INES INC.
DELTA AIR ULAL REPORT
2000 ANN
Fiscal Year 2000 Highlights
Most traveled airline in the world, carrying 117 million
passengers
Reported net income of $1.0 billion (excluding
nonrecurring items)
Acquired Comair, a Delta Connection carrier Monetized $1.2 billion of non-core assets, including
$784 million of priceline.com common stock
Launched SkyTeam
, a global alliance partnering
Delta with Aeromexico, Air France and Korean Air Repurchased 16.5 million shares of Delta's common
stock for $790 million
Announced industry's largest regional jet order of
94 Canadair Regional Jets (RJ) plus options to
purchase 406 additional RJ aircraft
Named one of 12 Digital Innovators for the
Year 2000 E-Gang by Forbes Magazine
Ranked in the top tier of U.S. airlines in the U.S. Launched a redesigned delta.com Web site
Department of Transportation's four operational
performance measures Received the 2000 Computerworld Smithsonian
Award for Technology Innovation
Ranked #2 in University of Michigan's Airline
Customer Satisfaction Index
Ranked #2 in Harris lnteractive's survey of top
domestic airline carriers
Announced program to offer employees home
computers and Internet access at a low cost in
conjunction with PeoplePC
Reported record diluted earnings per share of
$7 .36 (excluding nonrecurring items)
Named "Corporation of the Year" by the Georgia
Minority Supplier Development Council
Ranked by the Council on Economic Priorities as the
Top Environmental Performer within the airline industry
Business Description
Delta Air Lines, Inc. provides air transportation for passen-
gers and freight throughout the U.S. and around the world.
As of September 1, 2000, Delta (including its wholly owned
subsidiaries, Atlantic S_
outheast Airlines, Inc. and Comair,
Inc.) served 205 domestic cities in 45 states, the District
of Columbia, Puerto Rico and the U.S. Virgin Islands, as
well as 44 cities in 28 countries. With its domestic and
international codeshare partners, Delta's route network
covers 221 domestic cities in 48 states, and 118 cities
in 4 7 countries.
Based on calendar 1999 data, Delta is the largest
U.S. airline in terms of aircraft departures and passengers
enplaned, and the third largest as measured by operat-
ing revenues and revenue passenger miles flown. Delta
is the leading U.S. airline in the transatlantic, offering
the most daily flight departures, serving the largest num-
ber of nonstop markets and carrying more passengers
than any other U.S. airline.
Delta is a Delaware corporation headquartered in
Atlanta, Georgia. Delta is subject to government regulation
under the Federal Aviation Act of 1958, as amended, as
well as many other federal, state and foreign laws.
Table of Contents
1 Financial and Operating Highlights
2 Letter to Shareowners, Customers
and Employees
6 Fly Hassle Free
10 Fly From Anywhere to Everywhere
12 Network and Route Maps
16 Fly With a Superior Team
18 Fly Connected
20 Fly With a Company That Cares
22 Officers
24 Board of Directors
25 Financial Review
56 Shareowner Information
Back Delta's Aircraft Fleet
Cover
Consolidated Financial Highlights
Excludes nonrecurring items
Dollar amounts in millions, except per share data.
Fiscal Year Ended June 30
Operating Revenues
Operating Expenses
Operating Income
Operating Margin
Net Income
Diluted Earnings Per Share
Dividends Declared on Common Stock
Dividends Per Common Share
Common Shares Issued and Outstanding at Year End (000's)
Passenger Mile Yield
Operating Revenue Per Available Seat Mile
Operating Cost Per Available Seat Mile
Consolidated Operating Highlights
Fiscal Year Ended June 30
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 Aircraft Fuel Price Per Gallon
Number of Aircraft in Fleet at Year End
Average Age of Aircraft Fleet at Year End (Years)
Average Aircraft Utilization (Hours per Day)
Average Full-Time Equivalent Employees
2000
$15,922
$14,045
$ 1,877
11.8%
$ 1,019
$ 7.36
$ 13
$ 0.10
122,640
13.51
10.48
I
9.25
2000
116,595
110,347
151,913
72.6%
63.5%
1,814
31.94
2,876
57.23
809
10.1
8.2
77,860
DELT A AIR L I N E S , INC .
1999 Change
$14,597 9%
$12,727 10%
$ 1,870
12.8% (1.0) pts.
$ 1,085 (6%)
$ 7.09 4%
$ 14 (7%)
$ 0.10
138,554 (11%)
13.09 3%
10.14 3%
8.84 5%
D ELT A AIR LI N E S , INC.
1999 Change
106,902 9%
104,575 6%
144,003 5%
72.6% - pts.
62.5% 1.0 pts.
1,690 7%
32.97 (3%)
2,730 5%
49.83 15%
676 20%
11.6 (13%)
8.7 (6%)
74,000 5%
1 The Consolidated Financial and Operating Highlights include the results of operations of ASA Holdings, Inc. and Comair Holdings, Inc. since April 1, 1999 and
November 22, 1999, respectively.
2 Nonrecurring items include gains from the sale of investments, asset writedowns and other special charges, the effects of a change in accounting principle and a
charge for the voluntary prepayment of debt. See page 26 for further information.
1
"Delta has consistently
delivered industry-leading
customer service and
financial results by
keeping our five key
objectives at the center
of our efforts. "
Leo F. Mullin
Chairman and Chief Executive Officer
To Delta's Shareowners, Customers and Employees:
Delta made excellent progress during the last year, outpacing
the industry in virtually every category and building on our
core strengths in new and innovative ways . This continued
strong performance ensures that we are on track to reach our
goal of becoming the world 's best airline , prepared to suc-
ceed in any environment. And that's a crucial point, given
the immense challenges and rapid changes occurring all
around us. From potential restructuring of the industry to
serious concerns about the worldwide air traffic control (ATC)
system, aviation is poised on the cusp of a new era.
Regardless of what direction the industry takes in the
coming months, we are ready to meet the future. Delta is:
Maintaining an unwavering focus on our basic mission of
providing safe, comfortable and efficient air transportation.
Continuing to provide excellent value to the constituencies
we serve: shareowners, customers and employees.
Delivering consistent, solid financial and operational results
with cost levels that remain below the industry average.
Making investments to ensure that we maintain our
industry-leading position, from e-commerce initiatives
to new mainline aircraft and regional jet orders.
2
An Industry in Motion
A key issue facing the airline industry today is the possibility
of consolidation and restructuring. For U.S. airlines as well as
those in Europe, Asia and Latin America, major alterations in
the industry landscape are under consideration or already in
progress. Airline combinations can increase competitiveness
and enhance efficiency, but there is an important caveat.
The basic free market principles that served to create the
world 's finest system of air travel must not be sacrificed. The
U.S. aviation system is too critical a part of our nation 's eco-
nomic and social fabric -as well as the global economy-to
risk serious alterations to levels of service or competition.
The primary industry concern is that if any two current
airlines combine, the resulting "mega" airline would have a
significant destabilizing effect on the industry. Such an
imbalance would almost certainly lead to full industry con-
solidation, bringing with it broad implications for the competi-
tive landscape and, thereby, the flying public. For those
reasons, Delta believes any such proposals require careful
consideration if we are to preserve the free market charac-
teristics that have made air travel increasingly affordable
and available to the public.
But whatever direction the industry takes, Delta
enters this latest period of potential change in a strong
position, with resources and opportunities that will allow
us to choose how we continue building the world's best
airline. We fully realize that, viewed from the investor's
perspective, many actions taken by airlines- including some
proposed changes to the industry structure- appear to give
shareowner value short shrift. We know that the activity of
getting bigger sometimes suppresses the pursuit of share-
owner value. As we consider our options in this and other
matters, we can assure you that we will make any decision
with full respect for our core responsibility of enhancing
value for shareowners, customers and employees.
A Clear Focus on the Future
For the past few years, Delta has consistently delivered
industry-leading customer service and financial results by
keeping our five key objectives at the center of our efforts:
Become #1 in the eyes of our customers
Develop an airline network to take passengers from any-
where to everywhere
Build a superior team with the will and the means to win
Make continued excellent financial performance an
inevitable result of all that we do
Find innovative ways to maximize the value of the com-
pany's core resources
Delta's core function is to provide the level of passenger
service that will help us reach the first strategic objective -
become #1 in the eyes of our customers . In today's travel
environment, this is a tough challenge - not just for Delta, but
for the entire industry. Despite the hurdles, Delta has
made substantial progress over the past year in the area of
customer satisfaction. In fact, Delta ranked #2 in passenger
preference (second only to Southwest Airlines) in two polls
featured earlier this year in the Wall Street Jouma/. 1
But we know very well that the task of keeping cus-
tomer satisfaction at high levels is increasingly difficult. The
good and bad news for the airline industry is that we are
serving more people than ever before. Beginning with the
Airline Deregulation Act of 1978, air travel has become so
affordable that almost everyone in America who wants to fly
can-and the majority do. That's good news.
1 University of Michigan's Airline Customer Satisfaction Index and
Harris lnteractive 's survey of top domestic airline carriers.
The bad news, though, is that airlines, airports, and-
more importantly-the ATC systems were not prepared for
these crowds. The airlines have now built the network infras-
tructure and purchased the planes to accommodate the
wants and needs of travelers who are responding enthusi-
astically to more competition and lower fares. However, our
airports and ATC systems remain woefully inadequate, both
in capacity and in many measures of operational perfor-
mance. We are continuing to work closely with governmental
representatives to find solutions that will fix the interrelated
ATC problems of uncertain funding, inadequate equipment,
an unresponsive organizational structure , and outmoded
systems. We urge public support of these same issues.
Making Technology Work for the Customer
Despite these challenges, Delta has continued to make
important advances in customer service. We know what pas-
sengers really want is essentially straightforward. In addi-
tion to on-time arrivals, they also seek fast, polite service;
convenient schedules; good fares ; and baggage that arrives
with them. When bad weather and heavy air traffic cause
delays or cancellations, passengers want good recovery on
our part, supported by frequent and accurate reports on the
status of recovery efforts and its implications for them.
That's not too much to ask-in fact, it 's the minimum.
And through both improved processes and significant leaps
in technology, Delta is making real strides in providing these
basics, and more. You 'll find many examples of our progress
in other sections of this Annual Report. From new services for
passengers that speed up the gate and boarding process to
new partnerships that will eventually give passengers wire-
less access to Internet services throughout their travels,
Delta is making sure that the technology revolution serves
our customers well.
From Anywhere to Everywhere
Delta has also made significant advances in another arena
of customer service - developing an airline network that
takes passengers from anywhere to everywhere. Throughout
our 71-year history, Delta has consistently worked to create
3
"Delta's global reach received a significant boost this summer when we
joinedAeromexico, Air France and Korean Air to launch \"'k_yTet1m.
Over tinie, our teanz will change the ,lirline alliance landscape entire~y
as we grow to be the best international network ever founded. "
an exemplary network. Today, we're exceedingly proud that
our company's network holds the industry record for the
number of customers flown. We carry more passengers than
any airline in the world: 117 million in fiscal year 2000 alone.
Delta is growing in ways that bring more and improved
service to our customers while enhancing our competitive
and strategic position. We're building on our strong position
at the Atlanta Worldport and strengthening our East Coast
presence, including plans for a new, consolidated airport
terminal at Boston-Logan International Airport. Delta's
gateway at New York-Kennedy and hubs in Cincinnati ,
Dallas/ Ft. Worth and Salt Lake City complete the network
that gives customers the best connections available through-
out North America.
But our story doesn 't stop there. Delta flies nonstop to
more European cities than any U.S. airline, and this year
we added new or increased service to Dublin, London , Lyon ,
Venice and Zurich. We 're continuing to grow swiftly and
profitably in Latin America, where we now serve 11 cities
through our dual gateways at the Atlanta Worldport and
New York-Kennedy.
Connecting the World and America's Heartland
Delta's global reach received a significant boost this summer
when we joined Aeromexico, Air France and Korean Air to
launch SkyTeam , our new international airline alliance.
Over time, our team will change the airline alliance landscape
entirely as we grow to be the best international network ever
founded. We believe we can do that because we have three
important advantages: We 're intensely customer focused; our
network of hubs is unsurpassed; and our long standing rela-
tionships have been proven to work-not just on paper but in
the real world of day-to-day, airport-to-airport travel. SkyTeam
airlines have a time-tested history of codeshares and other
working relationships prior to this partnership, so we know
and understand each other. Our similar corporate cultures,
matched networks, and common performance ethics mean
a smoother flight for customers, right from the start.
Delta also continues to expand into the U.S. heart-
land, reaching small- and medium-sized cities and towns of
America with our growing fleet of regional jets, or RJs. RJs
allow Delta to reallocate larger aircraft to meet customer
4
demand on longer-haul routes while efficiently preserving our
presence in small markets. They also place us in a clear lead-
ership role in markets characterized by strong performance
and excellent growth potential.
Delta is positioned for continued RJ industry leadership
through our fiscal 1999 purchase of Atlantic Southeast Airlines
and our fiscal 2000 purchase of Comair, the carrier named
"1999 Best Managed Regional Airline " by Aviation Week &
Space Technology. This year we also announced the industry's
largest regional jet order ever-94 Canadair RJs plus options
to purchase 406 additional RJ aircraft- a move that cements
our competitive advantage in this important market.
Building a Winning Team
Delta's continued progress is the result of our clear focus
on strategic initiatives. This vision must be shared and
then implemented by a superior team with the will and the
means to win. At Delta, we have assembled a highly quali-
fied senior management group that is well respected in the
industry. One of the first responsibilities of this leadership
group is to continue building a highly skilled and diverse
workforce, then retain and motivate these employees .
An important aspect of building the best possible team
is Delta's unwavering commitment to diversity in the work-
place. We know that maintaining our competitive edge
requires the contributions of a team whose members have
full and equal opportunity to grow as professionals in a
demanding and rewarding business. We will continue to take
active steps to ensure that we remain attractive to the widest
array of people who can contribute to Delta's success.
We also believe that people work best when they know
that high performance is recognized and rewarded, and that
they share materially in their company's success. We support
top-level pay scales for top-level performance throughout our
organization . We backed up that commitment this year with
compensation increases to ensure that Delta's pay scales
remain among the highest in the industry.
This premise guides our negotiations with the Air Line
Pilots Association, International (ALPA) and led to an agree-
ment this year on industry-leading pilot pay rates and work
rules for new Boeing 767-400 and 777 aircraft. In the com-
prehensive contract negotiations now underway, Delta's
leadership team has already indicated its continued will-
ingness to provide top-level compensation for pilots. Our
goal is to reach a timely, mutually rewarding outcome.
Keeping an Eye on the Bottom Line
Delta's strategic initiatives are part of an overarching commit-
ment to our shareowners to create and operate an excellent
business where continued superior financial performance is
an inevitable result of all we do. Our company's disciplined
and innovative financial strategy has consistently set the
industry standard-and this year was no exception.
For the past fiscal year Delta posted:
Record diluted earnings per share of $7 .36 *
Net income of $1 billion * (the third consecutive year Delta
has reached or exceeded the billion-dollar threshold). When
all nonrecurring items, including the sale of priceline.com
stock, are considered, net income rises to $1.3 billion for
fiscal 2000.
Operating margin of 11.8 percent*
Continued 6 percent unit cost advantage over the industry.
Delta 's financial performance is the result of a disci-
plined and thorough planning process that provides the solid
platform necessary for innovations such as our fuel hedging
program, which saved Delta $442 million during fiscal 2000.
Initiatives like this one, combined with strong cash returns
and a solid capital structure, have allowed Delta the flexibil-
ity to continue reinvesting in our company's future. Our excel-
lent financial performance supported $3.3 billion in funding
during fiscal year 2000 for aircraft acquisitions and facility
improvements, strengthening our ability to grow and prosper.
And while making these investments, we further enhanced
shareowner value with the repurchase of 16.5 million shares
of common stock for $790 million.
Our commitment to excellent profitability is also sup-
ported by the strategic goal of finding innovative ways
to maximize the value of the company's core resources.
Technology has proved to be an excellent tool in that quest.
Delta's role as the industry leader in e-commerce is gaining
increasing attention - in fact, Forbes recently named Delta
among the nation 's top 12 digital innovators.
* Excluding nonrecurring items
We're also making sure that our employees are ready
for this digital revolution with new programs such as our
Wired Workforce. This initiative provides home computers
and Internet access to all interested employees and their
families at low, subsidized rates. The Wired Workforce
brings a real benefit to our people both in the workplace
and at home, and it also ensures that we develop employ-
ees who are proficient in the wired world.
As exciting as the new e-world is for Delta, we have been
careful to base our strategy on value. For example, during fis-
cal year 2000 we realized $784 million in cash from the sale
of a portion of the early and industry-leading equity stake we
took in priceline.com . Our current course of e-commerce
action was developed and is being implemented with future
benefits to shareowners always at top of mind.
Continuing the Course
Taken individually, each of Delta's areas of operational and
financial achievement over the past few years is positive.
But taken as a whole , a portrait emerges of a powerful
company operating well and profitably, with high potential
for finding new ways to grow and expand .
You can be sure that Delta enters this new and chal-
lenging phase of aviation history in a position of strength .
We have the resources and the opportunities that will allow
us to choose how we will continue this journey as we work
to build the world 's best airline. And you can be confident
that we will develop our next steps with full and total respect
for the very critical issue of creating value for our share-
owners, our customers and our employees.
Leo F. Mullin
Chairman and Chief Executive Officer
September 1, 2000
5
A DeJta
Becoming #1 in the Eyes of Our Customers
Delta is listening to customers and seeing the world through
their eyes to reach our goal of becoming #1 in customer ser-
vice. Customer feedback received through day-to-day inter-
actions , focus group sessions , a series of independent
interactive polls and our Web site is driving our customer
experience strategy. This strategy is designed to enhance
our passengers' travel experience from booking to baggage
claim by achieving operational excellence, providing helpful
and caring service, making time fly for our customers and
building relationships with them.
Operational Excellence
Operational excellence is the flawless execution of every
task, every time, by every member of the Delta team. It
means providing our customers with a safe, on-time travel
experience that includes professional and dedicated service.
During fiscal 2000, we achieved excellent ratings in the U.S.
Our new baggage tracking system and scanning technology farther
ensure that passengers and their bags travel together; automated
ticketing kiosks simplify and expedite the ticketing process.
Department of Transportation's four customer service mea-
sures among the ten major U.S. airlines, ranking:
3rd in on-time arrivals
2nd in fewest customer complaints
2nd in fewest involuntary denied boardings
4th in fewest mishandled bags
We also took a leadership position on the Airline Customer
Service Commitment, a set of 12 guidelines (listed below)
developed by major carriers that provide passengers with
a clear understanding of our commitment to meet essential
performance objectives. Our plan meets all 12, and exceeds
nine, of the industry guidelines.
Helpful and Caring Service
During fiscal 2000, we integrated customer service attributes
of Delta-Style Service into our initial and recurrent frontline
training programs. These programs teach our people leadership
and conflict resolution skills, the tenets of personalizing ser-
vice, and the importance of giving our customers information
Before you Fly, Delta will:
12 Customer Service Commitments
1. Offer on our telepl1one reservations system tile lowest fa1-e for
wilwl1 tl1e customer is eligible fo1- tile date. flight and class of
service requested.
2. Give our customers time to compare our fares witil tl1ose of othe1-
a1rlines. We will l1old reservations fm travel witilin tl,e continental
U.S. until midnight. one day after the reservation is rnacle.
3. Issue refunds for eligible domestic tickets witilin seven business
clays for credit card purchases and 20 l)usiness days for purchases
made l)y cash 01- check.
