 million for fiscal 1996
and 1995, respectively. The unrealized losses on these
investments were less than $1 million and were reflected in
shareholders' equity at June 30, 1997 and 1996, respec-
tively. Interest income was $27 million, $33 million and
$31 million from these investments for fiscal 1997, 1996
and 1995, respectively.
3. Investments in Associated Companies
The Company's percentage ownership and quoted market
value (where applicable) of its investment in associated com-
panies at June 30, 1997, and equity earnings (losses) for fiscal
1997, 1996 and 1995, were as follows:
Percentage
Investment Ownership
WORLDSPAN 38%
ASA 27
Comair 21
SkyWest 15
Quoted
Market
Value
(In Millions)
NIA
$229
259
24
Equity Earnings
(Losses)
1997 1996 1995
(In Millions)
$23 $ (5) $ (4)
15 13 12
16 13 6
2 1 2
--
WORLDSPAN provides certain computer reserva-
tions services to Delta. Delta provides certain communica-
tions, information processing and administrat~ve services
to WORLDSPAN.
On June 26, 1996, Delta and NCR Corporation (for-
merly AT&T Global Information Solutions Company)
announced an agreement to discontinue the TransQuest
partnership. Effective July 1, 1996, the partnership ended and
TransQuest, Inc. was formed as a wholly owned subsidiary
of Delta. TransQuest, Inc. provides information technology
. services to Delta. Delta's equity losses related to its 50%
ownership in the TransQuest partnership were $8 million for
fiscal 1996 and $3 million for fiscal 1995.
35
1 997 ANNUAL R EPO RT
N o t es to C o n s o I i d ate d Fi n a n c i a I St ate m e n ts continued
JUNE 30, 1997, 1996 AND 1995
D ELTA AIR LINES, INC.
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 and accounts
receivable, net approximate fair values at June 30, 1997 and
1996. Short-term investments classified as available-for-sale
are recorded at fair value in accordance with SF.AS 115.
(See Note 2.)
The fair values and carrying values of long-term debt,
including current maturities, at June 30, 1997 and 1996,
were as follows:
(In Billions)
Fair value
Carrying value
1997
$1.8
1.7
1996
$2.0
1.8
These values are based on quoted market prices, where
available, or discounted cash flow analyses. T he carrying
values of all other financial instruments approximate their
fair values.
Off-Balance-Sheet Financial Instruments: Risks and Fair
Values - Fuel Price Risk Management - Under its fuel
hedging program, the Company may enter into certain con-
tracts 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 under-
lying fuel being hedged is used. Any premiums paid to enter
into hedging contracts are recorded as a prepaid expense and
amortized to fuel expense over the respective contract periods.
At June 30, 1997, Delta had contracted for approximately
441 million gallons of its projected fiscal 1998 fuel require-
ments. At June 30, 1997, the fair value of option contracts
used for purchases of jet fuel at fixed average prices was imma-
terial. The Company is exposed to fuel hedging transaction
losses in the event of non-performance by counterparties,
but management does not expect any counterparty to fail
to meet its obligations.
Foreign Exchange Risk Management - 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 approximately $29 million at June 30, 1997. Gains and
36
losses resulting from foreign exchange forward contracts are
recognized as a component of miscellaneous income (expense),
offsetting the foreign currency gains and losses resulting from
translation of the Company's assets and liabilities denomi-
nated in foreign currencies.
Credit Risks - To manage credit risk associated with its fuel
price risk and foreign exchange risk management pro-
grams, the Company selects counterparties based on their
credit ratings, limits its exposure to any one counterparty
under defined guidelines, and monitors the market posi-
tion of the program and its relative market position with
each counterparty.
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 agree-
ments, 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 ser-
vices 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 it is subject to any sig-
nificant concentration of credit risk.
5. Miscellaneous Expense, Net
Miscellaneous expense, net for fiscal 1997, 1996 and 1995
consisted of:
(In Millions) 1997 1996 1995
Equity earnings from
associated companies $ 56 $ 14 $ 13
Foreign exchange gains (losses) (7) (15) 12
Losses on repurchase of debt (8) (1 8) (4)
Travel agency litigation settlement (20) - -
Ocher (23) (11) (21)
Total miscellaneous
expense, net $ (2) $(30) $ -
DELTA A I R L I NES
6. Income Taxes
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabil-
ities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities as of June 30,
1997 and 1996 are a result of temporary differences related
to the items described below:
(In Millions) 1997 1996.
Deferred Tax Assets:
Postretirement benefits $ 741 $ 724
Alternative minimum tax credit carryforwards 216 354
Gains on sale and leaseback transactions (net) 302 336
Other employee benefits 261 232
Rent expense 212 202
Spare parts repair expense 122 114
Tax accruals 56 43
Frequent flyer expense 48 40
Accrued compensation expense 67 36
Other 108 98
Total Deferred Tax Assets $2,133 $2, 179
Deferred Tax Liabilities:
Depreciation and amortization $1,239 $1,083
Postemployment benefits 80 82
Marketable equity securities 65 81
Software development costs 62 58
Employee Stock Ownership Plan 39 73
Other 132 35
Total Deferred Tax Liabilities $1,617 $1,412
The alternative minimum tax credit carryforwards do
not expire.
Based on the Company's earnings history, expectations
of 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 future taxable income will be suf-
ficient to fully utilize the deferred tax assets which existed
at June 30, 1997.
Income taxes provided in fiscal 1997, 1996 and 1995
consisted of:
(In Millions) 1997 1996 1995
Current taxes $(321) $(177) $(104)
Deferred taxes (244) 54 (99)
Tax benefit of dividends on
allocated Series B ESOP
Convertible Preferred Stock 4 3 3
Income taxes provided $(561) $(120) $(200)
The income tax provisions generated for fiscal 1997,
1996 and 1995 differ from amounts which would result
from applying the federal statutory tax rate to pretax
income, as follows:
(In Millions) 1997 1996 1995
Income before income taxes $1,415 $ 276 $ 494
Items not deductible for tax purposes:
Meals and entertainment 36 36 41
Amortization 9 9 9
Other, net (14) (8) 3
Adjusted pretax income 1,446 313 547
Federal statutory tax rate 35% 35% 35%
Income tax provision at statutory rate (506) (110) (191)
State and other income taxes, net
of federal income tax provision (55) (10) (9)
Income taxes provided $ (561) $(120) $(200)
The Company made income tax payments, net of
income tax refunds, of $336 million in fiscal 1997, $192
million in fiscal 1996 and $25 million in fiscal 1995.