4 . lnforn, custorne1-s upon tl1eir request if the fligilt on whicl1 they are
ticketed is ove1'L1ooked. We also will provide information at airports
about our policies and procedures for l1anclling situations when all
ticketed customers cannot be accommodated on a flight.
promptly. We are recognizing and rewarding employees on the
spot who demonstrate outstanding Delta-Style Service and
Customer Commitment behaviors. We also implemented new
field management programs in customer contact areas to
enable our frontline employees to respond to customer issues
quickly and effectively.
Making Time Fly for Our Customers
During the last three years, Delta has invested heavily in
developing a cross-functional technology platform that commu-
nicates with every part of our organization , transforming our
technological infrastructure from trailing edge to leading edge.
The center of our program is Airport Renewal, which was hon-
ored with the 2000 Computerworld Smithsonian Award for
Technology Innovation in the Transportation Industry.
During fiscal 2000, we implemented Airport Renewal in
our top 26 airports. We will complete implementation at an
additional 28 airports by the end of the calendar year. Airport
Renewal provides the infrastructure for our planned technology
deployments and allows all operating units within Delta to be
connected real time to key operational information.
Many of Delta's advances in technology are designed to
reduce or eliminate the need for our customers to wait in line.
During the year, we:
Expanded the availability of Skycap-to-Sky service, which
enables customers with electronic tickets to check their
5. Provide customers timely and complete information about policies
and procedures tl1at affect their travel.
Captain Donald Williams and First Officer Tom Duda make sure
our passengers fly "in the know" by providing up-to-the minute
information on their flight status; Flight 1999 's Orlando-based
crew, Christine Singman, Cari Oen, Chris Tepovich, Flo Allen and
Cathy Shoemake received high accolades from passengers for their
outstanding service during a lengthy weather delay.
luggage, confirm their seat assignments and receive their board-
ing cards at curbside. This service is more convenient than
checking in at the ticket counter and is available in 95 of our top
100 U.S. airports-reaching 98 percent of our customers.
Streamlined gate and boarding technology, which reduces
customer processing time by approximately 15 minutes. Bar-
coded boarding cards allow us to automatically update pas-
sengers' records when they board the aircraft. This
process speeds up flight close-out procedures and enhances
on-time departures. Also, Medallion SkyMiles members
will soon be able to check in via the telephone or
Internet, proceed directly to the gate and board the air-
craft using their bar-coded SkyMiles card in lieu of a
boarding pass.
Added Gate Information Display screens to give customers
answers to the 10 most frequently asked questions -from
up-to-the-minute information on boarding times to meal ser-
vice. These screens are currently available in the Atlanta
Worldport's T-Concourse and in Jacksonville. Additional
units will be installed in Boston-Logan, Chicago-O 'Hare,
6. Ensure t11at our domestic codeshare partners cornrnit to providing
cornpa1al)le consumer plans and policies. Our partners are 1egional
airlines tl1at connect small- and medium-sized ma1kets witl1 Deltas
netwo1k.
1Cont11we(/ on P,1ge 8)
7
Improved gate and boarding technowgy has greatly expedited the boarding
process; Gate agent Deborah Franklin and Ramp Agent Chris Rossing
are exampks of Delta's commitment to customer service. They recently
helped a concerned passenger locate a lost item of sentimental value on
board the aircraft.
New York-La Guardia and Washington, D.C.-Reagan by the
end of the calendar year.
Installed automated ticketing kiosks , which enable cus-
tomers to avoid ticket and gate counters altogether. Currently
available to our Delta Shuttle customers, the kiosks will be
installed in Boston-Logan , Chicago-O'Hare and New York-
La Guardia for mainline use by the end of the calendar year.
Improved the ticket change and reissue process for all
ticketed customers. Ticket changes or reissues are now
available over the phone, eliminating the need to stand in
ticketing lines. New technology has expedited the process-
ing time by streamlining the transaction process.
During the year, Delta made other improvements to show
our passengers that we value their time. Customers may now
access their flight itineraries, up-to-the minute flight arrival
and departure information, same-day gate information and
worldwide flight schedules via their hand-held personal digital
assistants and Web-enabled wireless phones. We also con-
tact our customers in advance when irregular operations occur.
Customers for whom we have contact information are noti-
fied when a cancellation occurs two or more hours in advance
of the scheduled flight time.
At the Airport, Delta will:
7. Provide customers with infom,ation about our policies and proce-
clures fm accommodating disabled and special needs custon,ers.
ancl unaccompanied minors.
8. Prnvicle full ancl timely information on the status of delayed and
canceled flights.
New technology is helping reduce the possibility of
mishandling luggage at the world's busiest airport . Delta's
baggage tugs at the Atlanta Worldport are being equipped
with wireless devices which give drivers real-time data on
gate changes and other information to ensure that bags and
passengers travel together.
We have also improved our Crown Room Club program
by adding industry-leading amenities, including desktop com-
puters in all domestic clubs and plasma screens featuring
news broadcasts in 30 of our domestic clubs. To fu rther
expedite the boarding process and allow more room for
carry-on baggage, we began expanding overhead bins in the
MD-88 and B-757 aircraft. Installation will be complete by
Spring 2001.
Our new venture with SoftNet Systems, Inc. will provide
our customers with wireless Internet access through a sophisti-
cated broadband network. This access will be available in our
Crown Room Clubs and at our gates, providing new opportuni-
ties for customers to stay connected to the Internet or their
office network.
Building Relationships
Delivering distinguished products and services based on
a customer's personal needs is the goal of our Customer
Relationship Management (CRM) program , which we began
developing in fiscal 2000. Building on information obtained
9. Provide full and timely information regarding the status of a flight if
tl,ere is an extreme delay after customers have boarded or after
the plane l,as landed. and we will provide for customers' essential
neecls while on board.
from the SkyMiles program, the CRM database serves as the
centralized information source for all customer interactions.
Over time, all customer touch points-from Marketing to
Customer Service to Operations -will have access to this
data, allowing Delta to tailor products, marketing programs
and services to individual needs and preferences.
The technology platform will store information about cus-
tomer preferences, such as preferred seating, special meals,
personal contact information and special handling requirements,
as well as detailed information about travel patterns and experi-
ences. This information, combined with new ways of commu-
nicating, will allow Delta to be more proactive across the travel
experience, ultimately reducing transaction times and enhancing
the ability of our employees to provide superior service.
Air Logistics
Cargo customers are also important to Delta. We changed the
name of Delta's cargo operation to Air Logistics during fiscal
2000 to better represent the comprehensive service we pro-
vide our cargo customers. This service -from sourcing, ware-
housing and inventory management, to distribution and supply
to the end user- is actually a management process and a
partnership with our customers. In some cases we even
assign employees to work on-site at our customers'
After landing, Delta will:
10. Strive to return custon1ers misplaced baggage witl1in 24 l1ours. for
travel witl1in tl1e continental U.S. Additionally, we will attempt to
contact owners of unclairnecl baggage when a name and add1ess
or telepl1one number is available.
Gate information display screens give our passengers access to
real-time flight information; Delta's passengers can access their flight
information anytime and anywhere using their personal digital assis-
tant devices.
businesses to strengthen this partnership.
We are making significant strides to improve our Air
Logistics service. During fiscal 2000, we installed new call
center technology, which increased our efficiency and reduced
waiting time for our customers. We also successfully tested
VISion technology, which will improve our booking and track-
ing of cargo throughout our system. We expect to implement
VISion technology before the end of the year. These improve-
ments enable our professionals to work more effectively with
our cargo customers in transporting freight across the coun-
try- or the world.
To achieve our customer service goals, we will continue to
view the travel experience through the eyes of our passengers,
provide the service our customers desire and carefully man-
age every aspect of their travel with us. Their needs will drive

11. Increase tl1e per passenge1 domestic bc1ggage lialJility l1111itc1tion
from $1,250 to $2.500.
12. Respond to written customer complaints witl1in 30 days.
From Anywhere to Everywhere
This year 117 million passengers chose to fly Delta, more
than any other airline in the world. Behind this success stands
a global network strategy that continues to build on the
strengths of the Delta system , extending our reach and
penetration around the world. Unlike any other carrier, Delta
has five products that allow us to compete successfully in
multiple markets, making it possible for customers to use
Delta service regardless of their air travel needs - domestic,
international, business or leisure.
Delta Mainline - Domestic and International Service
Delta blankets North America with air service through effi-
cient and strategically located hubs in Atlanta, Cincinnati ,
Dallas/Ft. Worth, and Salt Lake City. At the Atlanta Worldport,
improved scheduling and management have confirmed the air-
port's status as the world 's largest and most efficient
hub. We are further strengthening our position in the eastern
U.S. by adding regional, transcontinental and international
service at New York and Boston, which positions us to expand
market share in these important cities.
Delta's international service gives our customers access to
the world. During the past year, we reaffirmed our position as
the #1 U.S. carrier over the Atlantic with the introduction of new
10
Delta's Sky Team partnership creates greater opportunities to get our
passengers from anywhere to everywhere; ''Delta provides many options
for travel to European cities through its gateways inAtlanta and New
York-Kennedy," says Platinum SkyMil.es program member jean Scott.
or increased service to Dublin, London, Lyon, Venice and Zurich.
Today, Delta flies to more nonstop destinations in Europe than
any other U.S. airline. And as we enter the third year of our
Latin American expansion strategy, Delta has become a major
competitor in the region, with service to 11 destinations in 8
countries. This fall, we continue that growth as we inaugurate
new flights to Bogota, Colombia; Leon, Los Cabos, Monterrey
and Puebla, Mexico; and Santiago, Chile. Our success in the
region underscores the importance of our gateways in Atlanta
and at New York-Kennedy. And we've further expanded our inter-
national system by adding Caribbean destinations from two new
gateways, Cincinnati and New York-Kennedy.
SkyTeam and Other Delta Alliances
Despite our excellent network and continued growth, Delta
can 't fly to every destination - no single airline can. With the
launch of our global SkyTeam alliance this year, Delta and its
partners -Aeromexico, Air France and Korean Air - now offer
customers access to an unsurpassed network that covers the
world's major travel markets. SkyTeam also gives passengers
enhanced benefits such as frequent flyer mileage and
lounge access throughout the global network. We hold an
important advantage in the competitive world of interna-
tional airline networks because we lead the pack in growth
potential at SkyTeam's key hubs. Major expansions are
already planned at Paris-Charles deGaulle, Seoul, and
Atlanta Worldport during the coming years.
Integration of operations and services among SkyTeam
partners continues to bring significant value to the Delta net-
work. Air France has added new transatlantic frequencies at
Atlanta, Boston and Philadelphia, and Delta has expanded
codeshare services with Air France via Paris-Charles deGaulle.
Our codeshare relationship with Aeromexico is now the most
extensive partnership of any airline alliance in the industry.
Together we serve 11 U.S. gateways to Mexico and provide
access to 27 nonstop destinations in Mexico, bringing an
easy, convenient codeshare exchange service to more than
750 passengers in each direction every day. And as Delta's
codeshare operations expand, passengers get more travel
options to more international destinations.
Delta Shuttle
Business travelers in the Northeastern U.S. rely on the Delta
Shuttle. Ranked #1 in customer satisfaction and on-time per-
formance, the Delta Shuttle consistently demonstrates its
ability to maintain high service standards even while expand-
ing. This year we added the new Boston-Washington, D.C.-
Reagan route, which gives customers yet another travel option
among the busy Northeastern corridor destinations of Boston-
Logan, New York-LaGuardia, and Washington, D.C.-Reagan. To
increase customer comfort, Delta Shuttle began replacing its
fleet of B-727 aircraft with new, state-of-the-art B-737-800s.
We added the first new aircraft in August 2000 and will com-
plete the initiative by February 2001.
Regi,onal jets provide passengers in smaller cities with greater access to
their destinations. Delta placed the largest Rf order ever for 94 Canadair
aircraft and 406 options; Delta Express provides service from major mar-
kets in the Northeast and Midwest to five leisure destinations in F/,orida.
Delta Express
Drawn by low fares and reliable service, more Northeast and
Midwest passengers are flying Delta Express to vacation desti-
nations throughout Florida than ever before. We grew the
Delta Express fleet to 40 aircraft and expanded service to
include flights from New York-Kennedy to Ft. Lauderdale.
Additional flights from New York-Kennedy to Orlando and
Tampa are planned for this fall.
Delta Connection
Our regional carrier service provides passengers in small and
medium-sized cities greater access to their destinations,
especially with our growing fleet of RJs. The RJ market is the
fastest-growing in the industry, spurred on by passenger
appreciation of the aircraft's speed and reliability. RJs are an
industry-changing phenomenon. Their longer range and effi-
cient operating costs are opening smaller cities to jet service
and permitting increased frequencies on existing routes - and
for Delta, that means more traffic feed to our hubs.
Capitalizing on our growing strength in this dynamic sec-
tor, Delta has become the world 's largest operator of RJs. In
fiscal 1999, we purchased Atlanta-based Atlantic Southeast
Airlines; in fiscal 2000, we acquired Cincinnati-based Comair.
This year we also significantly expanded RJ service from
Atlanta, Cincinnati, Dallas/Ft. Worth and New York-LaGuardia,
and placed the largest RJ order in airline history.
11
Building a Superior Team
At Delta , we are building a highly skilled , motivated and
globally diverse team. Reaching that goal requires strong lead-
ership to drive the necessary innovation, growth and world-
class performance-and our leadership team is ready to meet
the challenge. Delta veterans and more recent additions have
joined together all across Delta, blending our traditional
strengths with fresh ideas.
Delta is committed to a positive, inclusive work environ-
ment that recognizes and rewards employees for a job well
done. We 're forging a new partnership with all employees
founded upon the following core ideas and values:
Safety
Teamwork and participation
Customer-focused professionalism
Speed and simplicity
World-class performance
Leading-edge technology
Trust and respect
Flexibility
We are building a team with the will and the means to win.
Listening to Employees
Employee opinions and concerns are a vital part of building a
highly motivated team. As a result of listening to Delta peo-
ple, we know that a key challenge for many in our work-
force is the need to balance work life and home life. New
enhancements such as a two-year leave of absence program
and a part-time employment category with a full benefits
16
We strive to provide a workplace that exhibits a spirit of winning to
Jeff Simons and more than 81,000 Delta employees; self-managed
work teams are motivating and give Technical Operation's High
Performance Workplace employees Roosevelt Cooper, Dan Buhler and
Guy Wells a sense of inclusion and ownership.
package are helping Delta people find the right balance- and
helping us create a better, more satisfied workforce.
To find out even more about what our employees think,
we 're also in the midst of a broad-reaching survey. Delta
Survey 2000 gives our workforce the opportunity to tell us
what they think we're doing well and what they think we could
do better. It will measure employee opinions in areas such as
leadership trust, customer service, safety, job satisfaction, and
rewards and recognition. Once the results are provided to us
later this year by the independent surveying firm , we 'll have a
new resource for future decisions about how we improve our
operations and enhance our workplace. In addition, Delta exec-
utives have held nearly 100 face-to-face meetings with Delta
frontline people all across the company.
Another communication link for frontline employees to
Delta's leadership team and the Delta Board of Directors is
through the ALPA representative to the Board of Directors
and the seven Delta Board Council (DBC) representatives -
one member from each of the seven non-pilot employee
groups. These representatives serve as employee advocates
while also providing a sounding board for Delta's management
team and the Board on employee issues.
Top Rewards for Top Performance
Delta recognizes and rewards high performance. Our out-
standing financial performance over the last three years has
translated into total compensation packages that rank at or near
the top among our competitive peers for all employee groups.
Delta also values the extraordinary service commitment
shown by our employees, and we demonstrate our thanks
with a wide range of recognition programs. Our Chairman 's
Club, for example, is an annual gala event in honor of 100
employees chosen by their peers for consistently exemplifying
our leadership values through their superior job perfor-
mance . These employees are honored at a celebratory recep-
tion and banquet hosted by Delta's Chairman & CEO and the
entire senior management team.
Learning and Education at Delta
Delta is creating a learning environment to drive world-class
performance and to develop and retain the best talent.
Training is offered worldwide via classroom , computer and
Web-based programs. Courses and programs are designed
to build interpersonal skills and develop management and
leadership capabilities. As part of this leadership training,
we 've also introduced two new assessment tools that pro-
vide managers access to specific feedback on their leader-
ship performance from their manager, direct reports, peers,
and internal customers.
Employees can pursue lifelong learning opportunities for
career and professional development. Delta is establishing
alliances with a global network of academic partners to form
Delta University, which gives employees access to college
Debbie Dorsey, Michiko Palmer and Seni Bulger share our vision to
become the world's best airline. Delta employee Art Ross provides helpful
and caring service to a special needs passenger.
credit and degree programs at those institutions. Delta is also
partnering with the American Council on Education (ACE) to
approve in-house company training courses for college credit.
To date, ACE has qualified nearly 40 Delta courses for college
credit. Delta's enhanced tuition reimbursement policy helps
employees take advantage of these programs as well as other
continuing education opportunities.
Continuing to Build a Superior Delta Team
Delta's corporate succession planning system and mentoring
process provide the foundation for developing and retaining a
superior leadership team. Through mentoring and coaching pro-
cesses, the knowledge, skills and experience of our current
leaders are transferred to emerging leaders, allowing Delta to
build a diverse pool of potential leaders.
Our vision to become the world's best airline requires a
shared sense of purpose that extends throughout the company
and provides for a fully inclusive workplace. The Delta team con-
tinues to grow and thrive as a result of open communication with
leadership, rewards and recognition for top performance, and
the means to futher professional and personal development.
17
~ -Delta
delta.com
Leveraging Our Strengths
Delta's e-business strategy is derived from our success in
building a great airline. Our initiatives in the e-world focus
on three important areas:
Business-to-customer programs to strengthen our relation-
ship with our customers
Business-to-employee strategies to enhance our partner-
ship with our employees
Business-to-business initiatives to streamline our business
processes
Business-to-Customer
We know that our customers want simplicity and flexibility
when purchasing airl ine tickets. Our business-to-customer
initiatives have enhanced existing distribution channels and
created new ones that meet customers' needs.
In February 2000, Delta completed the redesign of its
Web site to provide users with quicker and easier access
to information. In addition to making flight reservations,
customers who use our Web site can check flight arrival
and departure information, check their SkyMiles account
Delta was recently recognized by Forbes magazine as an industry
leader in the new e-world; the newly redesigned delta.com Web site
has been well received by our customers.
balance, upgrade to first or business class on certain flights
and enroll in special programs such as our Internet fares
e-mail program. SkyMiles members can also view and select
seating assignments using our Web site, whether their reser-
vation was made online, at a Delta reservation office or tick-
eting location , or through a travel agent. The redesigned
site has been an overwhelming success as evidenced by
increased usage, customer feedback and a survey conducted
by The NPD Group, an independent research firm that ranked
Delta's Web site #1 in both "Online User Loyalty" and "Intent
to Repurchase" categories in its Summer 2000 survey.
To leverage the strength of the Delta brand , Delta has
changed its Web site URL address from delta-air.com to
delta.com. The new address makes it even easier for cus-
tomers to locate Delta's customer-friendly site. Future enhance-
ments to delta.com include an award calendar showing
destinations available to SkyMiles members using mileage
awards and the ability to redeem mileage credits online.
Delta is an industry leader in developing new distribu-
tion channels to meet the unique needs of its customers.
For our corporate accounts, we are partnering with e-Travel,
Inc. to enable business customers to purchase tickets
through a direct link to our internal reservations system.
Reprinted by Permission of Forbes Magazine 2000 Forbes 2000.
18
Delta /,ed the industry with its Wired Workforce initiative to provide
its employees including Brian Smith and his family with home com-
puters; Delta is an industry kader in providing its customers with a
variety of channels to make travel reservations.
For small businesses , Delta is creating myobtravel.com
(Mind Your Own Business Travel), a new travel Web site
providing access to airline reservations as well as car rental
and hotel bookings. Site users can also modify itineraries
online, create and store traveler profiles and create user-
defined travel reports. Myobtravel.com will begin operations
later this year.
Delta is a founding partner of Orbitz, the first multi-airline
travel Web site featuring published fares from virtually all air
carriers worldwide. Orbitz will partner with hotels, car rental
companies, cruise lines and other travel partners to help cus-
tomers build an entire travel experience at just one site. Orbitz
is planning to begin operations in 2001.
Business-to-Employee
We were one of the first companies to announce our Wired
Workforce program to offer home computers and Internet con-
nection to employees. This program will help our employees
become more informed and effective in both their personal
and professional lives. Delta is also leveraging technologies
to enhance its relationship with employees, including "self-
service" tools that allow them to make changes to their
benefit elections and other information changes through
our Intranet site. These tools will reduce administrative costs
while improving service levels by creating a more effective
infrastructure and by eliminating process inefficiencies.
Business-to-Business
Our business-to-business efforts are aimed at streamlin-
ing and integrating business processes, achieving cost
efficiencies and developing collaborative ways to work with
our suppliers. In April 2000, Delta announced a new ven-
ture with six airlines to create and operate an Internet
marketplace that will link airline carriers worldwide with quali-
fied sellers of airline-related goods and services. Specific
items bought and sold through this marketplace may include
fuel , airframes, avionic and engine components, and main-
tenance and airport services. In addition, Delta implemented
new technology during fiscal 2000 to simplify the process of
procuring goods and services. This new technology also
establishes a common platform to be used for future
business-to-business opportunities.
Additionally, our strategic airline catering partnership
with e-gatematrix, a new business formed by Gate Gourmet
Holding AG and i2 Technologies, Inc., will provide Delta with
a single point of accountability across all catering functions.
Customers will benefit from improved product consistency
and quality through this new partnership.
Delta understands the importance of being well-
positioned to participate in the new e-world. Last year we
carried 117 million passengers, served 27 million frequent
fliers, interacted with over one million customers a day and
employed 81,000 people worldwide. Delta is leveraging
these core assets to assume a leadership position in
shaping the new e-world.
19
Community and Environment
Our community involvement is derived from the core values
that are the heart of our company. Delta has established a
philanthropic program that melds need, strategic initiatives
and effective use of financial and human resources. The
quest to become the world's best airline also drives Delta to
be a leader in charitable contributions, volunteerism and par-
ticipation in the communities we serve.
Our financial support to the community is provided by
The Delta Air Lines Foundation, corporate contributions and
employee giving through the United Way. During fiscal 2000,
we contributed over $10 million to charitable organizations.
We also continued to organize the energies and skills of
our employees, who contribute countless hours building
homes, leading organizations, participating in charity walks
and engaging in other activities to build communities.
Our Focus
Delta believes that a healthy start in life encourages children
to become productive citizens. Consistent with this philoso-
phy, our focus areas for company giving are:
Youth Wellness programs that promote the physical and
mental health of children; and
20
Our employees join together to build a home for Habitat for Humanity;
Joycelyn Benham and fellow employees volunteer as mentors and
tutors to children in their communities.
Youth Leadership Development programs that help young
people develop character, leadership skills , self-esteem ,
trust, conflict resolution skills and compassion.
Our Partnership with United Way
This year, Delta began a partnership with United Way to
create larger and more focused giving opportunities. A key
component of our United Way program is to encourage all
employees to do their fair share by contributing via payroll
deductions. Last year, Delta donated more than $1.1 million
to the United Way and our employees pledged a record
$2.6 million.
Signature Partners
Delta is also proud to sponsor four organizations, known as
"Signature Partners, " who focus on our two key areas of
Youth Wellness and Youth Leadership Development: American
Red Cross, CARE, Children's Miracle Network and the Juvenile
Diabetes Foundation. Our Signature Partners provide signifi-
cant support to organizations that truly make a difference for
the individuals they serve. Last year, Delta donated over
$1 million and our employees volunteered more than 5,000
hours to these outstanding organizations.
Environmental Performance
Delta is fully committed to protecting the environment,
as well as the health and safety of our communities. As
a responsible corporate citizen, we work diligently to ensure
our operations are conducted in total compliance with the
law and sound risk management practices. We also
continually evaluate our processes to prevent environ-
mental, health or safety incidents, to eliminate condi-
tions or behaviors that may cause personal injury, and
to enhance environmental performance. Delta is proud
to have established a track record of going beyond com-
pliance, encouraging environmental stewardship and mov-
ing toward sustainability.
The involvement of each and every Delta employee is
vital to the development and success of our environmental,
health and safety program. All employees are trained and
empowered to operate in a responsible manner and to
identify opportunities for improvement.
As part of our commitment to the environment, we are
working with other stakeholders, the Environmental
Protection Agency and the Federal Aviation Administration
to create a voluntary framework for an emissions reduction
program. We are examining a host of potential opportunities,
such as ground support equipment, air conditioning trucks
and stationary sources, to reduce emissions. This is a
large undertaking to help airlines and airports go beyond
regulatory requirements to help mitigate local air quality
challenges.
During fiscal 2000, we reduced our hazardous
Delta sponsored its fifth successful Waste to Work Day in conjunc-
tion with Earth Day 2000; David Warren and Paul Dellinger
work together to protect the environment from hazardous wastes.
waste stream by 35 percent compared to fiscal 1999
and by 51 percent compared to fiscal 1998. This was a
direct result of the hard work and initiatives of our
employees around the world.
For the fifth consecutive year, in conjunction with
Earth Day, we sponsored our Waste to Work Day. This
program encourages employees to bring household haz-
ardous wastes (used oil , antifreeze, pesticides and
other hazardous materials) to work for proper disposal
in order to avoid contaminating our municipal landfills.
Delta continues to provide leadership in the airline
industry through our improved technology and key innova-
tions. We constantly search for better ways to serve our
customers and communities. During fiscal 2000, our
environmental program was recognized by the Council on
Economic Priorities as the #1 program among Fortune 500
companies in our industry.
A complete copy of our 2000 Environmental, Health
and Safety Report is available on our delta.com Web site.
21
Officers
Leo F. Mullin
Chairman and Chief Executive Officer
Malcolm B. Armstrong
Executive Vice President-Operations
M. Michele Burns
Executive Vice President and
Chief Financial Officer
Robert L. Colman
Executive Vice President-
Human Resources
Vicki B. Escarra
Executive Vice President-
Customer Service
Frederick W. Reid
Executive Vice President and
Chief Marketing Officer
Delta Subsidiaries
Robert P. DeRodes
President and Chief Executive Officer-
Delta Technology, Inc.
David A. Siebenburgen
President and Chief Executive Officer-
Delta Connection , Inc.
W. E. {Skip) Barnette
President-ASA Holdings Inc.,
and Atlantic Southeast Airlines, Inc.
Randy D. Rademacher
President-
Comair Holdings, Inc., and Comair, Inc.
22
Left to right: Mac Armstrong, Michele Burns, Bob DeRodes, Leo Mullin,
Vicki Escarra, David Siebenburgen, Fred Reid, Bob Colman
Edward H. Bastian
Senior Vice President-
Finance and Controller
David S. Bushy
Senior Vice President-
Flight Operations
Fred Buttrell
Senior Vice President-
Strategy and Business Development
Vincent F. Caminiti
Senior Vice President-
e-Business
Anthony N. Charaf
Senior Vice President-
Air Logistics
Mark A. P. Drusch
Senior Vice President-
Network Management
Robert S. Harkey
Senior Vice President-
General Counsel and Secretary
Lee A. Macenczak
Senior Vice President-
Sales and Distribution
Paul G. Matsen
Senior Vice President-International
and Alliances
John N. Selvaggio
Senior Vice President-
Airport Customer Service
Thomas J. Slocum
Senior Vice President-
Corporate Communications
Ray Valeika
Senior Vice President-
Technical Operations
Sharon I. Wibben
Senior Vice President-
In-Flight Service
D. Scott Yohe
Senior Vice President-
Government Affairs
Anthony L. Austin
Vice President-
Human Resources-Customer Service
R. Michael Bell
Vice President-
Schedule Development
Harlan R. Bennett
Vice President- Reservation Sales
Harold L. Bevis
Vice President-Public Affairs
Doug W. Blissit
Vice President- Network Analysis
John W. Boatright
Vice President-
Properties and Facilities
W. Martin Braham
Vice President-Delta Global Services
Robert T. Cirulnick
Vice President-
Finance-Customer Service
Paulette L. Corbin
Vice President-
Airport Customer Service-West
Richard W. Cordell
Vice President-
Airport Customer Service-
Central
Jack A. Daulton
Vice President - Corporate Security
Terry M. Erskine
Vice President- Employee Relations
Jeffrey T. Fisher
Vice President-
Financial Planning and Analysis
Hank Halter
Vice President- Finance-Operations
Subodh Karnik
Vice President-
Finance-Corporate Development
William D. Kline
Vice President-Chief Learning Officer
Joseph Licitra
Vice President-
Airport Customer Service- East
John C. Marshall
Vice President-
Corporate Safety and Compliance
James V. Maucere
Vice President-
Aircraft Base Maintenance
Patrice G. Miles
Vice President- Distribution Planning
Leon A. Piper
Vice President- Worldwide Benefits
and Health Resources
Udo Rieder
Vice President-
Engineering and Quality
Gregory L. Riggs
Vice President- Deputy General
Counsel and Assistant Secretary
Dave J. Smith
Vice President-
Global Rewards and Recognition
Belinda R. Stubblefield
Vice President-Global Diversity
William F. Wangerien
Vice President-Operational
Planning, Control and Reliability
Martin C. White
Vice President-Consumer Marketing
Lemuel R. Wimbish
Vice President - Atlanta Worldport
Michael M. Young
Vice President-Community Affairs
Dean C. Arvidson
Assistant Secretary
Susan T. Hudson
Assistant Secretary
Leslie P. Klemperer
Assistant Secretary
23
Board of Directors
Edwin L. Artzt
Retired Chairman of the Board and Chief
E ecutive Officer, The Procter & Gamble Company
James L. Broadhead
Chairman of the Board and Chief Executive Officer,
FPL Group, Inc. and Florida Power & Light Company
Edward H. Budd
Retired Chairman of the Board and Chief
E ecutive Officer, The Travelers Corporation
R. Eugene Cartledge
Former Chairman of the Board, Savannah
Foods & Industries, Inc.; Retired Chairman of the
Board and Chief E ecutive Officer, Union Camp
Corporation
Mary Johnston Evans
Director of Ba ter International, Inc.; Household
International, Inc.; Sunoco, Inc. and The Dun &
Bradstreet Corporation
George M.C. Fisher
Chairman of the Board , Eastman Kodak Company
David R. Goode
Chairman of the Board, President and Chief
Executive Officer, Norfolk Southern Corporation
Gerald Grinstein
Non-Executive Chairman of the Board, Agilent
Technologies, Inc.; Retired Chairman of the Board,
Burlington Northern Santa Fe Corporation; former
Chief Executive Officer, Western Air Lines, Inc.
Leo F. Mullin
Chairman 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
Andrew J. Young
Chairman of the Board and Senior Partner,
Goodworks International , Inc.; Chairman of the
Southern Africa Enterprise Development Fund;
former Mayor of Atlanta, Georgia; former United
States Ambassador to the United Nations, former
member of the U.S. House of Representatives
Standing, from left to right: David Goode, Eugene Cartledge, George Fisher, Edwin A rtzt,
Mary Johnston Evans, James Broadhead, Edward Budd; sitting, from left to right: Andrew Young,
Leo Mullin and Gerald Grinstein.
Board Committees
Audit
James L. Broadhead, Chairman
Mary Johnston Evans
George M.C. Fisher
Andrew J. Young
Benefit Funds Investment
Andrew J. Young, Chairman
James L. Broadhead
Mary Johnston Evans
George M.C. Fisher
Corporate Governance
Mary Johnston Evans, Chairman
James L. Broadhead
Gerald Grinstein
Andrew J. Young
Corporate Strategy
R. Eugene Cartledge
Edwin L. Artzt
James L. Broadhead
Edward H. Budd
Gerald Grinstein
Representative of Air Line Pilots Association, International
Executive
Gerald Grinstein , Chairman
Edwin L. Artzt
James L. Broadhead
Edward H. Budd
R. Eugene Cartledge
Mary Johnston Evans
Andrew J. Young
Captain Mark D. Halsor- Associate non-voting member of the Board of Directors
Delta Board Council Representatives
Operational Support/Clerical Supervisory/ Administrative
Richard C. Buckalew Theresa Hicks
Field and Cargo Sales
Michele F. Chase
24
Technical Operations
Paul A. Letourneau
Reservation Sales and
City Ticket Offices
William M. Morey
Finance
Edwin L. Artzt , Chairman
Edward H. Budd
R. Eugene Cartledge
David R. Goode
Gerald Grinstein
Personnel & Compensation
Edward H. Budd, Chairman
R. Eugene Cartledge
David R. Goode
Gerald Grinstein
Airport Customer Service
and Air Logistics
Larry J. Stites
In-Flight Service
Dale C. Willi ams
Glossary of Defined Terms
Accumulated Postretirement Benefit Obligation - a measure
of the deferred compensation obligation, other than pen-
sions, that Delta has to its employees under postretirement
welfare benefit plans.
Air Traffic Liability-a liability on Delta's balance sheet that
represents the payment received for passenger ticket sales
and cargo transportation services which have not yet been
provided. As the transportation service is provided by Delta,
the amount is removed from the air traffic liability and
is recognized as revenue.
ASM-Available Seat Miles. A measure of capacity which is
calculated by multiplying the total number of seats available
for transporting passengers by the total number of miles
flown during a reporting period.
Cargo Ton Miles -the total number of tons of cargo trans-
ported during a reporting period, multiplied by the total
number of miles cargo is flown.
CASM-(Operating) Cost per Available Seat Mile.
The amount of operating cost incurred per available seat
mile during a reporting period. Also referred to as unit cost.
Collective Bargaining Agreement- an agreement between an
employer and a union representing a group of employees
which details pay rates and working conditions for that
group of employees.
Common Stock -the common stock, par value $1.50 per
share, of Delta Air Lines, Inc.
Net Debt-to-Capital Ratio- a measure of leverage which is
calculated by dividing net debt by total capitalization. Net
debt includes short-term and long-term debt, capital lease
obligations and the present value of operating lease obliga-
tions, reduced by cash and short-term investments. Capital
includes total debt and shareowners ' equity, including
Series B ESOP Convertible Preferred Stock.
DELTA AIR LINES , INC .
ER/SA- The Employee Retirement Income and Security Act
of 197 4. This federal law governs employee benefit and
retirement plans.
Non-Fuel CASM-the amount of operating cost incurred per
available seat mile during a reporting period, excluding air-
craft fuel expense.
Operating Margin-operating income divided by operating
revenues.
Passenger Load Factor- a measure of aircraft utilization
which is calculated by dividing RPMs by ASMs for a report-
ing period.
Passenger Mile Yield - amount of passenger revenue earned
per revenue passenger mile during a reporting period.
Projected Benefit Obligation- a measure of the deferred
compensation obligation that Delta has to its employees
under its pension plans.
RASM-(Operating) Revenue per Available Seat Mile. The
amount of operating revenue earned per available seat mile
during a reporting period. Also referred to as unit revenue.
RPM- Revenue Passenger Mile. One revenue-paying passen-
ger transported one mile. RPMs are calculated by multiply-
ing the number of revenue passengers by the number of
miles they are flown for the reporting period.
Series B ESOP Convertible Preferred Stock-convertible pre-
ferred stock, $1.00 par value, $72.00 stated and liquidation
value, which is allocated to participants as part of the
Employee Stock Ownership Plan (ESOP).
Ton Mile Yield- amount of cargo revenue earned per cargo
ton mile during a reporting period.
Working Capital Position- current assets minus current
liabilities.
Financial Review
Management's Discussion and Analysis of
Financial Condition and Results of Operations 26
Consolidated Statements of Income 33
Consolidated Balance Sheets 34
Consolidated Statements of Cash Flows 36
Consolidated Statements of Shareowners' Equity 37
Notes to the Consolidated Financial Statements 38
Report of Management 53
Report of Independent Public Accountants 53
Consolidated Summary of Operations 54
25
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
FISCAL 2000 COMPARED TO FISCAL 1999
Net Income and Earnings per Share (EPS)
For the year ended June 30, 2000, we reported
record net income of $1.3 billion, an 18% increase
over our previous record of $1.1 billion for fiscal
I Diluted EPS*
(In Dollars) $7.36
$7.09
$6.34
1998 1999 2000
Excludes nonrecumng items
Nonrecurring Items
1999. Basic EPS was
$9.92 in fiscal 2000, a
30% increase over fiscal
1999 basic EPS of $7 .63.
Diluted EPS was $9.42
for fiscal 2000, a 31%
increase over fiscal 1999
diluted EPS of $7 .20.
Excluding the nonrecurring
items described below, net
income for fiscal 2000
totaled $1.0 billion, basic
EPS was $7. 73 and
diluted EPS was $7 .36.
Our fiscal 2000 results of operations include
the following nonrecurring items: gains from the sale
of investments; asset writedowns and other special
charges; the effects of a change in accounting princi-
ple; and a loss on the voluntary prepayment of
debt. These items, as described below, are collec-
tively referred to in this report as "nonrecurring items."
We recorded pretax gains from the sale of
investments totaling $1.2 billion ($733 million
after tax, or $5.63 basic and $5.32 diluted EPS)
in fiscal 2000. This includes pretax cash gains of
(1) $784 million from the sale of 12.3 million
shares of priceline.com Incorporated (priceline)
common stock; (2) $137 million from the sale of
our equity interest in Singapore Airlines Limited
(Singapore Airlines); (3) $29 million from the sale of
our equity interest in SAirGroup; and (4) $24 million
from the sale of a portion of our equity investment
in Equant, N.V. , an international data network ser-
vices company. It also includes a pretax non-cash
gain of $228 million from the exchange of six million
shares of priceline common stock for priceline
preferred stock. (See Note 2 of the Notes to the
Consolidated Financial Statements.)
During fiscal 2000, we recorded pretax asset
writedowns and other special charges totaling
$555 million ($339 million after tax, or $2.60 basic
and $2.45 diluted EPS). This includes pretax charges
26
DELTA A I R L I NES, I NC .
of (1) $320 million for an asset writedown resulting
from the decision to retire certain aircraft earlier than
previously planned; (2) $149 million for asset impair-
ment losses and costs incurred to streamline certain
operations; and (3) $86 million for our early retire-
ment medical option program. (See Note 6 of the
Notes to the Consolidated Financial Statements.)
Delta changed its method of accounting for the
sale of frequent flyer mileage credits to participating
partners to comply with SEC Staff Accounting Bulletin
(SAB) 101, "Revenue Recognition in Financial
Statements. " Under the new accounting method,
a portion of the revenue from the sale of mileage
credits is deferred and recognized when the credits
are redeemed for travel. We retroactively adopted
SAB 101 as of July 1, 1999, which resulted in a
cumulative effect charge of $66 million after tax
($.51 basic and $.48 diluted EPS). The adoption
of SAB 101 also decreased fiscal 2000 operating
income by $34 million ($21 million after tax, or $.16
basic and $.15 diluted EPS). (See Note 18 of the
Notes to the Consolidated Financial Statements.)