37
1 99 7 ANNUAL R E PORT
N o t es to Co n so I i d ate d Fi n a n c i a I St ate m e n ts continued
JUNE 30, 1997, 1996 AND 1995
DELTA AIR LINES, INC.
7 Long-Term Debt
At June 30, 1997 and 1996, the Company's long-term
debt (including current maturities) was as follows:
{In Millions)
9
% Notes, unsecured, due January 1, 1998 $
1997 1996
207 $ 220
Medium-Term Notes, Series A and B, unsecured, interest rates ranging from
7.55% to 9.15% and with maturities ranging from 1998 to 2007 157 196
9
% Notes, unsecured, due May 15, 2000 142 142
8
% Notes, unsecured, due March 15, 2002 71 71
8.10% Series C Guaranteed Serial ESOP Notes, unsecured, payable in installments between 2002 and 2009 290 290
Development Authority of Fulton County, unsecured loan agreement, repayable $10 million on November 1, 2007
and $20 million on November 1, 2012. Interest ranges from 6.85% to 6.95% O\;er the life of the loan 30 30
10% Debentures, unsecured, due May 15, 2010 113 113
10%
% Debentures, unsecured, due February 1, 2011 176 176
9% Debentures, unsecured, due May 15, 2016 102 126
Development Authority of Clayton County, 7
0
io unsecured loan agreement, repayable on January 1, 2020 45 45
9
% Debentures, unsecured, due May 15, 2021
9
% Debentures, unsecured, due March 15, 2022
10%
% Debentures, unsecured, due December 15, 2022
Other, net
Total
Less: Current maturities
Total long-term debt
During fiscal 1997 and 1996, respectively, the Com-
pany voluntarily repurchased and retired $88 million and
$224 million principal amount of its long-term debt. As a
result of these transactions, the Company recognized net
pretax losses of $8 million and $18 million, respectively,
which are included in miscellaneous expense, net in the
Company's Consolidated Statements of Operations.
On May 2, 1997, the Company and a group of banks
entered into the 1997 Bank Credit Agreement and termi-
nated the 1995 Bank Credit Agreement. The 1997 Bank
Credit Agreement provides for unsecured borrowings by
the Company of up to $1.25 billion on a revolving basis
until May 1, 2002. Up to $700 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 sub-
ject 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 1997 Bank Credit Agree-
ment contains certain negative covenants that restrict the
Company's ability to grant liens, incur or guarantee debt
and enter into flight equipment leases. It also provides that if
38
251 25 1
64 116
66 66
(3) (3)
1,71 1 1,839
236 40
$1,475 $1,799
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 August 15, 1997, no borrowings or letters of credit were
outstanding under the 1997 Bank Credit Agreement.
At June 30, 1997, there were outstanding $290 million
principal amount of the Delta Family-Care Savings Plan's
Series C Guaranteed Serial ESOP Notes (Series C ESO P
Notes), which are guaranteed by Delta. The Series C ESO P
Notes, which were issued pursuant to certain note purchase
agreements, are payable in installments between July 1, 2002
and January 1, 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
D E LTA AI R L I NES
higher by Moody's and A- or higher by Standard & Poor's
(Required Ratings). If Delta 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 is based on, among other factors,
the yield to maturity of U.S. Treasury notes having matu-
rities 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 1 \ 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 then exist-
ing 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) which, as amended, pro-
vides for the issuance ofletters of credit for up to $500 mil-
lion 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 sim-
ilar to those contained in the 1997 Bank Credit Agreement.
In the event of any drawing under the Letter of Credit
Facility, Delta is required, at its election, (1) 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 its then existing Bank
Credit Agreement to credit enhance the Series C ESOP
Notes. The Letter of Credit Facility expires June 6, 2000.
At August 15, 1997, the face amount of the letter of
credit issued under the Letter of Credit Facility was $450 mil-
lion. It covers the $290 million outstanding principal amount
of the Series C ESOP Notes, up to $128 million of Make
Whole Premium Amount and approximately one year of
interest on the Series C ESOP Notes.
An Indenture ofTrust, dated August 1, 1993 (Indenture),
among Delta, the Trustee, and Fidelity Management Trust
Company, as ESOP trustee, contains certain terms and con-
ditions 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. 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 (1) 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 expi-
ration date; (3) Delta elects to terminate the letter of credit;
or (4) the Trustee receives notice there has occurred an event
of default under the credit agreement relating to the letter of
credit; unless, generally within 10 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 confir-
mation, by Moody's and Standard & Poor's. Circumstances
that might cause either rating agency to lower or fail to con-
firm 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 least
A3 by Moody's and A- by Standard & Poor's. On August 15,
1997, Delta's long-term senior unsecured debt was rated Baa3
by Moody's and BB+ by Standard & Poor's.
39
1 99 7 ANNUAL R E P ORT
Notes to Conso I idated Fi nanc i a I Statements continued
JUNE 30, 1997, 1996 AND 1995
D ELTA AIR LINES, INC.
At June 30, 1997, the annual scheduled maturities of
long-term debt during the next five fiscal years were as follows:
Years Endin une 30 Amount
(In Millions)
1998 $236
1999 67
2000 142
2001
2002 75
The Company's debt agreements contain certain restric-
tive covenants, but do not limit the payment of dividends on
the Company's capital stock. The terms of the Series B ESOP
Convertible Preferred Stock limit the Company's ability to
pay cash dividends on the Common Stock in certain circum-
stances. (See Note 13.)
Cash payments of interest, including interest on the
Series C ESOP Notes and net of interest capitalized, totaled
$171 million in fiscal 1997; $232 million in fiscal 1996;
and $238 million in fiscal 1995.
8. Lease Obligations
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 were $0.9 billion in fiscal 1997
and fiscal 1996 and $1.1 billion in fiscal 1995.