Also during fiscal 2000, we recorded a $40 mil-
lion charge ($24 million after tax, or $.19 basic and
$.18 diluted EPS) for the voluntary prepayment of
certain long-term debt obligations.
In fiscal 1999, we recorded a pretax gain of
$26 million ($16 million after tax, or $.11 basic and
$.10 diluted EPS) from the sale of a portion of our
equity investment in Equant.
Acquisition of ASA Holdings, Inc. and
Comair Holdings, Inc.
Delta strengthened its competitive position by
acquiring ASA Holdings, Inc. (ASA Holdings) in fiscal
1999 and Comair Holdings, Inc. (Comair Holdings)
in fiscal 2000. ASA Holdings and Comair Holdings
are the parent companies of regional jet carriers
Atlantic Southeast Airlines, Inc. (ASA) and Comair,
Inc. (Comair), respectively. Our consolidated results
of operations for fiscal 2000 include the results of
operations of ASA Holdings for the entire fiscal year
and of Comair Holdings from November 22, 1999
through June 30, 2000. Our consolidated results of
operations for fiscal 1999 include the results of oper-
ations of ASA Holdings from April 1, 1999 through
June 30, 1999. (See Note 17 of the Notes to the
Consolidated Financial Statements.)
Operating Revenues
(In Millions of Dollars)
$15,888
$14,597
$14,057
1998 1999 2000
Operating Revenues
Operating revenues
were $15.9 billion for
fiscal 2000, increasing
9% from $14.6 billion in
fiscal 1999. Passenger
revenue grew 9%, reflect-
ing a 6% increase in RPMs
on 5% capacity growth
and a 3% increase in
passenger mile yield.
North American Passenger Revenues - North American
passenger revenues grew 10% to $12.5 billion. RPMs
increased 5% on capacity growth of 6%, while passen-
ger mile yield rose 5%. The increase in RPMs primarily
reflects favorable economic conditions, the inclusion
of ASA and Comair in our results of operations and
the expansion of our fleet. The increase in passenger
mile yield is largely due to the inclusion of ASA and
Comair, partially offset by increased low-fare com-
petition and capacity increases by competitors.
International Passenger Revenues - International
passenger revenues increased 2% to $2.4 billion
during fiscal 2000. RPMs increased 7% on capacity
growth of 2%, while passenger mile yield declined
4%. The increase in RPMs primarily reflects our con-
tinued expansion in Latin America, which resulted in
21% traffic growth in that region. The decline in pas-
senger mile yield is primarily attributable to increased
pricing pressures resulting from industry-wide capacity
growth in the Atlantic market.
Cargo and Other Revenues - Cargo revenues
increased 4% to $579 million, reflecting a 7%
increase in cargo ton miles and a 3% decrease in
ton mile yield. The increase in cargo ton miles is pri-
marily due to capacity increases and higher mail vol-
ume from the growth in e-commerce activity. The
decrease in ton mile yield is due to pricing pressure
resulting from industry-wide capacity growth in inter-
national markets. Other revenues increased 22% to
$433 million, mainly a result of higher revenues
from codeshare activity and frequent flyer partner-
ship programs.
I CASM*
9.25
8.88 8.84
1998 1999 2000
Excludes nonrecurring items
Operating Expenses
Operating expenses
totaled $14.6 billion for
fiscal 2000, increasing
15% from $12. 7 billion in
fiscal 1999. Operating
capacity rose 5% to
152 billion ASMs. CASM
increased 9% to 9.61 ,
while non-fuel CASM grew
8% to 8.53. Excluding
nonrecurring items, CASM
increased 5% to 9.25.
Salaries and related costs increased 12% dur-
ing fiscal 2000. The number of full-time equivalent
employees increased 9%, largely from the inclusion of
ASA and Comair. The increase in salaries and related
costs also reflects salary increases for most domestic
employees of 2% on January 1, 1999, and 3% on
April 1, 2000.
Aircraft fuel expense increased 21% in fiscal
2000, with the average fuel price per gallon rising
15% to 57.23. Total gallons consumed increased
5% due to increased operations on a 5% rise in
capacity. Delta's fuel cost per gallon is net of
gains of $442 million on fuel hedging contracts,
which hedged approximately 75% of our aircraft fuel
requirements during fiscal 2000. Depreciation and
amortization expense rose 19% due to the acquisi-
tion of additional aircraft and ground equipment, as
well as the inclusion of ASA and Comair. Other sell-
ing expenses increased less than 1.0%.
Passenger commissions expense declined 17%,
reflecting changes to the travel agent commission
rate structure and our customers' increased use
of lower cost distribution channels such as the
Internet. Internet sales accounted for approximately
10% of total tickets flown in fiscal 2000 compared
to 3% in fiscal 1999. Contracted services expense
increased 16% due to the inclusion of ASA and
Comair, as well as higher costs related to customer
service and technology initiatives.
Landing fees and other rents increased 5%,
aircraft rental expense increased 18%, and aircraft
maintenance materials and outside repair expense
grew 21%, primarily due to the inclusion of ASA and
27
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Comair. Passenger service expense declined 6%
due to process improvements which streamlined
our catering operations. Other costs increased 4%
due to higher expenses associated with fuel-related
taxes and supplies, as well as the inclusion of ASA
and Comair.
Operating Income*
(In Millions of Dollars)
$1,870 $1,877
$1,694
1998 1999 2000
'Excludes nonrecurnng items
Operating Income and
Operating Margin
Operating income was
$1.3 billion for fiscal 2000,
compared to $1.9 billion in
fiscal 1999. Excluding non-
recurring items, operating
income totaled $1.9 billion
in fiscal 2000.
Operating margin
declined to 8.1% during
fiscal 2000 from 12.8%
in fiscal 1999. Excluding
nonrecurring items, operating margin was 11.8% in
. fiscal 2000.
Other Income
Other income was $995 million during fis-
cal 2000 compared to other expense of $44 million
in fiscal 1999. The increase is primarily a result
of pretax gains from the sale of investments total-
ing $1.2 billion. (See Note 2 of the Notes to
the Consolidated Financial Statements.) Interest
expense, net increased to $197 million in fiscal
2000 from $101 million in fiscal 1999 primarily from
increased levels of debt outstanding and higher inter-
est rates, partially offset by higher levels of cash
invested. Miscellaneous expense was $10 million dur-
ing fiscal 2000 compared to miscellaneous income of
$31 million during fiscal 1999 due to a $40 million
loss on the voluntary prepayment of certain long-term
debt obligations.
FISCAL 1999 COMPARED TO FISCAL 1998
Net Income and Earnings per Share
Net income grew 10% to $1.1 billion during fis-
cal 1999, from $1.0 billion in fiscal 1998. Our fiscal
1999 results include the results of operations for ASA
Holdings from April 1, 1999 through June 30, 1999.
(See Note 17 of the Notes to the Consolidated
Financial Statements.)
Basic EPS was $7 .63 in fiscal 1999, compared
to $6.64 in fiscal 1998, a 15% increase. Diluted
EPS was $7 .20 for fiscal 1999, a 14% increase from
fiscal 1998 diluted EPS of $6.34. Fiscal 1998 EPS
has been restated to reflect our two-for-one com-
mon stock split which became effective in November
28
DELTA AIR LINES, INC .
1998. (See Note 1 of the Notes to the Consolidated
Financial Statements.)
Operating Revenues
Operating revenues were $14.6 billion for fiscal
1999, increasing 4% from $14.1 billion in fiscal 1998.
Passenger revenue growth of 4% reflects a 3%
increase in RPMs on 3% capacity growth. Passenger
mile yield increased less than 1% to 13.09.
North American Passenger Revenues - North American
passenger revenues grew 5% to $11.4 billion, driven
by a 3% increase in RPMs on capacity growth of
2%. The increase in RPMs was a result of favorable
economic conditions and increased traffic (including
the effects of pilot labor actions at two of our com-
petitors), as well as our reallocation of aircraft to
higher-demand markets. Passenger mile yield rose
2% due to the full-year effect of a domestic fare
increase in September 1997 and improved asset
utilization, partially offset by increased low-fare
competition and matching sale fares implemented
by a competitor after its pilot strike.
International Passenger Revenues - International
passenger revenues remained flat at $2.3 billion
during fiscal 1999. A 5% increase in RPMs on
capacity growth of 7% was offset by a 6% decline
in passenger mile yield. The increase in RPMs pri-
marily reflects the addition of new Atlantic routes
and continued expansion into Latin America. The
decline in passenger mile yield is a result of
increased competitive pressures due to industry-
wide capacity growth in the Atlantic and Latin
American markets.
Cargo and Other Revenues- Cargo revenues
declined 4% during fiscal 1999, reflecting a 3%
decrease in cargo ton miles and a 1% decrease in ton
mile yield. Other revenues increased 20%, mainly a
result of higher revenues from codeshare programs.
Operating Expenses
In fiscal 1999, operating expenses totaled
$12.7 billion, increasing 3% from $12.4 billion in
fiscal 1998. Operating capacity rose 3% to 144 bil-
lion ASMs. CASM remained flat year over year while
non-fuel CASM grew 2% to 7 .89. The increase in
operating expenses primarily resulted from higher
salaries and related costs due to headcount growth
and a general salary increase; higher depreciation
and amortization expense due to the acquisition of
additional aircraft and ground equipment; an increase
in other selling expenses resulting from increased
advertising and promotional activities, as well as
increased credit card charges due to higher pas-
senger volume; and increased contracted services
expense due to expanded operations into new and
existing markets and contract rate increases. Aircraft
fuel expense decreased 10%, with the average fuel
price per gallon falling 12%. Passenger commission
expense fell 12% due to lower effective commission
rates and increased utilization of lower cost distri-
bution channels.
Operating Income and Operating Margin
During fiscal 1999, operating income totaled
$1.9 billion, which represented an increase of 10%
over fiscal 1998. Operating margin increased to
12.8% in fiscal 1999 from 12.1% in fiscal 1998.
Other Expense
Other expense decreased 4% to $44 million
during fiscal 1999 due to higher interest expense,
net, offset by a $26 million gain from the sale of a
portion of our equity investment in Equant and an
increase in miscellaneous income.
Financial Condition and Liquidity
FISCAL YEAR 2000
Cash and cash equivalents and short-term
investments totaled $1. 7 billion at June 30, 2000,
compared to $1.1 billion at June 30, 1999. Our
principal sources and uses of cash during fiscal
2000 are summarized below.
Sources
Generated $2.4 billion of cash from operations.
Generated $256 million from the sale of flight
equipment.
Issued $2.1 billion, net, of unsecured long-term
notes to pay the $1.8 billion purchase price of
Comair Holdings and for general corporate pur-
poses. (See Note 5 of the Notes to the
Consolidated Financial Statements.)
Borrowed $301 million from the Development
Authority of Clayton County to refund bonds that
had been issued to finance certain Delta facilities
at Hartsfield Atlanta International Airport. (See
Note 5 of the Notes to the Consolidated Financial
Statements.)
Issued 0.6 million shares of common stock for
$32 million (including an income tax benefit of
$4 million for stock options exercised). These
shares were primarily issued under our broad-based
employee stock option plans. (See Note 10 of the
Notes to the Consolidated Financial Statements.)
Generated $1.2 billion from the sale of invest-
ments. (These sales resulted in pretax cash gains
of $97 4 million. See Note 2 of the Notes to
the Consolidated Financial Statements.)
Uses
Invested $2. 7 billion in flight equipment and
$556 million in ground property and equipment.
Paid $790 million to repurchase 16.5 million
shares of common stock. (See Note 11 of the
Notes to the Consolidated Financial Statements.)
Paid $1.8 billion to acquire Comair Holdings.
(See Note 17 of the Notes to the Consolidated
Financial Statements.)
Paid $42 million in cash dividends on preferred
and common stock.
Cash flows from operations for fiscal 2000
totaled $2.4 billion. We invested in future growth
opportunities during fiscal 2000 by purchasing
Comair Holdings, upgrading airport and administra-
tive technology, investing in customer service
improvements and acquiring new aircraft.
Cash Reinvested in
the Business
(In Millions of Dollars) $3,902
$2,765
$2,324
1998 1999 2000
We have increased the
amount of cash used in
investing activities over the
past three fiscal years,
highlighting our emphasis
on business reinvestment
and growth opportunities.
As of June 30, 2000,
we had a negative working
capital position of $2.6 bil-
lion, compared to negative
working capital of $2. 7 bil-
lion at June 30, 1999.
A negative working capital
position is normal for us, primarily due to our air traf-
fic liability, and does not indicate a lack of liquid-
ity. We expect to meet our obligations as they become
due through available cash, short-term investments
and internally generated funds, supplemented as
necessary by debt financings and proceeds from sale
and leaseback transactions. At June 30, 2000, we
had $1.25 billion of credit available under our
1997 Bank Credit Agreement. (See Note 5 of the
Notes to the Consolidated Financial Statements.)
Long-term debt and capital lease obligations,
including current maturities, totaled $5.1 billion
at June 30, 2000, compared to $2. 7 billion at
June 30, 1999. The increase in debt is primarily
the result of borrowings to finance our acquisition of
Comair Holdings. Shareowners' equity was $4.9 bil-
lion at June 30, 2000, compared to $4.5 billion
at June 30, 1999. Our net debt-to-capital position,
29
Management's Discussion and Analysis
of Financial Condition and Results of Operations
including current maturities, was 71% at June 30,
2000, compared to 68% at June 30, 1999.
For additional information regarding Delta's credit
agreements and long-term debt, see Note 5 of the
Notes to the Consolidated Financial Statements.
PRIOR YEARS
Fiscal 1999
In fiscal 1999, our principal source of funds was
$2.9 billion of cash from operations and $1.1 billion
from the issuance of debt. We invested $2.3 billion in
flight equipment and $561 million in ground property
and equipment. We made payments of $431 million
on debt and capital lease obligations, and paid
$700 million to acquire ASA Holdings. In addition,
we repurchased $885 million of common stock and
paid $43 million in cash dividends on preferred and
common stock.
Fiscal 1998
During fiscal 1998, our principal source of funds
was $3.0 billion of cash from operations. We invested
$1.8 billion in flight equipment and $531 million in
ground property and equipment, and made payments
of $307 million on long-term debt and capital lease
obligations. We also repurchased $354 million of
common stock and paid $43 million in cash dividends
on preferred and common stock.
COMMITMENTS
Estimated future expenditures for aircraft and
engines on firm order as of August 11, 2000 totaled
$9.5 billion. In addition, we have planned capital
expenditures of $986 million for the twelve months
ending June 30, 2001 for airport and office facility
improvements, aircraft modifications and the pur-
chase of ground equipment and other assets. (See
Notes 7 and 8 of the Notes to the Consolidated
Financial Statements for additional information regard-
ing our lease obligations and purchase commitments.)
Other Matters
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133
requires us to recognize all derivatives on the balance
sheet at fair value. Derivatives that are not designated
as part of a hedging relationship must be adjusted to
fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, the effective
portion of the hedge's change in fair value is either
30
DELTA AIR L IN E S, IN C .
(1) offset against the change in fair value of the
hedged asset, liability or firm commitment through
income or (2) held in equity until the hedged item
is recognized in income. The ineffective portion of a
hedge's change in fair value is immediately recog-
nized in income. We will adopt SFAS 133, as
amended, on July 1, 2000.
The adoption of SFAS 133 will result in a $100
million charge, net of tax, from a cumulative effect
of a change in accounting principle, and a $440
million increase, net of tax, in shareowners' equity
in our financial statements for the quarter ending
September 30, 2000.
FISCAL YEAR CHANGE
On June 29, 2000, our Board of Directors
approved a change of Delta's fiscal year end from
June 30 to December 31, effective December 31,
2000. We plan to file a transition report on Form 10-K
covering the transition period from July 1, 2000
through December 31, 2000. This filing will include
audited financial statements for the twelve months
ended December 31, 2000, 1999 and 1998.
COLLECTIVE BARGAINING MATTERS
Approximately 16% of the 81,000 total employees
of Delta, ASA and Comair are represented by unions.
In September 1999, Delta began negotiations
with the Air Line Pilots Association, International
(ALPA), on a new collective bargaining agreement to
replace the existing contract for Delta's approxi-
mately 9,000 pilots that became amendable in May
2000. Delta is also in negotiations on an initial collec-
tive bargaining agreement with the Transport Workers
Union of America (TWU), which became the represen-
tative of Delta's approximately 110 pilot ground train-
ing instructors in October 1999.
In March 2000, Delta's approximately 11,000
ramp and cargo employees rejected representation
by the TWU, with 17% of the employees voting in favor
of union representation. The National Mediation Board
(NMB) recently ordered a rerun election. The NMB
plans to mail ballots to employees on September 1,
2000, and to announce the results of the voting on
October 2, 2000.
ASA is in negotiations with the TWU on an initial
collective bargaining agreement for ASA's approxi-
mately 30 flight dispatchers. The TWU became the rep-
resentative of this employee group in November 1998.
Comair is in negotiations with ALPA on a
new collective bargaining agreement for Comair's
approximately 1,300 pilots, and with the International
Brotherhood of Teamsters (IBT) on an initial contract
for Comair's approximately 550 flight attendants.
Comair's existing collective bargaining agreement
with ALPA became amendable in June 1998. The
IBT became the representative of Comair's flight
attendants in September 1998.
Unions are currently engaged in organizing efforts
to represent various groups of employees of Delta,
ASA and Comair. The outcome of these union organiz-
ing efforts, as well as the TWU rerun election and the
collective bargaining negotiations outlined above, can-
not presently be determined.
COMPETITIVE ENVIRONMENT AND SEASONALITY
The airline industry is highly competitive and
is characterized by substantial price competition. If
price reductions are not offset by increases in traffic
or changes in the mix of traffic that improve our
passenger mile yield, our operating results will be
adversely affected.
Two of our competitors, UAL Corporation and
US Airways Group, Inc., recently entered into a
definitive merger agreement. If that merger were
to occur, conditions and competition in the airline
industry could be significantly altered.
There are seasonal variations in the demand for
air travel. Therefore, operating results for an interim
period do not necessarily indicate results for an
entire year. In general, demand for air travel is
higher in the June and September quarters, particu-
larly in international markets, because there is more
vacation travel during these periods than during the
remainder of the year. Demand is also affected by
factors such as economic conditions and fare levels.
ENVIRONMENTAL AND LEGAL CONTINGENCIES
Delta is a defendant in legal actions relating to
antitrust matters, employment practices, environmen-
tal issues and other matters concerning our business.
Although the ultimate outcome of these matters can-
not be predicted with certainty, we believe that the
resolution of these actions is not likely to have a
material adverse effect on our consolidated finan-
cial statements.
MARKET RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS
Delta has market risk exposure related to air-
craft fuel prices, stock prices, interest rates and for-
eign currency exchange rates. The market risk is
the potential negative impact of adverse changes
in these prices or rates on our consolidated financial
statements. To manage the volatility relating to these
exposures, we periodically enter into derivative trans-
actions pursuant to stated policies. (See Note 4 of
the Notes to the Consolidated Financial Statements
for further discussion of our policies for managing
such exposures.)
The following sensitivity analyses do not consider
the effects that an adverse change would have on
demand for air travel, the economy as a whole, or
additional actions by management to mitigate our
exposure to a particular risk. For these and other rea-
sons, the actual results of changes in these prices
or rates may differ materially from the following hypo-
thetical results.
Aircraft Fuel Price Risk
Our results of operations could be significantly
impacted by changes in the price and availability
of aircraft fuel. During fiscal 2000, aircraft fuel
accounted for 11% of our operating expenses.
Based on our projected aircraft fuel consumption
of 3.0 billion gallons for the twelve months ending
June 30, 2001, a 10% rise in our projected jet fuel
prices would increase our aircraft fuel expense by
approximately $99 million for that period. This analy-
sis includes the effects of fuel hedging instruments
in place at June 30, 2000. Based on our fiscal 2000
aircraft fuel consumption of 2.9 billion gallons, a 10%
rise in our jet fuel prices would have increased our
aircraft fuel expense by approximately $40 million in
fiscal 2000. This analysis includes the effects of fuel
hedging instruments in place at June 30, 1999.
For additional information regarding our aircraft
fuel price risk management program, see Note 4 of
the Notes to the Consolidated Financial Statements.
Equity Securities Risk
At June 30, 2000, our ownership interest in
SkyWest, Inc. was our only readily marketable equity
investment. The estimated fair value and aggregate
unrealized gain from this investment was $11'5 million
and $101 million, respectively, at June 30, 2000.
The market risk associated with this investment is
the potential loss in fair value resulting from a
decrease in SkyWest's common stock price.
At June 30, 1999, the estimated fair value of all
our equity investments totaled $962 million, with
an aggregate unrealized gain of $568 million. The
decrease in fair value of our equity investments
at June 30, 2000 compared to June 30, 1999 is
due to the sale of our equity interests in Singapore
Airlines Limited and SAirGroup during fiscal 2000,
and the fact that our equity investments at June 30,
1999 included our minority ownership interest in
Comair Holdings. During fiscal 2000, we acquired a
100% ownership interest in Comair Holdings. As a
result of that acquisition, at June 30, 2000, Delta
and Comair Holdings are consolidated for financial
reporting purposes. (See Note 17 of the Notes to
the Consolidated Financial Statements.)
31
Management's Discussion and Analysis
of Financial Condition and Results of Operations
We own depository certificates that are convert-
ible, subject to certain restrictions, into the common
stock of Equant. The market risk relating to this
investment is the potential reduction in value result-
ing from a decrease in Equant's common stock price.
(See Note 2 of the Notes to the Consolidated
Financial Statements.)
At June 30, 2000, we had warrants to purchase
5.5 million shares of priceline common stock. Our
market risk associated with these warrants is the
potential loss of gain based on decreases in the
price of priceline common stock. (See Note 2 of the
Notes to the Consolidated Financial Statements.)
Interest Rate Risk
Our exposure to market risk due to changes in
interest rates relates to our long-term debt obliga-
tions and cash investment portfolio.
Market risk associated with our long-term debt
is the potential change in fair value resulting from
a change in interest rates. An assumed 10% decrease
in interest rates would increase the estimated fair
value of our long-term debt by $270 million and
$100 million at June 30, 2000 and June 30, 1999,
respectively. A 10% increase in average annual inter-
est rates would not have had a material impact on our
interest expense for fiscal 2000 or fiscal 1999.
Based on our average balance of cash and cash
equivalents and short-term investments during fiscal
2000 and fiscal 1999, a 10% decrease in average
annual interest rates would not have had a material
impact on our interest income.
We may use non-leveraged, over-the-counter
financial instruments to manage our interest rate risk.
Foreign Currency Exchange Rate Risk
Delta is subject to foreign currency exchange
rate fluctuations in the U.S. dollar value of foreign
currency-denominated transactions. Based on our
average annual net currency positions in fiscal 2000
and 1999, a 10% adverse change in average annual
foreign currency exchange rates would not have been
material to our consolidated financial statements for
the years ended June 30, 2000 or 1999.
We may use foreign currency options and for-
ward contracts with maturities of up to 12 months
to manage our foreign currency exchange rate risk.
32
DE LT A A I R L INES , I NC .
FORWARD-LOOKING INFORMATION
Statements in this Annual Report which are not
purely historical facts, including statements regarding
our beliefs, expectations, intentions, or strategies for
the future, may be "forward-looking statements" as
defined in the Private Securities Litigation Reform
Act of 1995.
Any forward-looking statements involve a number
of risks and uncertainties that could cause actual
results to differ materially from the plans, intentions
and expectations reflected in or suggested by the
forward-looking statements. Factors and events that
could cause these differences include, but are not
limited to:
general economic conditions, both in the United
States and in our markets outside the United
States;
competitive factors , such as the airline pricing
environment, international alliances, codesharing
programs and capacity decisions by competitors;
outcomes of negotiations on collective bargaining
agreements;
changes in aircraft fuel prices;
fluctuations in foreign currency exchange rates;
actions by the United States and foreign
governments;
the willingness of customers to travel generally
and with us specifically, which could be affected by
factors such as our on-time performance, our bag-
gage handling performance, how well we respond
to customer complaints and our and the industry's
safety record; and
the outcome of our litigation.
Forward-looking statements made by us are
based on our knowledge of our business and the
environment in which we operate. Due to the factors
listed above, as well as other factors beyond our
control, actual results may differ materially from
those anticipated in the forward-looking statements.
All forward-looking statements attributable to us
or persons acting on our behalf are expressly qualified
in their entirety by these cautionary statements. We
assume no obligation to update these forward-looking
statements even though our situation will change in
the future.
Consolidated Statements of Income
For the years ended June 30, 2000, 1999 and 1998 DELTA A IR LI N E S , INC .
2000 1999 1998 I
(In Millions, Except Per Share Data)
Operating Revenues:
Passenger $14,876 $13,685 $13,180
Cargo 579 557 582
Other, net 433 355 295
Total operating revenues 15,888 14,597 14,057
Operating Expenses:
Salaries and related costs 5,597 4,993 4,850
Aircraft fuel 1,646 1,360 1,507
Depreciation and amortization 1,146 961 860
Other selling expenses 644 641 600
Passenger commissions 722 867 980
Contracted services 893 772 694
Landing fees and other rents 742 707 649
Aircraft rent 694 590 552
Aircraft maintenance materials and outside repairs 681 561 495
Passenger service 471 500 450
Asset writedowns and other special charges 555
Other 809 775 726
Total operating expenses 14,600 12,727 12,363
Operating Income 1,288 1,870 1,694
Other Income (Expense):
Interest income (expense), net (197) (101) (69)
Gains from the sale of investments 1,202 26 - I
Miscellaneous income (expense), net (10) 31 23
Total other income (expense) 995 (44) (46)
Income Before Income Taxes 2,283 1,826 1,648
Income Taxes Provided (914) (725) (647)
Net Income Before Cumulative Effect of
1.00~
I
Change in Accounting Principle, Net of Tax 1,369 1,101
Cumulative Effect of Change in Accounting
Principle, Net of Tax (66)
Net Income 1,303 1,101 1,001
Preferred Stock Dividends (12) (11) (11)
Net Income Available to Common Shareowners $ 1,291 $ 1,090 $ 990
Basic Earnings Per Share Before Cumulative Effect of
Change in Accounting Principle $ 10.42 $ 7.63 $ 6.64
Basic Earnings Per Share $ 9.92 $ 7.63 $ 6.64
Diluted Earnings Per Share Before Cumulative Effect of
Change in Accounting Principle $ 9.90 $ 7.20 $ 6.34
Diluted Earnings Per Share $ 9.42 $ 7.20 $ 6.34
The accompanying notes are an integral part of these consolidated financial statements.
33
Consolidated Balance Sheets
June 30, 2000 and 1999
ASSETS
(In Millions)
Current Assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance for
uncollectible accounts of $34 at June 30, 2000
and $30 at June 30, 1999
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
Investments in associated companies
Cost in excess of net assets acquired, net of
accumulated amortization of $166 at
June 30, 2000 and $121 at June 30, 1999
Leasehold and operating rights, net of accumulated
amortization of $231 at June 30, 2000 and
$220 at June 30, 1999
Other noncurrent assets
Total other assets
Total assets
34
2000
$ 1,252
493
739
356
506
3,346
15,838
5,037
10,801
506
303
203
4,212
2,250
1,962
525
13,491
396
242
2,183
104
804
3,729
$20,566
DELTA AIR LINES , INC .
1999
$ 1,124
19
602
403
524
2,672
13,595
4,405
9,190
515
264
251
3,862
2,123
1,739
493
11,673
523
300
782
113
687
2,405
$16. 750
l
LIABILITIES AND SHAREOWNERS' EQUITY
(In Millions, Except Share Data)
Current Liabilities:
Current maturities of long-term debt
Current obligations under capital leases
Accounts payable and miscellaneous accrued liabilities
Air traffic liability
Accrued salaries and vacation pay
Accrued rent
Total current liabilities
Noncurrent Liabilities:
Long-term debt
Capital leases
Postretirement benefits
Accrued rent
Deferred income taxes
Other
Total noncurrent liabilities
Deferred Credits:
Deferred gains on sale and leaseback transactions
Manufacturers' and other credits
Total deferred credits
Commitments and Contingencies ( Notes 4, 5, 7 and 8)
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 6,455,372 shares at
June 30, 2000 and 6,547,495 shares at June 30, 1999
Unearned compensation under employee stock ownership plan
Total Employee Stock Ownership Plan Preferred Stock
Shareowners' Equity:
Common stock, $1.50 par value;
450,000,000 shares authorized; 180,356,181 shares issued at
June 30, 2000 and 179,763,547 shares at June 30, 1999
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
Treasury stock at cost, 57,716,615 shares at
June 30, 2000 and 41,209,828 shares at June 30, 1999
Total shareowners' equity
Total liabilities and shareowners' equity
The accompanying notes are an integral part of these consolidated financial statements.
$
2000
526
43
2,738
1,920
500
213
5,940
4,378
147
2,008
742
869
458
8,602
592
345
937
465
(251)
214
271
3,245
4,043
40
(2,726)
4,873
$20,566
I
$
1999
660
39
2,209
1,819
470
195
5,392
1,756
196
1,894
720
755
470
5,791
642
282
924
471
(276)
195
270
3,208
2,756
149
(1,935)
4,448
$16,750
I
35
Consolidated Statements of Cash Flows
For the years ended June 30, 2000, 1999 and 1998 DELTA AIR LINES , IN C .
2000 1999 1998
(In Millions)
Cash Flows From Operating Activities:
Net income $1,303 $1,101 $1,001
Adjustments to reconcile net income to cash
provided by operating activities:
Cumulative effect of change in accounting principle 66
Asset writedowns and other special charges 555
Depreciation and amortization 1,146 961 860
Deferred income taxes 250 353 294
Pension, postretirement and postemployment expense
in excess of payments 36 34 179
Dividends in excess of (less than) equity income 52 (53) (51)
Gains from the sale of investments (1,202) (26)
Income tax benefit from exercise of stock options 4 34 84
Changes in certain current assets and liabilities:
(Increase) decrease in accounts receivable (189) 339 5
Decrease (increase) in prepaid expenses and
other current assets 58 (176) 15
Increase in air traffic liability 89 152 249
Increase in other payables and accrued expenses 14 77 330
Other, net 196 141 34
Net cash provided by operating activities 2,378 2,937 3,000
Cash Flows From Investing Activities:
Property and equipment additions:
Flight equipment, including advance payments (2,733) (2,258) (1,760)
Ground property and equipment (556) (561) (531)
(Increase) decrease in short-term investments, net (310) 568 (43)
Proceeds from sale of flight equipment 256 30 10
Proceeds from sale of investments 1,240 26
Prepayment of long-term lease obligations (215)
Acquisition, net of cash acquired (1,584) (570)
Net cash used in investing activities (3,902) (2,765) (2,324)
Cash Flows From Financing Activities:
Payments on long-term debt and capital
lease obligations (2,099) (154) (307)
Payments on notes payable - (277)
Cash dividends (42) (43) (43)
Issuance of long-term obligations 4,472 324 125
Issuance of short-term obligations 83 779
Issuance of common stock 28 131 318
Repurchase of common stock (790) (885) (354)
Net cash provided by (used in) financing activities 1,652 (125) (261)
Net Increase in Cash and Cash Equivalents 128
Cash and cash equivalents at beginning of year 1,124
Cash and cash equivalents at end of year $1,252
=
Supplemental disclosure of cash paid for:
Interest, net of amounts capitalized 320
Income taxes 332
47
j 415
1,077 662
$1,124 $1,077
~ 152
2 244
The accompanying notes are an integral part of these consolidated financial statements.
36
Consolidated Statements of Shareowners' Equity
For the years ended June 30, 2000, 1999 and 1998 DELTA AIR LINES , INC .
Accumulated
Additional Other
Common Paid-In Retained Comprehensive Treasury
(In Millions, Except Share Data) Stock Capital Earnings Income Stock Total
Balance at June 30, 1997 $251 $2,645 $ 711 $101 $ (701) $3,007
I
Fiscal Year 1998:
Net income 1,001 1,001
Dividends on common stock ($0.10 per share) (15) (15)
Dividends on Series B ESOP Convertible
Preferred Stock allocated shares (11) (11)
Issuance of 9,276,084 shares of common stock
under dividend reinvestment and stock purchase
plan and stock options ($34.28 per share*) 14 304 318
Repurchase of 6,316,746 common shares
($56.04 per share*) (354) (354)
Income tax benefit from exercise of stock options 84 84
Transfer of 99,082 shares of common stock from
treasury under stock incentive plan
($38.59 per share*) 3 3
Accumulated other comprehensive income (12) (12)
Other 1
1.68~
I
2
Balance at June 30, 1998 265 3,034 89 (1,052) 4,023
Fiscal Year 1999:
Net income 1,101 1,101
Dividends on common stock ($0.10 per share) (14) (14)
Qividends on Series B ESOP Convertible
Preferred Stock allocated shares (11) (11)
Issuance of 3,197,369 shares of common stock
under dividend reinvestment and stock purchase
plan and stock options ($41.01 per share*) 5 126 131
Repurchase of 15,149,658 common shares
($58.45 per share*) (885) (885)
Income tax benefit from exercise of stock options 34 34
Transfer of 55,614 shares of common stock from
treasury under stock incentive plan
($36.54 per share*) 2 2
Accumulated other comprehensive income 60 60
Other 14 (7) 7
Balance at June 30, 1999 270 3,208 2,756 149 (1,935) 4,448
Fiscal Year 2000:
Net income 1,303 1,303
Dividends on common stock ($0.10 per share) (13) (13)
Dividends on Series B ESOP Convertible
Preferred Stock allocated shares (12) (12)
Issuance of 592,634 shares of common stock
under dividend reinvestment and stock purchase
plan and stock options ($47.83 per share*) 1 27 28
Repurchase of 16,480,400 common shares
($47.93 per share*) (790) (790)
Income tax benefit from exercise of stock options 4 4
Transfers and forfeitures of 28,967 shares of
common stock under stock incentive plan
($56.48 per share*) (1) (1)
Accumulated other comprehensive income (109) (109)
Other 6 9 15
Balance at June 30, 2000 $271 $3,245 $4,043 $ 40 $(2,726) $4,873
* Average price per share.
The accompanying notes are an integral part of these consolidated financial statements.
37
Notes to the Consolidated Financial Statements
June 30, 2000, 1999 and 1998
1. Summary of Significant Accounting Policies
Basis of Presentation - Delta Air Lines, Inc.
(a Delaware corporation) is a major air carrier
that provides air transportation for passengers
and freight throughout the United States and
around the world. Our consolidated financial
statements include the accounts of Delta Air
Lines, Inc. and our majority-owned subsidiaries
(Delta). We have eliminated all significant inter-
company transactions. Purchased companies are
included from the date of acquisition. We have
reclassified certain amounts from prior years to be
consistent with the presentation in our fiscal 2000
financial statements. (See Note 18 of the Notes to
the Consolidated Financial Statements.)
Use of Estimates-We are required to make estimates
and assumptions when preparing our financial state-
ments in conformity with generally accepted account-
ing principles. These estimates and assumptions
affect the amounts reported in our financial state-
ments and the accompanying notes. Actual results
could differ from those estimates.
Cash and Cash Equivalents-We classify short-term,
highly liquid investments with original maturities of
three months or less as cash and cash equivalents.
These investments are stated at cost, which approxi-
mates fair value.
Passenger and Cargo Revenues - We record sales
of passenger tickets and cargo services as air
traffic liability on our Consolidated Balance Sheets.
Passenger and cargo revenues are recognized and
the related air traffic liability is reduced when we
provide the transportation. We periodically evaluate
the estimated air traffic liability. Any resulting
adjustments, which can be significant, are included
in the Consolidated Statements of Income in
the period that the evaluations are completed.
Property and Equipment-Property and equipment is
recorded at cost and depreciated on a straight-line
basis to estimated residual values over their esti-
mated useful lives. The estimated useful lives for
major asset classifications are as follows:
Asset Classification
Owned flight equipment
Flight equipment under capital lease
Ground property and equipment
Leasehold rights and landing slots
Estimated
Useful Life
15-25 years
Lease Term
3 -30 years
Lease Term
Residual values for flight equipment range from
5%-25% of cost. Purchased international route
38
DELTA AIR LINES , INC .
authorities are amortized over the lives of the
authorities as determined by their expiration dates.
Permanent route authorities with no stated expira-
tion dates are amortized over 40 years. Our cost
in excess of net assets acquired (goodwill) is amor-
tized over 40 years and is primarily related to our
acquisitions of Comair Holdings, Inc. (Comair Holdings)
in November 1999, ASA Holdings, Inc. (ASA Holdings)
in March 1999, and Western Air Lines, Inc. in
December 1986. Comair Holdings is the parent of
Comair, Inc. (Comair) and ASA Holdings is the parent
of Atlantic Southeast Airlines, Inc. (ASA). Comair and
ASA are participants in the Delta Connection program.
Interest Capitalized - Interest paid on advance pay-
ments used to acquire new aircraft and to construct
ground facilities is capitalized as an additional cost
of the related assets. We capitalize interest at our
weighted average interest rate on long-term debt or, if
applicable, the interest rate related to specific borrow-
ings. Interest capitalization ends when the property or
equipment is ready for service or its intended use.
Measurement of Impairment- In accordance with
Statement of Financial Accounting Standards
(SFAS) 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be
Disposed Of, " we record impairment losses on long-
lived assets used in operations, goodwill and other
intangible assets when events and circumstances
indicate the assets may be impaired and the undis-
counted cash flows estimated to be generated by
those assets are less than their carrying amounts.
If an impairment has occurred , the amount of the
impairment recognized is determined by estimating
the fair value of the assets and recording a provi-
sion for loss if the carrying value is greater than the
fair value.
Investments in Associated Companies - We use
the equity method to account for our 40% owner-
ship interest in WORLDSPAN, L.P., a computer reser-
vations system partnership. Our equity earnings
from this investment totaled $48 million in fiscal
2000, $22 million in fiscal 1999, and $14 million
in fiscal 1998. We accounted for our investments in
Comair Holdings and ASA Holdings under the equity
method until November 22, 1999 and March 22,
1999, the respective dates of acquisition.
Frequent Flyer Program- Delta records an esti-
mated liability for the incremental cost associated
with providing free transportation under its SkyMiles
frequent flyer program when a free travel award is
earned. The liability is included in accounts payable
and miscellaneous accrued liabilities, and is adjusted
periodically based on awards earned, awards
redeemed and changes in the SkyMiles program.