At June 30, 1997, the Company's minimum rental
commitments under capital leases and noncancelable oper-
ating leases with initial or remaining terms of more than
one year were as follows:
Years Endin une 30
1998
1999
2000
2001
2002
After 2002
Total minimum lease payments
Present value of future minimum
capital lease payments
Less: Current obli ations under ca ital leases
Long-term capital lease obligations
Capital Operating
Leases Leases
(In Millions)
$101 $ 860
100
68
57
57
118
501
117
384
62
$322
860
840
830
850
9,780
$14,020
40
9. Purchase Commitments
Future expenditures for aircraft, engines and engine hush-
kits on firm order as of June 30, 1997 are estimated to be
$1.6 billion, as follows:
Years Ending June 30 Amount
(In Millions)
1998 $ 790
1999 320
2000 230
2001 200
2002 60
After 2002
Total $1,600
During the March 1997 quarter, Delta and The Boeing
Company (Boeing) reached an understanding which pro-
vides for Delta placing orders to purchase, and obtaining
options (which have scheduled delivery slots) and rolling
options (which replace options and are assigned delivery slots
as options expire or are exercised) to purchase, the follow-
ing aircraft types:
Aircraft Type
B-737-600/700/800
B-757-200
B-767-300ER
B-767-400
B-777-200
Orders
(Scheduled Fiscal
Years of Delivery)
70
( 1999-2007)
5
(1999)
10
(1998-1999)
21
(2000-2001)
Rolling
Options Options
60 280
20 90
10 19
24 25
10
The understanding is subject to certain conditions,
including the negotiation of mutually acceptable definitive
purchase agreements between Delta and Boeing. The under-
standing provides, subject to certain conditions, that Boeing
will be the provider of new aircraft for Delta for 20 years,
and that Delta may switch orders among these aircraft types
and defer firm orders. The understanding would also accel-
erate the delivery dates for certain of Delta's existing orders,
terminate all of Delta's existing options and cancel Delta's
remaining MD-90 orders.
DELTA A IR LINES
Future expenditures for aircraft, engines and engine hush-
kits on firm order as ofJune 30, 1997 (as modified by the accel-
erated delivery dates for, and cancellation of, certain of these
orders as provided for under Delta's understanding with
Boeing), and the aircraft orders provided for under Delta's
understanding with Boeing, are estimated to be approxi-
mately $5.9 billion, as follows:
Years Ending June 30 Amount
(In Millions)
1998 $1,179
1999 1,031
2000 278
2001 1,224
2002 295
After 2002 1,850
Total $5,857
In addition, at August 15, 1997, the Company had
authorized capital expenditures of approximately $345 mil-
lion for fiscal 1998 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 invest-
ments and internally generated funds, supplemented as
necessary by debt financings and proceeds from sale and
leaseback transactions.
The Company has entered into code-sharing agree-
ments under which it has agreed to purchase seats at estab-
lished prices from specific foreign airlines, subject to certain
conditions. None of these agreements has noncancelable
terms in excess of one year.
10. Employee Benefit Plans
The Company sponsors various pension plans, medical plans
and disability and survivorship plans for employees who
meet certain service and other requirements. In addition,
the Company sponsors the Savings Plan (See Note 11) in
which employees who meet certain service and other require-
ments may elect to participate.
During fiscal 1997, the Company changed the annual
measurement date for its employee benefit plan assets and lia-
bilities from June 30 to March 31. This change in measure-
ment date has been accounted for as a change in accounting
principle. The change in measurement date had no material
cumulative effect on employee benefit expense for prior years.
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 the
Employee Retirement Income Security Act of 1974 (ERISA).
The qualified defined benefit plans are funded, on a current
basis, to meet the minimum funding requirements ofERISA.
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 March 31, 1997 and June 30, 1996.
The expected long-term rate of return on assets was 10.0%
at March 31, 1997 and June 30, 1996.
The following table sets forth the defined benefit pen-
sion plans' funded status and amounts recognized for fiscal
1997 and 1996:
(In Millions) 1997 1996
Actuarial present value of benefit obligations:
Accumulated benefit obligation1 $6,122 $6,134
Projected benefit obligation $7,517 $7,368
Plan assets at fair value 7,447 7,170
Projected benefit obligation in .
excess of plan assets 70 198
Unrecognized net gain 326 195
Unrecognized transition obligation (63) (64)
Unrecognized prior service cost (29) (31)
Contributions made between
April 1, 1997 and June 30, 1997 (18) -
Accrued pension cost recognized in
the Consolidated Balance Sheets $ 286 $ 298
1 Substantially all of the accumulated benefit obligation is vested.
Plan assets were invested at June 30, 1997, approxi-
mately 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 (4%).
41
1 99 7 ANNUA L RE P ORT
N o t es to C o n so I i d ate d Fi n a n c i a I St ate m e n ts continued
JUNE 30, 1997, 1996 AND 1995
DELTA AIR LINES, INC.
Net periodic defined benefit pension cost for fiscal
1997, 1996 and 1995 included the following components:
(In Millions) 1997 1996 1995
Service cost - benefits earned
during the year $ 188 $ 225 $ 221
Interest cost on projected
benefit obligation 564 526 489
Actual return on plan assets (731) (1,194) (795)
Nee amortization and deferral 89 612 266
Nee periodic pension cost $ 110 $ 169 $ 181
The restructuring charges described in Note 16 include
an aggregate charge for fiscal 1996 of $298 million for costs
primarily associated with special termination benefits and
curtailment losses related to the defined benefit pension
plans due to workforce reductions.
Defined Contribution Pension Plans - In addition to the
Savings Plan described in Note 11, the Company sponsors
the Delta Pilots Money Purchase Pension Plan (MPPP) to
which the Company contributes 5% of covered pay for each
eligible pilot. The MPPP is a continuation of the Delta Pilots
Target Benefit Plan and is related to the Delta Pilots Retire-
ment Plan through a floor-offset arrangement whereby the
defined benefit pension payable to a pilot is subject to reduc-
tion by the actuarial equivalent of the accumulated account
balance in the MPPP. The Company's contributions to this
plan were $49 million and $2 million for fiscal 1997 and
1996, respectively.
Postretirement Benefits Other Than Pensions - Delta's med-
ical plans provide medical and dental benefits to substan-
tially 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.