Deferred Gains on Sale and Leaseback Transactions -
Deferred gains on the sale and leaseback of prop-
erty and equipment under operating leases are amor-
tized over the lives of these leases. The gains are
reflected as a reduction in rent expense. Gains on
the sale and leaseback of property and equipment
under capital leases reduce the carrying value of the
related assets.
Manufacturers ' Credits- We periodically receive
credits in connection with the acquisition of aircraft
and engines. These credits are deferred until the
aircraft and engines are delivered, then applied on
a pro rata basis as a reduction to the cost of the
related equipment.
Advertising Costs- We expense advertising costs
as other selling expenses in the fiscal year incurred.
Advertising expense for fiscal 2000, 1999 and
1998 totaled $134 million, $136 million and
$105 million, respectively.
Foreign Currency Remeasurement- Assets and
liabilities denominated in foreign currencies are
generally remeasured using exchange rates in
effect on the balance sheet date. Revenues and
expenses denominated in foreign currencies are
generally remeasured using average exchange
rates for the periods presented. We recognize the
resulting foreign exchange gains and losses as
a component of miscellaneous income (expense).
Fixed assets and the related depreciation or
amortization charges are recorded at the exchange
rates in effect on the date we acquired the assets.
Stock-Based Compensation - Stock-based compensa-
tion is accounted for in accordance with Accounting
Principles Board Opinion (APB) 25, "Accounting for
Stock Issued to Employees." Under APB 25, we do
not recognize compensation expense for a stock
option grant if the exercise price at the measurement
date is equal to or greater than the fair market value
of our common stock on the grant date (see Note 15).
Stock Split- On November 2, 1998, our two-for-one
common stock split became effective. All references
in this annual report to the number of shares of
common stock (including references to our broad-
based employee stock option programs and our
common stock repurchase programs), our earnings
per share and our per share common stock prices
have been restated to reflect the stock split.
Derivatives and Hedging Activities- In June 1998, the
FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities. " SFAS 133
requires us to recognize all derivatives on the
balance sheet at fair value. Derivatives that are
not designated as part of a hedging relationship
must be adjusted to fair value through income. If
the derivative is a hedge, depending on the nature
of the hedge, the effective portion of the hedge's
change in fair value is either (1) offset against the
change in fair value of the hedged asset, liability or
firm commitment through income or (2) held
in equity until the hedged item is recognized in
income. The ineffective portion of a hedge's
change in fair value is immediately recognized in
income. We will adopt SFAS 133, as amended, on
July 1, 2000.
New Accounting Standards- During fiscal 2000,
we adopted Staff Accounting Bulletin (SAB) 101,
"Revenue Recognition in Financial Statements"
(see Note 18). We also adopted Statement of
Position (SOP) 98-1, "Accounting for Costs of
Computer Software Developed or Obtained for
Internal Use. " The adoption of SOP 98-1 did not
have a material impact on our consolidated finan-
cial statements. During fiscal 1999, we adopted
SFAS 130, "Reporting Comprehensive Income"
(see Note 12), and SFAS 131, "Disclosures about
Segments of an Enterprise and Related Information"
(see Note 13). During fiscal 1998, we adopted
SFAS 128, "Earnings Per Share" (see Note 14),
and SFAS 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits"
(see Note 9).
2. Financial Instruments
Our financial instruments, except long-term debt
and our investment in Worldspan , are carried at fair
value or have a carrying value which approximates
fair value.
Short-Term Investments
Delta invests cash in excess of operating require-
ments in short-term, highly liquid investments. These
investments are classified as available-for-sale
39
Notes to the Consolidated Financial Statements
June 30, 2000, 1999 and 1998
securities and are stated at fair value. The aggre-
gate fair value of short-term investments totaled
$493 million and $19 million at June 30, 2000 and
1999, respectively. Accumulated other comprehen-
sive income includes unrealized gains and losses
from these investments, net of related deferred
taxes. The unrealized gains and losses from our
short-term investments were not material at
June 30, 2000 and 1999.
Marketable Equity Securities
We sold our equity investments in Singapore
Airlines and SAirGroup during fiscal 2000, and recog-
nized pretax gains of $137 million and $29 million,
respectively. Our investment in SkyWest, Inc. is
classified as an available-for-sale security under
SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities," and is recorded at fair
value. The following table summarizes these invest-
ments at June 30, 2000 and 1999:
Quoted Cost Unrealized
(In Millions) Fair Value Basis Gain
June 30, June 30,
2000 1999 2000 1999
Singapore Airlines $ - $335 $ - $ - $154
SAirGroup $ - $110 $ - $ - $ 25
SkyWest $1.1.5 $ 78 $14 $101 $ 64
Accumulated other comprehensive income
includes the aggregate unrealized gains from
our outstanding investments, net of the related
deferred tax provision, at June 30, 2000 and 1999.
Convertible Securities
priceline.com, Inc. - During fiscal 1999, we entered
into an agreement with priceline.com (priceline) under
which ticket inventory provided by Delta may be sold
through priceline's Internet-based e-commerce sys-
tem. As part of this agreement, we received a warrant
to purchase up to 18.6 million shares of priceline
common stock for $0.93 per share. We did not
recognize the value of the warrant in fiscal 1999
because its estimated fair value was not material.
The warrant became fully exercisable on July 25,
1999.
We partially exercised the warrant on August 17,
1999, and exercised the remainder of the warrant
on November 17, 1999. As a result of these
exercises, we acquired 18.3 million shares of price-
line common stock. We sold 12.3 million of these
shares during fiscal 2000, and recognized a pretax
40
DELTA AIR LINES , IN C .
cash gain of $784 million.
On November 17, 1999, price line and Delta
amended their original agreement. As a result of the
amendment, Delta received (1) the right to exchange
(exchange right) 6 million shares of priceline com-
mon stock for 6 million shares of priceline convert-
ible preferred stock; and (2) a new warrant (new
warrant) to acquire 5.5 million shares of priceline
common stock for $56.625 per share. The new
warrant may become exercisable in phases prior
to December 31, 2000 if certain conditions are
met. To the extent the conditions are met and the
warrant becomes exercisable, it will expire on
November 17, 2004. To the extent the conditions
are not met, the new warrant will become exercisable
on November 17, 2004 for a period of six months.
On June 30, 2000, we exercised our exchange
right in full, receiving six million shares of priceline
convertible preferred stock. These shares (1) have
a stated value of $59.93 per share; (2) are convert-
ible into shares of priceline common stock on a
one-for-one basis; (3) bear a dividend of 8% per year,
payable in shares of priceline common stock;
(4) may be redeemed by priceline after April 1, 2003
for $59.93 per share plus accrued and unpaid divi-
dends; and (5) are subject to mandatory redemption
on April 1, 2010. As a result of the exchange, we
recognized a pretax non-cash gain of $228 million.
The convertible preferred stock, the new war-
rant, and the shares of priceline common stock
underlying these securities are not registered under
the Securities Act of 1933, but we have certain
demand and piggyback registration rights relating to
the underlying shares of priceline common stock.
Based on an independent third party appraisal,
the total fair value of the new warrant on the date
received was determined to be $61 million. This
amount will be recognized in income ratably over a
three year period. The new warrant is reflected at its
current estimated fair value in marketable equity
securities on our Consolidated Balance Sheet as of
June 30, 2000. Under our agreement with priceline,
we are required to provide priceline access to
unpublished fares.
Equant, N. V. -During fiscal 2000 and fiscal 1999,
we sold a portion of our equity interest in Equant,
realizing pretax gains of $24 million and $26 million,
respectively. At June 30, 2000, we owned 540,852
depository certificates convertible, subject to cer-
tain conditions, into common stock of Equant. Our
equity interest is not recorded on our Consolidated
Balance Sheets at June 30, 2000. The shares of
Equant common stock underlying these certificates
had an estimated fair market value of $23 million at
June 30, 2000.
Long-Term Debt
The following table shows the estimated fair value
and carrying value of our long-term debt, including cur-
rent maturities, at June 30, 2000 and 1999:
(In Billions)
Fair value
Carrying value
2000
$4.7
$4.9
Fair values are estimated based on quoted
market prices, where available, or on discounted
cash flow analyses. Changes in assumptions or
estimation methods may significantly affect these
fair value estimates.
3. Income Taxes
Deferred income taxes reflect the net tax effect of
timing differences between the carrying amounts of
assets and liabilities for financial reporting purposes
and for income tax purposes. The table below shows
significant components of our deferred tax assets and
liabilities at June 30, 2000 and 1999:
(In Millions) 2000 1999
Deferred Tax Assets:
Postretirement benefits $ 810 $ 766
Other employee benefits 340 335
Gains on sale and
leaseback transactions (net) 216 296
Rent expense 218 206
Spare parts repair expense 159 151
Alternative minimum
tax credit carryforwards 27
Other 271 171
Total deferred tax assets $2,014 $1,952
Deferred Tax Liabilities:
Depreciation and amortization $2,158 $1,960
Other 369 344
Total deferred tax liabilities $2,527 $2,304
Income taxes provided in fiscal 2000, 1999 and
1998 consisted of:
(In Millions) 2000 1999 1998
Current taxes $(665) $(372) I $(353)
Deferred taxes (254) (358) (298)
Tax benefit of dividends
on allocated Series B
ESOP Convertible
Preferred Stock 5 5 4
Income taxes provided $(914) $(725) $(647)
The following table presents the principal rea-
sons for the difference between the effective tax
rate and the United States federal statutory income
tax rate for fiscal 2000, 1999 and 1998:
2000 1999 1998
U.S. federal statutory
income tax rate 35% 35% 35%
State taxes, net of federal
income tax effect 3.6% 3.6% 3.3%
Meals and entertainment .8% .8% .8%
Amortization .6% .2% .2%
Other, net -% .1% ~
Effective income tax rate 40.0% 39.7% 39.3%
4. Risk Management
Fuel Price Risk Management
We use options and other non-leveraged, over-
the-counter instruments, which have maturities of up
to 36 months, to manage the risk associated with
changes in aircraft fuel prices. The changes in the
market value of our hedging contracts have a high cor-
relation to changes in aircraft fuel prices. Gains and
losses from fuel hedging contracts are recognized
as part of fuel expense when we use the underly-
ing fuel being hedged. Premiums paid to enter into
hedging contracts are recorded as prepaid expenses
and amortized on a straight-line basis to fuel expense
over the contract settlement period. We do not enter
into fuel hedging contracts for speculative purposes.
At June 30, 2000, we had outstanding hedge
agreements for a total of 2.8 billion gallons of our pro-
jected aircraft fuel requirements for the period July 1,
2000 through June 30, 2003, including approximately
51% of our projected aircraft fuel requirements for the
year ending June 30, 2001. At June 30, 2000, our
fuel hedging contracts had an estimated fair value of
$704 million, with unrealized gains of $555 million.
41
Notes to the Consolidated Financial Statements
June 30, 2000, 1999 and 1998
Foreign Currency Exchange Risk Management
From time to time, Delta enters into foreign cur-
rency option and forward contracts to manage the
risk associated with foreign currency-denominated
transactions. Contracts are denominated in the same
currency in which the projected foreign cash flows are
expected to occur and have maturities of up to twelve
months. The estimated fair value of our foreign cur-
rency contracts was not material at June 30, 2000
and 1999. We do not enter into foreign currency hedg-
ing contracts for speculative purposes.
We recognize the gains and losses from foreign
currency exchange contracts as a component of mis-
cellaneous income (expense) as we recognize the
underlying transaction. These gains and losses were
not material for any period presented in our consoli-
dated financial statements.
5. Long-Term Debt
D E LT A A IR L I NES , I NC
Credit Risk Management
To manage credit risk associated with our fuel
price and foreign currency exchange risk management
programs, we select counterparties based on their
credit ratings and limit our exposure to any one coun-
terparty under defined guidelines. We also monitor the
market position of these programs and our relative
market position with each counterparty. The credit
exposure related to these programs was not signif-
icant at June 30, 2000.
Our accounts receivable are generated largely
from the sale of passenger airline tickets and
cargo transportation services to customers who
are economically and geographically dispersed.
In addition, our accounts receivable are generally
short-term in duration. Therefore, we believe we
have no significant concentration of credit risk.
The following table summarizes our long-term debt, including current maturities, at June 30, 2000 and 1999:
(In Millions)
8.3% Notes, unsecured, due December 15, 2029
8.125% Notes, unsecured, due July 1, 2039
2000 I
$1,000 1
538
1999 !
$
1999 Bank Credit Agreement, unsecured, 5.92% interest, due March 22, 2001
7.7% Notes, unsecured, due December 15, 2005
500
500
500
7 .9% Notes, unsecured, due December 15, 2009 500
Development Authority of Clayton County 2000, unsecured loan agreement, -1
Series 2000A $65 million due June 1, 2029, 4. 7% interest; Series 2000B $116 million due
May 1, 2035, 4.8% interest; and Series 2000C $120 million due May 1, 2035, 4.9% interest
6.65% Medium-Term Notes, Series C, unsecured, due March 15, 2004
301
300 300
8.1% Series C Guaranteed Serial ESOP Notes, unsecured,
due in installments between 2002 and 2009 290 290
9.75% Debentures, unsecured, due May 15, 2021 250
Other unsecured debt due 2000 to 2022; Interest rates of 5.3% to 10.375%
158
I
817 1,076
Total 4,904 2,416
Less: Current maturities 526 660
Total long-term debt $4,378 $1,756
Our variable interest rate long-term debt is shown using interest rates in effect at June 30, 2000.
Fiscal 2000 Financings
In July 1999, we issued $538 million of 8.125%
unsecured notes in a public offering for general cor-
porate purposes. The notes mature on July 1, 2039,
but we may redeem the notes, in whole or in part,
at par on or after July 1, 2004.
In November 1999, we borrowed $1.6 billion
under a new term loan facility to finance our acquisi-
tion of Comair Holdings (see Note 17). In December
1999, we issued $2.0 billion aggregate principal
amount of senior unsecured notes in a private
42
placement, consisting of $500 million of 7. 7% notes
due 2005, $500 million of 7 .9% notes due 2009, and
$1 billion of 8.3% notes due 2029. The net proceeds
from this offering were used to repay the $1.6 billion
outstanding under the term loan facility described
above; to fund the $200 million balance of the pur-
chase price of our acquisition of Comair Holdings;
and for general corporate purposes. In March 2000,
we completed an exchange offer under which the
notes issued in December 1999 (Old Notes) were
exchanged for new notes (New Notes). The New
Notes are substantially similar to the related series
of Old Notes, except the New Notes are registered
under the Securities Act of 1933.
In June 2000, the Development Authority of
Clayton County (Development Authority) issued
$301 million aggregate principal amount of bonds
in three series with scheduled maturities between
2029 and 2035. The proceeds of this sale were
loaned to us to refund bonds that had been issued
to finance certain Delta facilities at Hartsfield
Atlanta International Airport.
The Development Authority bonds currently bear
interest at a variable rate which is determined weekly.
The bonds may be tendered for purchase by their
holders on seven days notice. Subject to certain con-
ditions, tendered bonds will be remarketed at then
prevailing interest rates.
Principal and interest on the bonds, and the
payment of the purchase price of bonds tendered for
purchase, are presently paid under three uncondi-
tional, direct-pay letters of credit totaling $305 million
issued by a bank under a Reimbursement Agreement
between Delta and a group of banks (Reimbursement
Agreement). The Reimbursement Agreement generally
provides that, if there is a drawing under the letters of
credit to purchase bonds that have been tendered for
purchase, Delta may convert its repayment obligation
to a loan that becomes due and payable on the earlier
of (1) the date the bonds are remarketed; or (2) the
June 8, 2003 expiration date of the related letters
of credit. Unless the existing letters of credit are
extended, a mandatory tender of the bonds for pur-
chase will occur on the fifth day prior to the expiration
of such letters of credit. Among other options, Delta
could seek to replace the expiring letters of credit with
new letters of credit from an alternate credit provider
and remarket the bonds.
1997 Bank Credit Agreement
Under our 1997 Bank Credit Agreement with a
group of banks, we may borrow up to $1.25 billion on
an unsecured and revolving basis until May 1, 2002,
subject to our compliance with certain conditions.
We may use up to $700 million of this facility for the
issuance of letters of credit. The interest rate under
this facility is, at our option, LIBOR or the prime rate,
plus a margin that is dependent on Delta's long-term
senior unsecured debt ratings. We can also obtain
loans through a competitive bid procedure.
The 1997 Bank Credit Agreement contains nega-
tive covenants that place certain limits on our ability
to secure our property or assets; to incur or guarantee
debt; and to enter into flight equipment leases. It also
provides that, upon the occurrence of a change in
control of Delta, (1) the banks' obligation to extend
credit terminates; (2) any amounts outstanding under
the 1997 Bank Credit Agreement become due and
payable; and (3) Delta must deposit cash collateral
with the banks in an amount equal to all letters of
credit outstanding under that agreement. At June 30,
2000, there were no borrowings or letters of credit
outstanding under the 1997 Bank Credit Agreement.
1999 Bank Credit Agreement
During fiscal 1999, we entered into a $500 mil-
lion credit agreement with a group of banks to
finance a portion of our acquisition of ASA Holdings
(see Note 17). The interest rate is, at our option ,
LIBOR or the prime rate, plus a margin that is depen-
dent on Delta's long-term senior unsecured debt
ratings. This agreement expires on March 22, 2001,
and we may prepay the outstanding borrowings at
any time. At June 30, 2000, $500 million was out-
standing under this agreement.
Series C ESOP Notes
At June 30, 2000, there were outstanding
$290 million principal amount of the Delta Family-
Care Savings Plan's Series C Guaranteed Series
ESOP Notes (Series C ESOP Notes). The notes, which
are payable in installments between 2002 and 2009,
are guaranteed by Delta. We are required to purchase
the Series C ESOP Notes at the option of the note-
holders in certain circumstances if the notes are not
rated at least A3 by Moody's and A- by Standard &
Poor's (required ratings). Our purchase price would be
equal to the principal amount of the Series C ESOP
Notes being purchased plus accrued interest and, if
applicable, a make whole premium amount.
The holders of the Series C ESOP Notes are
presently entitled to the benefits of an unconditional,
direct-pay letter of credit issued by Bayerische
Hypo-Und Vereinsbank AG under a credit agreement
between Delta and a group of banks (the Letter of
Credit Facility). Required payments of principal, inter-
est and make whole premium amount on the Series C
ESOP Notes are paid under the letter of credit. At
43
Notes to the Consolidated Financial Statements
June 30, 2000, 1999 and 1998
June 30, 2000, the letter of credit totaled $421 mil-
lion, covering the $290 million outstanding principal
amount of the Series C ESOP Notes, approximately
one year of interest on the notes and $98 million of
make whole premium amount.
The Letter of Credit Facility and the related letter
of credit expire on May 19, 2003. The Letter of Credit
Facility provides that, if there is a drawing under the
letter of credit, Delta must immediately repay the
amount drawn or convert its repayment obligation to
a short-term loan.
Due to the existence of the letter of credit, the
Series C ESOP Notes currently have the required rat-
ings. However, these ratings are subject to change at
any time. The Series C ESOP Notes are not likely to
receive the required ratings without a credit enhance-
ment such as the letter of credit, unless Delta's long-
term senior unsecured debt is rated at least A3 by
Moody's and A- by Standard & Poor's. At June 30,
2000, our long-term senior unsecured debt was
rated Baa3 and BBB-, respectively.