42
Net periodic postretirement benefit cost for fiscal
1997, 1996 and 1995 included the following components:
(In Millions) 1997 1996 1995
Service cost - benefits earned
during the year $ 25 $ 32 $ 32
Interest cost on accumulated
postrecirement benefit obligation 115 118 118
Amortization of prior service cost (38) (31) (29)
Amortization of accumulated losses 1 4 4
- -
Net periodic postretirement
benefit cost $103 $123 $125
The accumulated postretirement benefit obligation
(APBO) for fiscal 1997 and 1996 consisted of the fol-
lowing components:
(In M illions) 1997 1996
Retirees and dependents $ 936 $ 928
Fully eligible participants 348 323
Ocher active participants 281 254
Total accumulated poscrecirement
benefit obligation 1,565 1,505
Unamortized prior service cost
(from plan changes) 426 464
Unrecognized net loss (76) (1 12)
Contributions made between
April 1, 1997 and June 30, 1997 (14) -
Accrued poscretirement benefit cost
in the Consolidated Balance Sheets $1,901 $1,857
The weighted average discount rate used to estimate the
APBO was 7.75% at March 31, 1997 and at June 30, 1996.
The assumed health care cost trend rate used in measuring
the APBO was 8.0% in fiscal 1997 and fiscal 1996, declin-
ing gradually to 4.25% by March 31, 2003, and remain-
ing level thereafter. Increasing the assumed health care cost
trend rate annually by 1 % for all future years would
increase the APBO as of March 31, 1997 by approximately
$142 million, and the net periodic postretirement benefit
cost by $13 million for fiscal 1997.
The restructuring charges described in Note 16 include
aggregate charges for fiscal 1996 of $32 million for costs .
primarily associated with special termination benefits and
curtailment losses related to postretirement benefits other
than pensions due to workforce reductions.
D E LTA A I R Ll NES
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 1, 1994, Delta adopted SPAS 112, which
requires recognition of the liability for postemployment bene-
fits during the period of employment. The adoption of SPAS
112 resulted in a cumulative after-tax transition benefit of $114
million in fiscal 1995, primarily due to the net overfunded sta-
tus of the Company's disability and survivorship plans. The
Company's postemployment benefit expense for fiscal years
1997, 1996 and 1995 was $71 million, $78 million and $85
million, respectively. The amount funded in excess of the liabil-
ity 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 insur-
ance 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.
11. Employee Stock Ownership Plan
The Company sponsors the Savings Plan, a qualified defined
contribution pension plan under which eligible Delta per-
sonnel may contribute a portion of their earnings. The Sav-
ings Plan includes an employee stock ownership plan
(ESOP) feature. Subject to certain conditions, the Company
contributes 50% of a participant's contributions to the Sav-
ings Plan, up to a maximum employer contribution of2% of
a participant's earnings. The Company's contributions are
made quarterly through the allocation of Series B ESOP
Convertible Preferred Stock, Common Stock or cash, and are
recorded as salaries and related costs in the Company's Con-
solidated Statements of Operations. Delta's total con.tribu-
tions to the Savings Plan were $45 million in fiscal 1997 and
fiscal 1996, and $47 million in fiscal 1995.
In connection with the adoption of the ESOP, the Com-
pany sold 6,944,450 shares of ESOP Preferred Stock to the
Savings Plan for approximately $500 million. The Company
has recorded unearned compensation to reflect 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' accounts, compensation expense
equal to the fair value of the ESOP Preferred Stock is recorded
and unearned compensation is reduced. Dividends on unallo-
cated shares ofESOP Preferred Stock are used by the ESOP
for debt service on the Series C ESOP Notes and are not con-
sidered dividends for financial reporting purposes. Dividends
on allocated shares of ESOP Preferred Stock are credited to
participants and considered dividends for financial report-
ing purposes. For purposes of computing primary and fully
diluted income per common share, allocated shares of ESO P
Preferred Stock are considered outstanding, but unallocated
shares of ESOP Preferred Stock are not.
12. Contingencies
The Company is a defendant in certain legal actions relat-
ing 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 certain-
ty and could have a material adverse effect on Delta's con-
solidated financial condition, results of operations or
liquidity, management presently believes that the resolu-
tion of these actions is not likely to have a material adverse
effect on Delta's consolidated financial condition, results of
operations or liquidity.
Delta's captive insuran:ce subsidiary has agreed to reim-
burse the primary insurers for losses under the Company's
aircraft hull and general liability insurance policies (Policies)
in an amount not to exceed $100 million per occurrence and
in the aggregate for the Policy year._
The obligations of the pri-
mary insurers to the insureds under the Policies are not limit-
ed or reduced in any way by this reimbursement obligation.
The reimbursement obligation of Delta's captive insur-
ance 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 reimbu'rse 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 liabili-
ties are periodically reviewed and adjusted as required.
43
l 99 7 ANNUA L R EP RT
N o t es to C o n so I i d ate d Fi n a n c i a I 5 tat e m e n ts continued
JUNE 30, 1997, 1996 AND 1995
D ELTA AIR LINES, INC.
13. Common and Preferred Stock
At June 30, 1997, 24,700,000 shares of Common Stock
were reserved for issuance under the Company's broad-
based employee stock option plans; 4,383,406 shares of
Common Stock were reserved for issuance under the 1989
Stock Incentive Plan; 5,720,023 shares of Common Stock
were reserved for conversion of the Series B ESOP Con-
vertible Preferred Stock; and 248,998 shares of Common
Stock were reserved for issuance under the Non-Employee
Directors' Stock Plan. In addition, 1,500,000 shares of pre-
ferred stock have been reserved for issuance under the
Shareholder Rights Plan.
On May 15, 1996, the Company gave notice that it
elected to redeem effective June 15, 1996 its 3.23%
Convertible Subordinated Notes due June 15, 2003
(Notes). Substantially all outstanding Notes were then
converted by the holders thereof into approximately 10
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 $626 million and shareholders'
equity increased by approximately the same amount in
the Company's Consolidated Balance Sheets. This trans-
action was treated as a noncash transaction in the Com-
pany's Consolidated Statement of Cash Flows for the
year ended June 30, 1996.