Covenants and Change in Control Provisions
The Reimbursement Agreement, the 1999 Bank
Credit Agreement and the Letter of Credit Facility con-
tain negative covenants and a change in control pro-
vision that are similar to or less restrictive than the
corresponding provisions in our 1997 Bank Credit
Agreement. The 1999 Bank Credit Agreement also
requires us to maintain a specified coverage ratio as
of the last day of each fiscal quarter if our senior
unsecured debt is rated below investment grade.
Our debt agreements do not limit the payment
of dividends on our capital stock. The terms of the
Series B ESOP Convertible Preferred Stock limit our
ability to pay cash dividends to our common share-
owners in certain circumstances (see Note 10).
ASA's credit agreements contain negative
covenants that apply only to the financial position
of ASA. The covenants, among other things, limit
ASA's ability to transfer funds in the form of cash divi-
dends, loans or advances. At June 30, 2000, approxi-
mately $300 million of ASA's net assets were subject
to these restrictions and approximately $60 million of
net assets were available for distribution by ASA to
Delta under the most restrictive of these provisions.
44
DELTA A I R LINES , INC .
Future Maturities
At June 30, 2000, the scheduled maturities of
our long-term debt during the next five fiscal years
were as follows:
Year Ending June 30,
(In Millions)
2001
2002
2003
2004
2005
After 2005
Principal
Amount
$ 526
90
61
356
569
3,302
Capitalized interest totaled $49 million, $46
million and $38 million in fiscal 2000, 1999 and
1998, respectively.
6. Asset Writedowns and Other Special Charges
In fiscal 2000, we recorded pretax charges
total ing $555 million for the following:
Management decided to accelerate the planned
retirement of our 16 MD-90 aircraft and 8 owned
MD-11 aircraft as part of our fleet simplification
strategy. As a result, we reviewed these fleet types
for impairment, determining that the estimated
future cash flows generated by these aircraft are
less than their carrying values. The estimated future
cash flows were based on projections of passenger
yield, fuel costs, labor costs and other relevant fac-
tors in the markets in which these aircraft will oper-
ate. These aircraft were written down to their fair
values, as estimated by management using pub-
lished sources and bids received from third parties.
Due to this impairment analysis, we recorded a pre-
tax asset writedown of $320 million in the quarter
ended December 31, 1999.
We changed our business practice regarding the dis-
posal of surplus aircraft parts and entered into an
agreement to sell all of our existing surplus aircraft
parts inventory to a third party. Accordingly, we
wrote down surplus aircraft parts and obsolete
flight equipment and parts to their estimated fair
values. We determined the estimated fair value
of inventory using the negotiated purchase price.
This resulted in a pretax charge of $107 million in
the quarter ended September 30, 1999. As of June
30, 2000, substantially all of the equipment and
parts under this agreement had been sold and
transferred.
We offered an early retirement medical option
to allow eligible Delta employees to retire with
continued medical coverage without paying cer-
tain early retirement medical premiums. Approxi-
mately 2,500 employees elected to participate in
the program. We recorded a pretax charge of
$86 million ($53 million after tax, or $.40 basic
and $.38 diluted EPS) as a result of this program
in the quarter ended June 30, 2000.
Delta implemented certain technology initiatives
which resulted in an abandonment of certain
legacy hardware and software assets. We also
decided to streamline certain administrative pro-
cesses. Accordingly, we recorded a pretax charge
of $42 million in the quarter ended September 30,
1999. We also remeasured the useful lives of cer-
tain technology assets that are still in use but that
will be replaced earlier than originally planned.
The effect on depreciation expense was immate-
rial.
7. Lease Obligations
Delta leases aircraft, airport terminal and main-
tenance facilities, ticket offices, and other property
and equipment. We record rent expense on a straight-
line basis over the life of the lease. Rental expense
for operating leases totaled $1.2 billion, $1.1 billion
and $0.9 billion in fiscal 2000, 1999 and 1998,
respectively. Amounts due under capital leases
are recorded as liabilities. Our interest in assets
acquired under capital leases is shown as assets
on our Consolidated Balance Sheets. Amortization
of assets recorded under capital leases is included
in depreciation expense in our Consolidated
Statements of Income.
The following table summarizes, as of June 30,
2000, our minimum rental commitments under capital
leases and operating leases with initial or remaining
terms of more than one year:
Years Ending June 30, Capital Operating
(In Millions) Leases Leases
2001 $ 57 $1,200
2002 57 1,200
2003 48 1,170
2004 32 1,120
2005 17 1,110
After 2005 23 9,060
Total minimum lease payments 234 $14,860
Less: Amounts of lease payments
which represent interest 44
Present value of future minimum
capital lease payments 190
Less: Current obligations under
capital leases 43
Long-term capital lease obligations $147
As of June 30, 2000, we operated 317 aircraft
under operating leases and 48 aircraft under capital
leases. These leases have remaining terms ranging
from five months to 18 years.
Certain municipalities have issued special
facility revenue bonds to build or improve airport and
maintenance facilities leased to Delta. The facility
lease agreements require Delta to make rental pay-
ments sufficient to pay principal and interest on the
bonds. The above table includes $2.1 billion of
rental commitments for such payments.
8. Purchase Commitments and Contingencies
Future expenditures for aircraft and engines on
firm order as of August 11, 2000 are estimated to
be $9.5 billion. The following table shows the timing
of these commitments:
Years Ending June 30 ,
(In Millions)
2001
2002
2003
2004
2005
After2005
Total
Amount
$2,700
2,300
1,350
1,110
1,360
710
$9,530
45
Notes to the Consolidated Financial Statements
June 30, 2000, 1999 and 1998
We have entered into a joint marketing and
Delta Connection carrier agreement with Atlantic
Coast Airlines Holdings, Inc. (ACA) and its newly
formed operating affiliate, Atlantic Coast Jet, Inc.
(ACJet). Under this agreement, Delta schedules
certain regional jets operated by ACJet, and sells
the seats on and retains the revenue from those
flights. We pay ACJet an amount that is based on
its costs to operate those flights and a specified
margin. We estimate these payments will be $73
million for the twelve months ending June 30,
2001. This agreement expires on March 31, 2010,
but may be terminated by Delta at an earlier date
in certain circumstances.
Delta is a defendant in legal actions relating
to antitrust matters, employment practices, environ-
mental issues, and other matters concerning our
business. Although the ultimate outcome of these
matters cannot be predicted with certainty, we believe
that the resolution of these actions is not likely to
have a material adverse effect on our consolidated
financial statements.
Delta self-insures a portion of its losses from
claims related to workers' compensation, environ-
mental, physical damage and general liability. Losses
are accrued based on an estimate of the ultimate
aggregate liability for claims incurred, using certain
actuarial assumptions followed in the insurance
industry and based on Delta's experience.
Approximately 16% of our employees are covered
by collective bargaining agreements. See "Collective
Bargaining Matters" on page 30 of Management's
Discussion and Analysis for additional information on
this subject.
9. Employee Benefit Plans
Delta sponsors defined benefit and defined contri-
bution pension plans, healthcare plans, and disability
and survivorship plans for eligible employees, their eli-
gible family members and retirees. We reserve the
right to modify or terminate these plans as to all par-
ticipants and beneficiaries at any time, except as
restricted by the Internal Revenue Code or ERISA.
Defined Benefit Pension Plans
Our qualified defined benefit pension plans cur-
rently meet or exceed ERISA's minimum funding
requirements.
DELTA A I R LINES , I NC
The following table shows the change in pro-
jected benefit obligation for our defined benefit pen-
sion plans for the plan years ended June 30, 2000
and 1999:
(In M1ll1ons)
Projected benefit obligation at
beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Plan amendments
Projected benefit obligation at end of year
2000
$8,872
251
644
(402)
(491)
27
$8,901
1999
$8,342
240
585
158
(45~)
I
$8,872
The following table shows the change in the fair
value of our defined benefit pension plan assets for
the plan years ended June 30, 2000 and 1999:
(In Millions)
Fair value of plan assets at
beginning of year
Actual return on plan assets
Employer contributions
Benefits paid
Fair value of plan assets at end of year
2000
$ 9,020
2,144
48
(491) I
$10,721
1999
$9,121 1
310
45
(456)
$9,020
The accrued pension cost recognized for these
plans on our Consolidated Balance Sheets at
June 30, 2000 and 1999 is computed as follows:
(In M1ll1ons)
Funded status
Unrecognized net actuarial gain
Unrecognized transition obligation
Unrecognized prior service cost
Contributions made between
April 1 and June 30
Intangible asset
Other comprehensive income
Accrued pension cost recognized
in the Consolidated Balance Sheets
2000
$1,820
(2,301)
58
57
14
(9)
(1)
$ (362)
1999 I
$ 148
(607)
60
37
12
(13)
___@_
$(365)
Net periodic pension cost for fiscal 2000, 1999
and 1998 included the following components:
(In Millions) 2000 1999 1998
Service cost $ 251 $ 240 $ 209
Interest cost 644 585 575
Expected return on
plan assets (852) (776) (685)
Amortization of prior
service cost 4 5 3
Recognized net actuarial
- I I
(gain) loss - (4)
Amortization of
net transition obligation 2 2 2
Net periodic
pension cost $ 49 $ 56 $100
We used the following actuarial assumptions to
determine the actuarial present value of our projected
benefit obligation:
March 31: 2000 1999
Weighted average discount rate 8.25% 7.25%
Rate of increase in
future compensation levels 4.93% 4.43%
Expected long-term rate of
return on plan assets 10.00% 10.00%
Delta also sponsors non-qualified pension
plans which are funded from current assets. The
accumulated benefit obligation of these plans
totaled $337 million at March 31, 2000, and
$301 million at March 31, 1999.
Defined Contribution Pension Plans
Delta Pilots Money Purchase Pension Plan (MPPP) -
We contribute 5% of covered pay to the MPPP for each
eligible Delta pilot. The MPPP is related to the Delta
Pilots Retirement Plan. The defined benefit pension
payable to a pilot is reduced by the actuarial equiva-
lent of the accumulated account balance in the MPPP.
During fiscal 2000, 1999 and 1998, we recognized
expense of $57 million, $53 million and $54 million,
respectively, for this plan.
Delta Family-Care Savings Plan -Our Savings Plan
includes an employee stock ownership plan (ESOP)
feature. Eligible personnel may contribute a portion of
their earnings to the Savings Plan. Delta matches
50% of those contributions with a maximum employer
contribution of 2% of a participant's earnings. We
make quarterly employer contributions by allocating
Series B ESOP Convertible Preferred Stock, common
stock or cash to the plan. These contributions, which
are recorded as salaries and related costs in our
Consolidated Statements of Income, totaled $58 mil-
lion, $52 million and $49 million in fiscal 2000,
1999 and 1998, respectively.
When we adopted the ESOP in 1989, we sold
6,944,450 shares of Series B ESOP Convertible
Preferred Stock to the Savings Plan for $500 million.
We have recorded unearned compensation equal to
the value of the shares of preferred stock not yet
allocated to participants' accounts. We reduce the
unearned compensation as shares of preferred stock
are allocated to participants' accounts. Dividends on
unallocated shares of preferred stock are used for
debt service on the Savings Plan 's Series C ESOP
Notes and are not considered dividends for financial
reporting purposes. Dividends on allocated shares of
preferred stock are credited to participants' accounts
and are considered dividends for financial reporting
purposes. Only allocated shares of preferred stock are
considered outstanding when we compute diluted
earnings per share. At June 30, 2000, 2,971,790
shares of Series B ESOP Convertible Preferred Stock
were allocated to participants' accounts.
Delta Connection Carrier Savings Plans - ASA and
Comair sponsor defined contribution retirement plans
for eligible employees. Eligible personnel may con-
tribute a portion of their earnings to the plans through
payroll deduction. Neither plan had a material impact
on our consolidated financial statements for the
year ended June 30, 2000.
Postretirement Benefits Other Than Pensions
Our medical plans provide medical and dental
benefits to substantially all Delta retirees and their
eligible dependents. Benefits are funded from our
general assets on a current basis. Plan benefits
are subject to copayments, deductibles and other
limits as described in the plans. Benefits are
reduced when a retiree is eligible for Medicare.
The following table shows the change in our accu-
mulated postretirement benefit obligation (APBO) for
the plan years ended June 30, 2000 and 1999:
(In Millions) 2000 1999
APBO at beginning of year $1,612 $1,627
Service cost 38 37
Interest cost 117 112
Benefits paid (80) (71)
Actuarial gain (52) (65)
Substantive plan change 28 (28)
Special termination benefits 86
APBO at end of year $1,749 $1,612
The special termination benefits reflected in
the above table relate to the early retirement medi-
cal option offered to certain Delta employees (see
Note 6).
The following table shows the calculation of the
accrued postretirement benefit cost recognized on
47
Notes to the Consolidated Financial Statements
June 30, 2000, 1999 and 1998
our Consolidated Balance Sheets at June 30, 2000
and 1999:
(In Millions) 2000 1999
Funded status $(1,749) $(1,612) I
Unrecognized net (gain) loss (51) 1
Unrecognized prior service cost (302) (371)
Contributions made between
April 1 and June 30 20 17 I
Accrued postretirement benefit cost recognized
in the Consolidated Balance Sheets $(2,082) $(1,965)
Our net periodic postretirement benefit cost for
fiscal 2000, 1999 and 1998 included the follow-
ing components:
(In Millions) 2000 1999
Service cost $ 38 $37
Interest cost 117 112 110
Amortization of prior
service cost (41) (40) (38)
Recognized net actuarial
(gain) loss -I (2)
Other ~
Net periodic postretirement
-----1
benefit cost $114 $ 99 $103
We used the following actuarial assumptions to
determine the actuarial present value of our APBO:
March 31:
Weighted average discount rate
Assumed health care cost trend rate*
2000
8.25%
7.00%
1999
7.25%
5.50% I
* The assumed healthcare cost trend rate is assumed to decline gradually
to 5.25% in 2003 and remain level thereafter.
A 1% change in the health care cost rate used
in measuring the APBO at March 31, 2000 would
have the following effects:
(In Millions) 1% Increase
Increase (decrease) in
total service and interest cost $ 14
Increase (decrease) in the APBO $176
1% Decrease
$ (16)
$(149)
Postemployment Benefits- Delta provides certain
other welfare benefits to eligible former or inactive
employees after employment but before retirement,
primarily as part of the disability and survivorship
plans.
Postemployment benefit expense (income) was
$11 million in fiscal 2000, $(13) million in fiscal
1999, and $7 4 million in fiscal 1998. We include the
amount funded in excess of the liability in other non-
current assets on our Consolidated Balance Sheets.
48
DELTA A I R LINES, INC .
Future period expenses will vary based on actual
claims experience and the return on plan assets.
Gains and losses occur because actual experience
differs from assumed experience. These gains and
losses are amortized over the average future service
period of employees. We also amortize differences in
prior service costs resulting from amendments affect-
ing the benefits of retired and inactive employees.
We continually evaluate ways to better manage
employee benefits and control costs. Any changes to
the plans or assumptions used to estimate future
benefits could have a significant effect on the amount
of the reported obligation and future annual expense.
10. Common and Preferred Stock
In fiscal 2000, we issued 376,412 shares of
common stock under our broad-based employee stock
option plans, and a total of 216,222 shares of com-
mon stock under our 1989 Stock Incentive Plan ,
Dividend Reinvestment and Stock Purchase Plan, and
Non-Employee Directors' Stock Plan. During fiscal
2000, we repurchased 16.5 million shares of com-
mon stock as part of our share repurchase programs
described in Note 11.
At June 30, 2000, 66.6 million shares of our
common stock were reserved for issuance, including
38.2 million common shares under our broad-based
employee stock option plans, and 11.1 million
common shares for conversion of the Series B
ESOP Convertible Preferred Stock.
The Series B ESOP Convertible Preferred Stock
pays a cumulative cash dividend of 6% per year per
share; is convertible into 1. 7155 shares of common
stock at a conversion price of $41.97 per share;
and has a liquidation price of $72 per share, plus
accrued and unpaid dividends. The preferred stock
generally votes together as a single class with the
common stock and has two votes per share. It is
redeemable at our option at $72 per share, payable
in cash or common stock. We cannot pay cash divi-
dends on common stock until all cumulative divi-
dends on the preferred stock have been paid. The
conversion rate, conversion price and voting rights
of the preferred stock are subject to adjustment in
certain circumstances.
The Shareowner Rights Plan is designed to pro-
tect shareowners against attempts to acquire Delta
that do not offer an adequate purchase price to all
shareowners, or are otherwise not in the best interest
of Delta and our shareowners. Under the plan, each
outstanding share of common stock is accompanied
by one-half of a preferred stock purchase right. Each
whole right entitles the holder to purchase 1/
100 of a
share of Series D Junior Participating Preferred Stock
at an exercise price of $300, subject to adjustment.
The rights become exercisable only after a person
acquires, or makes a tender or exchange offer that
would result in the person acquiring, beneficial owner-
ship of 15% or more of our common stock. If a person
acquires beneficial ownership of 15% or more of our
common stock, each right will entitle its holder (other
than the acquiring person) to exercise his rights to
purchase our common stock having a market value of
twice the exercise price.
If a person acquires beneficial ownership of
15% or more of our common stock and (1) we are
involved in a merger or other business combination in
which Delta is not the surviving corporation, or (2) we
sell more than 50% of our assets or earning power,
then each right will entitle its holder (other than the
acquiring person) to exercise his rights to purchase
common stock of the acquiring company having a
market value of twice the exercise price.
The rights expire on November 4, 2006. Delta
may redeem the rights for $0.01 per right at any
time before a person becomes the beneficial owner
of 15% or more of our common stock.
11. Common Stock Repurchases
Our Board of Directors has authorized various
repurchases of our common stock. In fiscal 2000, we
repurchased 16.5 million shares of common stock
for $790 million. This included five million shares
held by Singapore Airlines. In fiscal 1999, we repur-
chased 15.0 million shares of common stock for
$878 million.
We are also authorized to repurchase the
49.4 million shares of common stock that may
be issued under our broad-based employee stock
option plans (See Note 15). As of June 30, 2000,
we had repurchased 21.4 million shares for
$962 million under this authorization. We are autho-
rized to repurchase the remaining shares as employ-
ees exercise their stock options under those plans.
Repurchases are subject to market conditions, and
may be made on the open market or in privately
negotiated transactions.
12. Comprehensive Income
Comprehensive income for the fiscal years ended
June 30, 2000, 1999 and 1998 included the fol-
lowing components:
(In Millions) 2000 1999 1998
Net income $1,303 $1,101 $1,001
Realization of gain from
I -I
Singapore and Swissair (179) -
Unrealized gain (loss) on
marketable equity
securities 4 99 (22)
Other (3) 1
Total other
comprehensive income (178) 99 (21)
Income tax effect on other
comprehensive income 69 (39) 9
Total other comprehensive
income, net of
income taxes (109) 60 (12)
Comprehensive income,
net of income taxes $1,194 $1,161 $ 989
13. Geographic Information
SFAS 131 requires us to disclose certain informa-
tion about our operating segments. Operating seg-
ments are defined as components of an enterprise
with separate financial information which is evaluated
regularly by the chief operating decision maker and is
used in resource allocation and performance assess-
ments. We are managed as a single business unit
that provides air transportation of passengers and
cargo. Our operating revenues by geographic region
for fiscal 2000, 1999 and 1998 are summarized in
the following table:
(In Millions) 2000 1999 1998
North America $13,211 $11,956 $11,416
Atlantic 1,960 1,973 2,092
Pacific 302 326 304
Latin America 415 342 245
Total $15,888 $14,597 $14,057
Operating revenues are assigned to a specific
geographic region based on the origin and destina-
tion of each flight segment. Our tangible assets con-
sist primarily of flight equipment, which is mobile
across geographic markets. Accordingly, assets are
not allocated to specific geographic regions.