On October 24, 1996, Delta's Board of Directors adopted
a new Shareholder Rights Plan (Rights Plan) to replace the
rights plan that expired on November 4, 1996. The new
Rights Plan is designed to enhance the Board's ability to
protect shareholders against unsolicited attempts to acquire
Delta that do not offer an adequate price to all shareholders
or are otherwise not in the best interests of the Company
and its shareholders. Under the new Rights Plan, each out-
standing share of Common Stock is accompanied by a pre-
ferred stock purchase right which entitles the holder to
purchase from the Company 1/100 of a share of Series D
Junior Participating Preferred Stock for $300, subject to
adjustment in certain circumstances (Purchase Price). The
rights become exercisable only after a person or group acquires
beneficial ownership of 15% or more of the Common Stock
or commences a tender or exchange offer that would result
in such person or group beneficially owning 15% or more
of the Common Stock. The rights expire on November 4,
2006, and may be redeemed by Delta for $0.01 per right
44
until 10 business days following the announcement that a
person or group beneficially owns 15% or more of the Com-
mon Stock. Subject to certain conditions, if a person or group
becomes the beneficial owner of 15% or more of the Com-
mon Stock, each right will entitle its holder (other than
certain acquiring persons) to purchase, for the Purchase Price,
Common Stock having a market value of twice the Purchase
Price. In addition, subject to certain conditions, if Delta is
involved in a merger or certain other business combination
transactions, or the Company sells or otherwise transfers
more than 50% of its assets or earning power, each right
will entitle its holder to purchase, for the Purchase Price,
Common Stock of the other party having a market value of
twice the Purchase Price.
Each share of Series B ESOP Convertible Preferred Stock
(ESOP Preferred Stock) has a stated value of $72; bears an
annual cumulative cash dividend of 6%, or $4.32; is con-
vertible into 0.8578 shares of Common Stock (a conversion
price of $83.94), subject to adjustment in certain circum-
stances; 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 adjust-
ment 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 cumulative dividends on the ESOP Preferred
Stock have not been paid when due, Delta may not pay
cash dividends on the Common Stock.
14. Stock Options and Awards
Under its 1989 Stock Incentive Plan and a predecessor plan,
the Company has granted non-qualified stock options and,
prior to fiscal 1993, tandem stock appreciation rights (SARs)
to officers and other key employees. The exercise price for all
stock options, and the base price upon which the SARs are
measured, is the fair market value of Common Stock on the
date of grant. Awards exercised as SARs are payable in a
combination of cash and Common Stock. The Company
recognized compensation expense (included in salary and
related costs) related to SARs in fiscal 1997, 1996 and 1995
of $3 milli\m, $14 million and $9 million, respectively. Stock
options awarded will generally be exercisable beginning one
year, and ending 10 years, after their grant date.
DELTA A I R L I NES
On October 24, 1996, the Company's shareholders
approved two plans providing for the issuance of non-
qualified stock options to substantially all of Delta's non-offi-
cer personnel in their individual capacity to purchase a total
of 24.7 million shares of Common Stock. One plan is for
eligible Delta personnel who are not pilots (Nonpilot Plan);
the other plan covers the Company's pilots (Pilot Plan).
The Nonpilot and Pilot Plans involve non-qualified
stock options to purchase 14.7 million and 10 million shares
of Common Stock, respectively. The plans provide for grants
in three equal annual installments at an exercise price equal
to the opening price of the Common Stock on the New York
Stock Exchange on the grant date. Stock options awarded
under the plans are generally exercisable beginning one year
and ending 10 years after their grant dates, and are not
transferable other than upon the death of the person granted
the stock options. On October 30, 1996, Delta granted
eligible personnel non-qualified stock options to purchase
a total of 8.2 million shares of Common Stock at an exer-
cise price of $69 per share. The second and third grant dates
under the Nonpilot and Pilot Plans are scheduled to occur
on October 30, 1997 and 1998, respectively.
Transactions involving stock options and SARs during
fiscal 1997, 1996 and 1995 were as follows:
Fiscal 1997 Fiscal 1996 Fiscal 1995
Stock Options Shares
(000)
Outstanding at beginning of fiscal year 2,332
Granted 8,932
Exercised (1,279)
Expired -
Forfeited (84)
- - -
Outstanding at end of fiscal year 9,901
-
Stock options exercisable at fiscal year end 1,049
Weighted average grant-date fair value of
options granted during the fiscal year $ 17
The following table summarizes ,information about
stock options outstanding at June 30, 1997:
Stock Options Outstanding
Range of Number Weighted
Exercise Outstanding at Average
Prices June 30, 1997 Remaining Life
(000) (Years)
$52-68 530 7
$69-82 9,371 9
The Company accounts for its stock-based compensa-
tion plans in accordance with APB 25. During fiscal 1996,
the PinancialAccounting Standards Board issued SPAS 123.
SPAS 123 encourages, but does not require, the use of a fair
value based method of accounting for stock-based compen-
sation plans under which the fair value of stock options is
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Price Shares Price Shares Price
(000) (000)
$65 3,386 $63 3,015 $65
70 644 71 719 52
67 (1,654) 63 (79) 56
- - - (258) 67
75 (44) 65 (11) 66
- - - - -
69 2,332 65 3,386 63
- -
$63 1,698 $63 2,668 $66
$ 24 $ 22
Stock Options Exercisable
Weighted Number Weighted
Average Exercisable at Average
Exercise Price June 30, 1997 Exercise Price
{000)
$55 530 $55
$70 519 $72
determined on the date of grant and expensed over the vest-
ing period of the stock options. While the Company has
elected to continue to apply the provisions of APB 25,
SPAS 123 requires proforma disclosure of net income and
income per common share as if the fair value based method
under SPAS 123 had been adopted.
45
1 99 7 A NNUA L RE P ORT
N o t es to C o n s o I i d ate d Fi n a n c i a I St ate m e n ts continued
JUNE 30, 1997, 1996 AND 1995
DELTA AIR LINES, INC.
The pro forma net income and income per common
share amounts below have been derived using the Black-
Scholes stock option pricing model with the following
assumptions for each stock option grant during the respec-
tive fiscal year:
Assumptions
Risk-free interest rate
Expected life of stock option (Years)
Expected volatility of
Common Stock
Expected annual dividends on
Common Stock
Net income (In Millions):
As reported
Proforma
Primary income per common share:
As reported
Proforma
Stock Options
Granted in Fiscal Year
1997 1996
6.0% 5.4%
2.7 5.1
26.4% 26.5%
$0.20 $0.20
Fiscal Year Ended
June 30, June 30,
1997 1996
$ 854 $ 156
791 152
$11.30 $1.42
10.46 1.35
Fully diluted income per common share:
As reported $11.01 $1.42
Proforma 10.18 1.35
Under SF.AS 123, stock options granted prior to fiscal
year 1996 are not required to be included as compensation
in determining pro forma net income. Therefore, the pro
forma effects on net income and income per common share
for fiscal 1997 and 1996 may not be representative of the
proforma effects SF.AS 123 may have in future years.
15. Stock Repurchase Authorization
Delta's Board of Directors has authorized the Company to
repurchase up to 24.7 million shares of Common Stock
and Common Stock equivalents. Under this authorization,
the Company may repurchase up to 6.2 million of these
shares before October 30, 1997 - the date the initial stock
option grants under the Nonpilot and Pilot Plans become
exercisable - 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 transac-
tions. Under this authorization, the Company repurchased
46
5,378,700 shares of Common Stock for $379 million dur-
ing fiscal 1997, and 821,300 shares of Common Stock for
$66 million during fiscal 1996.
16. Restructuring and Other Non-Recurring Charges
During fiscal 1997 and 1996, the Company recorded pretax
restructuring and other non-recurring charges of $52 mil-
lion and $829 million, respectively. These charges are sum-
marized in the table below:
1997 1996 Total
Leadership 7.5 $ - $104 $104
Pilot special early retirement program 273 273
L-1011 fleet early retirement 452 452
Transatlantic and European Realignment 52 52
Totals $52 $829 $881
Fiscal 1996 - The $829 million pretax charge for restruc-
turing and other non-recurring charges recorded in fiscal
1996 included a $452 million writedown of Delta's L-1011
fleet and related assets to their fair market value in accor-
dance with SF.AS 121. The charge also included $273 mil-
lion related to the special early retirement program for
approximately 500 pilots all of whom retired during fiscal
1997 and $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 work-
force reductions. Payments associated with curtailment losses
and special termination benefits will be paid as required for
funding appropriate pension and other postretirement
plans in future years.
The remaining $39 million of the $829 million charge
for fiscal 1996 included $29 million (net of reversals of
$14 million related to the Company's $526 million restruc-
turing charge recorded in fiscal 1994) for lease termination
costs related to abandoned facilities and $10 million non-
cash costs related to discontinued routes.
Fiscal 1997 - During the March 1997 quarter, Delta recorded
pretax restructuring and other non-recurring charges total-
ing $52 million related to the realignment of its transat-
lantic and European operations. Of this amount, $45 million
relates to personnel severance costs (for approximately 680
employees); $5 million relates to the reorganization of the
Frankfurt operation; and $2 million relates to abandoned
facilities in Frankfurt and other European locations.
DELTA AIR LI NES
The following table reflects the activity in the restructuring accrual balances (excluding accruals for pension and
other postretirement curtailment losses and special termination benefits discussed above) during fiscal 1997. All reduc-
tions in reserves represent payments of liabilities.
Balance at Balance at
(Amounts in Millions) June 30, 1996 Additions Reductions June 30, 1997
-
Leadership 7.5
Workforce Reductions $ 7 $ - $ 3 $ 4
Abandoned Facilities 41 - 3 38
Pilot special early retirement program 21 - 21 -
Transatlantic and European Realignment
Workforce Reductions - 45 6 39
Abandoned Facilities - 2 - 2
Other - 5 - 5
Totals $69 $52 $33 $88
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.
17. Segment Information
Delta provides scheduled air transportation for passengers, freight and mail over a network of routes throughout the United
States and abroad. Delta's unconsolidated operating revenue and operating income by geographic region, as reported to the
U.S. Department ofTransportation (which differs from operating revenue and operating income (loss) reported under
GMP), are as follows:
(In Millions) 1997 1996 1995
Operating Operating
Operating Operating Operating Income Operating Income
Entity Revenue Income Revenue (Loss) Revenue (Loss)
Domestic $11,096 $1,242 $10,067 $ 879 $ 9,619 $733
Atlantic 2,223 195 2,175 (392) 2,164 (43)
Latin 278 48 214 12 223 9
Pacific 341 40 354 (40) 398 (40)
Total $13,938 $1,525 $12,8 10 $ 459 $12,404 $659
47
1 99 7 AN NUA L R E P R T
Notes to Consolidated Fi nanc i a I Statements continued
J UNE 30, 1997, 1996 AND 1995
D ELTA AIR LINES, INC.
18. Quarterly Financial Data (Unaudited)
The following is a summary of the unaudited quarterly
results of operations for fiscal 1997 and 1996 (in millions,
except per share data):
Fiscal 1997
Operating revenues
Operating income
Net income
Primary income per common share
Fully diluted income per common share
Fiscal 1996
Operating revenues
Operating income (loss)
Net income (loss)
Primary income (loss) per common share
Fully diluted income (loss) per common share
Operating expenses for the March 1997 quarter include
$52 million pretax restructuring and other non-recurring
charges related to the realignment of the Company's trans-
atlantic and European operations. (See Note 16.)
Operating expenses for the March 1996 quarter include
$556 million pretax restructuring and other non-recurring
charges related to the writedown of the Company's L-1011
48
Three Months Ended
Sept. 30 Dec. 31 Mar. 31 June 30
$3,432 $3,197 $3,420 $3,541
$ 438 $ 227 $ 346 $ 519
$ 238 $ 125 $ 189 $ 302
$ 3.09 $ 1.66 $ 2.52 $ 3.98
$ 2.98 $ 1.63 $ 2.47 $ 3.90
$3,188 $2,944 $2,964 $3,359
$ 386 $ 169 $ (387) $ 295
$ 201 $ 70 $ (276) $ 161
$ 3.47 $ 0.93 $ (5.77) $ 2.69
$ 2.57 $ 0.93 $ (5.77) $ 2.08
fleet and related assets, and the continuation of the Com-
pany's Leadership 7.5 cost reduction program. Operating
expenses for the June 1996 quarter include a $273 million
pretax restructuring and other non-recurring charge for costs
associated with a special early retirement program under
which approximately 500 pilots retired during fiscal 1997.
(See Note 16.)
D ELTA AIR LI NES
Report of Independent Public Accountants
To the Shareholders 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 ofJune 30, 1997 and 1996, and the related
consolidated statements of operations, cash flows and share-
holders' equity for each of the three years in the period ended
June 30, 1997. These financial statements are the responsi-
bility 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
Report of Management
The integrity and objectivity of the information presented
in this Annual Report are the responsibility of Delta man-
agement. 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 selec-
tion and training of the Company's managers, organizational
arrangements that provide a division of responsibilities, and
communication programs explaining the Company's poli-
cies and standards. We believe that this system provides
reasonable assurance that transactions are executed in accor-
dance 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;
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Delta Air Lines, Inc. and subsidiaries as ofJune 30, 1997 and
1996, and the results of their operations and their cash flows
for each of the three years in the period ended June 30, 1997,
in conformity with generally accepted accounting principles.
As discussed in Note 10 of Notes to Consolidated Finan-
cial Statements, effective July 1, 1994, the Company changed
its method of accounting for postemployment benefits.
~~ LLP
Atlanta, Georgia
August 15, 1997
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.
/~ 4
Thomas J. Roeck, Jr.
Senior Vice President - Finance
and Chief Financial Officer
49
Leo F. Mullin
President and
Chief Executive Officer
1 997 A NN UAL R E P O R T
Consolidated Summary of Operations
For the fiscal years ended June 30
(In M illions, Ev:cept Per Share Data) 1997' 19962 19953 19944
Operating revenues $13,590 $12,455 $12, 194 $12,077
Operating expenses 12,060 11,992 11,533 12,524
Operating income (loss) 1,530 463 661 (447)
Interest expense, net (174) (243) (262) (271)
Gain (loss) on disposition of Aight equipment - 2 - 2
Miscellaneous income, net6 59 54 95 56
Income (loss) before income taxes 1,415 276 494 (660)
Income tax benefit (provision) (561) (120) (200) 250
Amortization of investment tax credits - - - 1
Net income (loss) 854 156 294 (409)
Preferred stock dividends (9) (82) (88) (110)
Net income (loss) attributable to common shareholders $ 845 $ 74 $ 206 $ (519)
Nee income (loss) per common share:
Primary $ 11.30 $ 1.42 $ 4.07 $ (10.32)
Fully diluted $ ll.01 $ 1.42 $ 4.01 $ (10.32)
Dividends declared on Common Srock $ 15 $ 10 $ 10 $ 10
Dividends declared per common share $ 0.20 $ 0.20 $ 0.20 $ 0.20
Other Financial and Statistical Data
For the fiscal years ended June 30
(In Millions, Except Share Data) 19971 19962 19953 19944
Total assets $12,741 $12,226 $12,143 $111896
Long-term debt and capital leases (excluding current maturities) $ 1,797 $ 2,175 $ 3,121 $ 3,228
Shareholders' equity $ 3,007 $ 2,540 $ 1,827 $ 1,467
Shares of Common Srock outstanding at year end 73,695,987 67,778,106 50,8 16,010 50,453,272
Revenue passengers enplaned (Thousands) 101,147 91,341 88,893 87,399
Available seat miles (Millions) 136,821 130,751 130,645 131,906
Revenue passenger miles (M illions) 97,758 88,673 86,417
Operating revenue per available seat mile 9.93 9.53 9.334:
Passenger mile yield 12.79 13. 104: 13.104:
Operating cost per available seat mile 8.8 l<t 9.17(): 8.834:
Passenger load factor 71.45% 67.82% 66.1 5%
Breakeven passenger load factor 62.71% 65.12% 62.28%
Available ton miles (Millions) 18,984 18,084 18, 150
Revenue ton miles (M illions) 11,308 10,235 10,142
Operating cost per available ton mile 63.53<t 66.31</: 63.55
1 Summary of operations and other financial and statistical data includes $52 million in pretax restructuring and other non-recurring charges ($0. 42 primary
and $0.41 folly diluted after-tax income per common share).
2 Summary of operations and other financial and statistical data includes $829 million in pretax restructuring and other non-recurring charges
($9.71 after-tax per common share).
3 Summary of operations and other financial and statistical data excludes $114 million after-tax cumulative effect of change in accounting standards
($2.25 primary and $ 1.42 folly diluted income per common share).
4Summary o
f operations and other financial and statistical data includes $526 mi/Lion in pretax restructuring charges ($659 after-tax per common share).
5 Summary of operations and other financial and statistical data includes $82 mllion p retax restructuring charge ($1. 05 after-tax per common share).
Summary of operations excludes $587 miflion after-tax cumulative effect o
f changes in accounting standards ($11.78 after-tax per common share).
6 Includes interest income.
50
DE L TA A I R L I NES
85,268
9. 164:
13.234:
9.494:
64.64%
67.21%
18,302
9,9 11
68.43<t
II
19935
$11,657
12,232
(575)
'
(177)
65
36
'
(651)
233
3
' (4 15)
(110)
I $ (525)
$ (10.54)
$ (] 0.54)
$ 35
$ 0.70
19935
$11,871
$ 3,716
$ 1,913
50,063,841
85,085
132,282
82,406
8.8H
13.234:
9.254:
62.30%
65.58%
18,1 82
9,503
67.27<t
- - - - -
1992 199 1 1990 1989 1988 1987
$10,837 $9,171 $8,583 $8,089 $6,915 $5,318
11,5 12 9,621 8,163 7,411 6,418 4,913
(675) (450) 420 678 497 405
(151) (97) (27) (39) (65) (62)
35 17 18 17 ( 1) 96
5 30 57 55 25 8
(786) (500) 468 711 456 447
271 163 (187) (279) (18 1) (219)
9 13 22 29 32 36
(506) (324) 303 461 307 264
(19) (1 9) (1 8) - - -
$ (525) $ (343) $ 285 $ 461 $ 307 $ 264
$ (10.60) $ (7.73) $ 5.79 $ 9.37 $ 6.30 $ 5.90
$ (10.60) $ (7.73) $ 5.28 $ 9.37 $ 6.30 $ 5.90
$ 59 $ 54 $ 85 $ 59 $ 59 $ 44
$ 1.20 $ 1.20 $ 1.70 $ 1.20 $ 1.20 $ 1.00
1992 1991 1990 1989 1988 1987
$10,162 $8,411 $7,227 $6,484 $5,748 $5,342
$ 2,833 $2,059 $1,3 15 $ 703 $ 729 $1,018
$ 1,894 $2,457 $2,596 $2,620 $2,209 $1,938
49,699,098 49,401 ,779 46,086,110 49,265,884 49,101,271 48,639,469
77,038 69,127 67,240 64,242 58,565 48,173
123,102 104,328 96,463 90,742 85,834 69,014
72,693 62,086 58,987 55,904 49,009 38,415
8.80 8.794: 8.90 8.91 - 8.06 7.7H
13.9 1</: 13.804: 13.634: 13.564: 13.154: 12.81</:
9.354: 9.224: 8.46 8.17 7.484: 7.12ct
59.05% 59.5 1 % 61.15% 61.61 % 57.10% 55.66%
62.99% 62.64% 57.96% 56.09% 52.69% 51.09%
16,625 13,825 12,500 11,725 ipso 9,000
8,361 7,104 6,694 6,338 5,557 4,327
69.24 69.59 65.30ct 63.21</: 57.05ct 54.604:
51
199 7 ANNUAL REP O RT
Shareholder Information
TRANSFER AGENT, REGISTRAR AND
DIVIDEND PAYING AGENT FOR COMMON STOCK
Registered shareholder 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 (201) 324-1225
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Registered holders of Common Stock may purchase addi-
tional shares of such stock through automatic dividend
reinvestment or cash contributions under the Company's
Dividend Reinvestment and Stock Purchase Plan. Inquiries,
notices, requests and other communications regarding par-
ticipation 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 (201) 324-1225
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
ANNUAL MEETING
The Annual Meeting of Shareholders will be held on Thurs-
day, October 23, 1997, at 9:00 a.m., local time, in the Holiday
Inn Professional Centre/ Atrium, 2001 Louisville Avenue,
Monroe, Louisiana 71201.
AVAILABILITY OF FORM 1O-K AND
OTHER FINANCIAL INFORMATION
A copy of the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1997 will be provided with-
out charge upon written request. Requests for other finan-
cial documents may also be directed to:
Delta Air Lines, Inc.
Investor Relations, Department 829
P. 0. Box 20706
Atlanta, Georgia 30320-6001
Telephone (404) 715-2170
52
Company documents filed electronically with the SEC
can also be found on the SEC's Web Site (http://www.sec.gov.).
A copy of the Annual Report can be found on Delta's Web
Site (http:/ /www.delta-air.com).
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 SHAREHOLDERS
As of August 15, 1997, there were 22,880 registered hold-
ers of Common Stock.
MARKET PRICES AND DIVIDENDS
Closing Price of
Common Srock on
Fiscal Year 1997 New York Srock Exchange
Quarter Ended: High Low
September 30 $827/s $667/s
December 31 771
/ 2
67
March 31 87 69
June 30 98 1/a 825/a
Fiscal Year 1996
Quarter Ended: High Low
September 30 $ 80 $66
December 31 795/s 64
March 31 82 67 3/a
June 30 86 771
/ 4
Photography by Delta Photography Department
Designed and produced by Corporate Reports fnc.!Atlanta
@ Printed on recycled paper
Cash
Dividends Per
Common Share
$0.05
0.05
0.05
0.05
$0.05
0.05
0.05
0.05
DELTA AIR L I NES
North American
Network
International
Network
Delta Express
Delta Shuttle
Delta Air Cargo
Delta is the largest U.S. airline measured
by aircraft departures and passengers
enplaned, and the third-largest U.S. air-
line measured by operating revenues and
revenue passenger miles flown. As of
August 15, 1997, Delta's North American
flight operations provide scheduled ser-
vice to 122 airports in 149 cities in the
U.S., Puerto Rico and the U.S. Virgin
Delta is the leading transatlantic airline
among U.S. carriers, with the most
departures, nonstop destinations and
passengers. Delta provides scheduled
passenger service to 31 airports in 31
cities within 21 foreign countries
On October 1, 1996, Delta began oper-
ating Delta Express, and in less than six
months of operations the millionth pas-
senger had been boarded. Delta Express
is a new low-fare service within the Delta
system which operates a dedicated fleet of
In 1991, Delta began operating the Delta
Shuttle. With a dedicated fleet of 14
Boeing 727 aircraft, the Shuttle provides
64 daily flights between New York and
Washington, D.C. and New York and
Boston. The Shuttle boarded over 2 mil-
lion customers during fiscal 1997, and in
April 1997 reached a boarding milestone,
Delta, the Delta Shuttle, Delta Express and
the Delta Connection carriers offer over
4,800 flights daily to cities all over the
world, and every flight has the ability to
carry cargo. Cargo terminal facilities are
strategically located to provide excellent
coverage for shipping destinations around
the U.S. and the world. Strategic loca-
tions and experienced staff have resulted
Islands and 9 airports in 10 cities in
Canada, Bermuda, the Bahamas and
Mexico. Mexico is also served through
8 airports and 10 cities on a code-share
basis. Delta's domestic route service is
supplemented by service operated by the
Delta Connection carriers, which include
Atlantic Southeast Airlines, Business
Express, COMAIR and SkyWest.
throughout Europe, Asia and Latin
America. When flights operated on a
code-share basis are included, Delta's
international route network includes
48 airports in 48 cities in 34 countries.
25 Boeing 737-200 aircraft in certain highly
competitive, leisure-oriented travel markets.
This route system connects the North-
eastern U.S. and Midwest with Orlando
and other Florida travel destinations.
having served over 10 million passengers
since 1991. The majority of Shuttle passen-
gers travel for business, and nearly one-half
live in the New York/New Jersey area.
With an on-time departure rate exceed-
ing 95% for fiscal 1997, the Delta Shuttle
provides exc;ellent service and reliability
for travelers in the Northeast market.
in outstanding records in both customer
service a.nd schedule reliability. From
expedited small package shipping (Delta
DASH
) and Priority First Freight to
second and third-day time-definite ser-
vice, the Air Cargo division offers a wide
range of products to assist customers in
their shipping needs.
A .Delta Air Lines
P.O. Box 20706, Atlanta, Georgia 30320-6001 U.S.A.
http://www.delta-air.com