14. Earnings Per Share
We calculate basic EPS by dividing the income
available to common shareowners by the weighted
average number of common shares outstanding.
49
Notes to the Consolidated Financial Statements
June 30, 2000, 1999 and 1998
Diluted EPS includes the dilutive effects of stock
options and convertible securities. The following table
shows our computation of basic and diluted EPS:
Fiscal Year Ended June 30,
(In Millions, except per share data)
Basic:
Net income
Dividends on allocated
Series B ESOP
Convertible Preferred Stock
Income available to
common shareowners
Weighted average
shares outstanding
Basic earnings per share
Diluted:
Net income
Adjustment to net income
assuming conversion of
allocated Series B ESOP
Convertible Preferred Stock
Income available to
common shareowners
Weighted average
shares outstanding
Additional shares assuming:
Exercise of stock options
Conversion of allocated
Series B ESOP Convertible
Preferred Stock
Conversion of
performance-based
stock units
Weighted average shares
outstanding as adjusted
Diluted earnings per share
2000
$1,303
(12)
$1,291
130.2
$ 9.92
$1,303
(5)
$1,298
130.2
5.1
2.4
.2
137.9
$ 9.42
1999
$1,101
(11)
$1,090
142.9
$ 7.63
$1,101
(4)
$1,097
142.9
4.7
4.7
152.3
$ 7.20
1998
$1,001
(11)
$ 990
149.2
$ 6.64
$1,001
(4)
$ 997
149.2
3.8
4.2
157.2
$ 6.34
DELTA AIR LINES , INC .
15. Stock Options and Awards
Under our 1989 Stock Incentive Plan, we granted
various stock based awards including non-qualified
stock options and tandem stock appreciation rights
(SARs) to officers and other key employees. The
exercise price for all stock options, and the base
measuring price of the SARs, is the fair market value
of our common stock on the grant date.
In fiscal 1997, our shareowners approved two
broad-based employee stock option plans for non-
pilot personnel and pilots. On October 30, 1996,
1997 and 1998, Delta granted eligible employees
non-qualified stock options to purchase a total of
49.4 million shares of common stock at an exercise
price equal to the fair market value of the common
stock on the grant date. The stock options are gener-
ally exercisable during the period beginning one year,
and ending ten years, after the grant date, and are
not transferable for any reason other than the death
of the employee. The following table summarizes
grant activity under the broad-based plans (including
200,000 options which were regranted after earlier
forfeitures):
Grant Date
October 30, 1996
October 30, 1997
October 30, 1998
Options Granted
(In Millions)
16.4
16.6
16.6
Exercise Price
(Per Share)
$34.50
$49.00
$50.59
During fiscal 2000, all options were granted under
the 1989 Stock Incentive Plan.
The following table summarizes all stock option and SAR activity during fiscal 2000, 1999 and 1998:
2000 1999 1998
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
Stock Options (000) Price (000) Price (000) Price
Outstanding at beginning of fiscal year 46,144 $48 30,006 $45 19,802 $35
Granted 3,039 57 19,639 51 19,698 50
Exercised (587) 43 (3,256) 41 (9,318) 35
Forfeited (851) 50 (245) 51 (176) 46
Outstanding at end of fiscal year 47,745 52 46,144 48 30,006 45
Stock options exercisable at fiscal year end 44,833 $47 26,640 $45 10,422 $35
The following table summarizes information about stock options outstanding and exercisable at June 30, 2000:
Stock Options Outstanding Stock Options Exercisable
Weighted
Range of Number Average Weighted Number Weighted
Exercise Outstanding Remaining Life Average Exercisable Average
Prices (000) (Years) Exercise Price (000) Exercise Price
$26 -$34 216 4 $26 216 $26
$35-$41 7,929 4 35 7,929 35
$42 -$63 39,600 5 51 36,688 50
50
The estimated fair values of stock options granted
in fiscal 2000, 1999 and 1998 were derived using
the Black-Scholes stock option pricing model. The fol-
lowing table shows our assumptions and the weighted
average fair values of stock options:
Stock Options Granted in Fiscal Year
Assumption 2000 1999 1998
Risk-free interest rate 6.0% 4.3% 5.8%
Average expected life of
stock options (in years) 7.9 5.1 3.3
Expected volatility of
common stock 26.8% 26.3% 25.3%
Expected annual dividends on
common stock $0.10 $0.10 $0.10
Weighted average fair value
of stock options $ 26 $ 16 $ 13
The following table shows our net income and
earnings per share for fiscal 2000, 1999 and 1998
as if we accounted for our stock option plans under
the fair value method of SFAS 123:
2000 1999 1998
Net income (in millions):
As reported $1,303 $1,101 $1,001
Fair value method
under SFAS 123 1,186 935 875
Basic earnings per share:
As reported $ 9.92 $ 7.63 $ 6.64
Fair value method
under SFAS 123 9.01 6.47 5.80
Diluted earnings per share:
As reported $ 9.42 $ 7.20 $ 6.34
Fair value method
under SFAS 123 8.53 6.11 5.54
Under SFAS 123, we are not required to include
stock options granted before fiscal 1996 as com-
pensation in determining pro forma net income.
Therefore, the pro form a effects of SFAS 123 on net
income and earnings per share for the periods pre-
sented may not be representative of the pro forma
effects of SFAS 123 in future years.
Subsequent to June 30, 2000, we granted
stock options covering a total of 3.1 million shares
of common stock under the 1989 Stock Incentive
Plan, with exercise prices ranging from $52. 75 to
$55.81 per share.
16. Sale of Receivables
During June 1999, we entered into an agreement
under which we sold a defined pool of our accounts
receivable, on a revolving basis, through a wholly
owned subsidiary to a third party. We initially sold
receivables with a fair value of $54 7 million to the
subsidiary. In exchange for the receivables sold,
we received (1) $325 million in cash from the sub-
sidiary's sale of an undivided interest in the pool of
receivables to a third party and (2) a $222 million
subordinated promissory note from the subsidiary.
The amount of the promissory note fluctuates
because it represents the portion of the purchase
price payable for the volume of receivables sold. We
retained servicing and record-keeping responsibilities
for the receivables sold. This agreement was renewed
on June 15, 2000, and will expire on June 15, 2001.
As part of the agreement, the subsidiary is
obligated to pay fees to a third party based on the
amounts invested by the third party. For fiscal 2000
and 1999, these fees were $20 million and $2 mil-
lion, respectively. The fees are included in other
income (expense) under miscellaneous income
(expense), net in our Consolidated Statements of
Income. The principal amount of the promissory note
was $122 million and $175 million at June 30, 2000
and 1999, respectively, and is included as accounts
receivable on our Consolidated Balance Sheets.
17. Business Acquisitions
Comair Holdings, Inc.
In fiscal 2000, we acquired all the remaining
outstanding common stock of Comair Holdings for
$1.8 billion. Comair Holdings is a holding company
whose principal asset is its 100% ownership of
Comair, a regional jet carrier. Prior to this acquisition,
we owned 22% of Comair Holdings' outstanding
common stock.
We used the purchase method of accounting to
record the acquisition of Comair Holdings. The pur-
chase price of the shares acquired was allocated to
the assets acquired and the liabilities assumed based
on the preliminary estimated fair values at the acquisi-
tion date. Based on the allocation as of June 30,
2000, the total cost of the acquisition exceeded the
estimated fair value of the underlying net assets by
$1.4 billion, which is being amortized on a straight-
line basis over a 40 year period. Our consolidated
financial statements as of June 30, 2000 include
Comair Holdings' balance sheet as of June 30, 2000
and results of operations from November 22, 1999.
ASA Holdings, Inc.
In fiscal 1999, we acquired all the remaining out-
standing common stock of ASA Holdings for $700 mil-
lion. ASA Holdings is a holding company whose
principal asset is its 100% ownership of ASA, a
regional air carrier. Prior to this acquisition, we owned
28% of ASA Holdings' outstanding common stock.
Notes to the Consolidated Financial Statements
June 30, 2000, 1999 and 1998
We used the purchase method of accounting to
record the acquisition of ASA Holdings. The purchase
price of the shares acquired was allocated to the
assets acquired and the liabilities assumed based
on the estimated fair values at the acquisition date.
The total cost of the acquisition exceeded the esti-
mated fair value of the underlying net assets by
$519 million, which is being amortized on a straight-
line basis over a 40 year period. Our consolidated
financial statements as of June 30, 1999 include
ASA Holdings' balance sheet as of June 30, 1999,
as well as its results of operations from April 1, 1999.
18. Change in Accounting Principle
Delta sells mileage credits in the SkyMiles
program to participating partners such as credit
card companies, hotels, and car rental agencies.
During fiscal 2000, in accordance with SAB 101,
we changed our method of accounting for the sale
of these mileage credits. Under the new account-
ing method, a portion of the revenue from the sale
of mileage credits is deferred until earned, and is
recognized when the credits are redeemed for
travel. The majority of the revenue from the sale of
mileage credits is recorded in passenger revenue,
and the remaining portion is recorded as an offset
to expense. Previously, the revenue from the sale of
mileage credits was recorded in other revenue in the
period in which the credits were sold. All prior year
amounts have been reclassified to conform with the
current year presentation.
19. Quarterly Financial Data (Unaudited)
DELTA A IR LI NES. IN C .
We retroactively adopted this change in account-
ing principle as of July 1, 1999. It resulted in a cumu-
lative effect charge of $66 million ($108 million
before income taxes), and decreased net income for
fiscal 2000 by $21 million (a $34 million decrease
before income taxes).
Unaudited pro forma results assuming retroactive
application of the change in accounting principle for
fiscal 2000, 1999 and 1998 are shown below:
(In millions, except for per share data):
Net income before
cumulative effect
of change
in accounting
principle
Basic EPS
Diluted EPS
2000
$1,369
$10.42
$ 9.90
1999
$1,083
$ 7.50
$ 7.08
1998
$ 991
$6.57
$6.28
For comparative purposes, our results excluding
implementation of the change in accounting principle
for fiscal 2000, 1999 and 1998 are shown below:
(In millions, except for per share data):
Net income before
cumulative effect
of change
in accounting
principle
Basic EPS
Diluted EPS
2000
$1,390
$10.58
$10.04
1999
$1,101
$ 7.63
~
1998
$1,001
$ 6.64
$ 6.34
The following table summarizes our unaudited quarterly results of operations for fiscal 2000 and 1999
(in millions, except per share data):
Three Months Ended
Fiscal 2000 Sept. 30 Dec.31 Mar. 31 June 30
Operating revenues $3,829 $3,678 $3,911 $4,470
Operating income $ 336 $ 2 $ 343 $ 607
Net income $ 344 $ 348 $ 217 $ 460
Basic earnings per share* $ 1.99 $ 2.60 $ 1.68 $ 3.73
Diluted earnings per share* $ 1.88 $ 2.48 $ 1.61 $ 3.51
Three Months Ended
Fiscal 1999 Sept. 30 Dec. 31 Mar. 31 June 30
Operating revenues $3,777 $3,424 $3,476 $3,920
Operating income $ 552 $ 320 $ 356 $ 642
Net income $ 327 $ 194 $ 216 $ 364
Basic earnings per share* $ 2.19 $ 1.34 $ 1.51 $ 2.59
Diluted earnings per share* $ 2.08 $ 1.29 $ 1.42 $ 2.40
*The sum of the quarterly earnings per share does not equal the fiscal earnings per share due to changes in average shares outstanding.
52
Report of Management
The integrity and objectivity of the information
presented in this Annual Report are the responsibility
of Delta management. The financial statements con-
tained in this report have been audited by Arthur
Andersen LLP, independent public accountants, whose
report appears below.
Delta maintains a system of internal financial
controls which are independently assessed on an
ongoing basis through a program of internal audits.
These controls include the selection and training
of Delta's managers, organizational arrangements
that provide a division of responsibilities, and
communication programs explaining our policies and
standards. We believe that this system provides rea-
sonable assurance that transactions are executed
in accordance with management's authorization; that
transactions are appropriately recorded to permit
preparation of financial statements that, in all
material respects, are presented in conformity with
Report of Independent Public Accountants
To Delta Air Lines, Inc.:
We have audited the accompanying consolidated
balance sheets of Delta Air Lines, Inc. (a Delaware
corporation) and subsidiaries as of June 30, 2000
and 1999, and the related consolidated statements
of income, cash flows and shareowners' equity
for each of the three years in the period ended
June 30, 2000. These financial statements are
the responsibility of the Company's management.
Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with
auditing standards generally accepted in the United
States. 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,
D EL TA A I R L I NES, INC .
accounting principles generally accepted in the United
States; and that assets are properly accounted for
and safeguarded against loss from unauthorized use.
The Board of Directors pursues its responsibili-
ties for these financial statements through its Audit
Committee, which consists solely of directors who
are neither officers nor employees of Delta. The
Audit Committee meets periodically with the inde-
pendent public accountants, the internal auditors
and representatives of management to discuss inter-
nal control, accounting, auditing and financial report-
ing matters.
M. Michele Burns
Executive Vice President and
Chief Financial Officer
Leo F. Mullin
Chairman and
Chief Executive Officer
DELTA AIR LINES , INC .
as well as evaluating the overall financial statement
presentation. We believe that our audits provide a rea-
sonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Delta Air Lines, Inc.
and subsidiaries as of June 30, 2000 and 1999, and
the consolidated results of their operations and their
cash flows for each of the three years in the period
ended June 30, 2000, in conformity with accounting
principles generally accepted in the United States.
As discussed in Note 18 to the consolidated
financial statements, effective July 1, 1999, the
Company changed its method of accounting for the
sale of mileage credits to participating partners in
its frequent flyer program.
Atlanta, Georgia
August 11, 2000
53
Consolidated Summary of Operations
DELTA AIR LINES, INC.
For the fiscal years ended June 30, 20001 1999 1998 1997 2
(In Millions, Except Per Share Data)
Operating revenues $15,888 $14,597 $14,057 $13,517
Operating expenses 14,600 12,727 12,363 11,986
Operating income (loss) 1,288 1,870 1,694 1,531
Interest expense, net (305) (153) (148) (174)
Miscellaneous income, net7 1,300 109 102 58
Income (loss) before income taxes 2,283 1,826 1,648 1,415
Income tax (provision) benefit (914) (725) (647) (561)
Amortization of investment tax credits
Net income (loss) before cumulative effect of
change in accounting principle 1,369 1,101 1,001 854
Net income {loss) after cumulative effect of
change in accounting principle 1,303 1,101 1,001 854
Preferred stock dividends (12) (11) (11) (9)
Net income (loss) attributable to common shareowners $ 1,291 $ 1,090 $ 990 $ 845
=
Earnings (loss) per share before cumulative
effect of change in accounting principle
Basic $ 10.42 $ 7.63 $ 6.64 $ 5.70
Diluted $ 9.90 $ 7.20 $ 6.34 $ 5.52
Earnings (loss) per share8
Basic $ 9.92 $ 7.63 $ 6.64 $ 5.70
Diluted $ 9.42 $ 7.20 $ 6.34 $ 5.52
Dividends declared on Common Stock $ 13 $ 14 $ 15 $ 15
Dividends declared per common share 8 $ 0.10 $ 0.10 $ 0.10 $ 0.10
Other Financial and Statistical Data
DELTA AIR LINES , INC .
For the fiscal years ended June 30, 20001 1999 1998 1997 2
(Financial Data In Millions)
Total assets $20,566 $16,750 $14,603 $12,741
Long-term debt and capital leases
(excluding current maturities) $ 4,525 $ 1,952 $ 1,782 $ 1,797
Shareowners' equity $ 4,873 $ 4,448 $ 4,023 $ 3,007
Shares of Common Stock outstanding at year end 8 122,639,566 138,553,719 150,450,394 147,391,974
Revenue passengers enplaned (Thousands) 116,595 106,902 104,148 101,147
Available seat miles (Millions) 151,913 144,003 140,149 136,821
Revenue passenger miles (Millions) 110,347 104,575 101,136 97 ,758
Operating revenue per available seat mile 10.46 10.14 10.03 9.88
Passenger mile yield 13.48 13.09 13.03 12.98
Operating cost per available seat mile 9.61 8.84 8.82 8.76
Passenger load factor 72.6% 72.6% 72.2% 71.4%
Breakeven passenger load factor 66.4% 62.7% 62.9% 62.8%
Available ton miles (Millions) 22,068 20,627 19,890 18,984
Revenue ton miles (Millions) 12,504 12,115 11,859 11,308
Operating cost per available ton mile 66.16 61.70 62.16 63.14
' Summary of operations and other financial and statistical data include pretax income of $574 million, net from nonrecurring items ($2.69 basic and $2.54 diluted after-tax
earnings per share), excluding the cumulative effect of a change in accounting principle.
2 Summary of operations and other financial and statistical data include $52 million in pretax restructuring and other nonrecurring charges
($0.22 basic and $0.21 diluted after-tax earnings per share).
' Summary of operations and other financial and statistical data include $829 million in pretax restructuring and other nonrecurring charges
($4.88 after-tax earnings per share).
' Summary of operations and other financial and statistical data exclude $114 million after-tax cumulative effect of change in accounting principles
($1.13 primary and $0. 71 fully diluted earnings per share).
5 Summary of operations and other financial and statistical data include $526 million in pretax restructuring charges ($3.30 ater-tax per share).
Summary of operations and other financial and statistical data include $82 million pretax restructuring charges ($0.53 after-tax per share).
Summary of operations exclude $587 million after-tax cumulative effect of changes in accounting principles ($5.89 after-tax per share).
7 Includes interest income.
All share and earnings per share amounts for fiscal years prior to 1999 have been restated to reflect the two-for-one common stock split that became effective on
November 2, 1998.
54
19963
$12,418
11,953
465
(243)
54
276
(120)
156
156
(82)
$ 74
$ 0.72
$ 0.72
$ 0.72
$ 0.72
$ 10
$ 0.10
19963
$12,226
$ 2,175
$ 2,540
135,556,212
91,341
130,751
88,673
9.50
13.19
9.14
67.8%
65.1%
18,084
10,235
66.10
19954 19945 19936 1992 1991 1990
~
$12,162 $12,058 $11,657 $9,171 $8,583
11,501 12,503 12,167 11,477 9,604 8,145
661 (445) (510) (640) (433) 438
(262) (271) (177) (151) (97) (27)
95 56 36 5 30 57
494 (660) (651) (786) (500) 468
(200) 250 233 271 163 ~
1 3 9 13 2
~ (409) (415) (506) (324) 3
294 (409) (415) (506) (324) 303
(88) (110) (110) (19) (19) (18)
$ 206 $ (519) $ (525) $ (525) $ (343) $ 285
$ 2.04 $ (5.16) $ (5.27) $ (5.30) $ (3.87) $ 2.90
$ 2.01 $ (5.16) $ (5.27) $ (5.30) $ (3.87) $ 2.64
$ 2.04 $ (5.16) $ (5.27) $ (5.30) $ (3.87) $ 2.90
$ 2.01 $ (5.16) $ (5.27) $ (5.30) $ (3.87) $ 2.64
$ 10 $ 10 $ 35 $ 59 $ 54 $ 85
$ 0.10 $ 0.10 $ 0.35 $ 0.60 $ 0.60 $ 0.85
19954 19945 19936 1992 1991 1990
$12,143 $11,896 $11,871 $10,162 $8,411 $7,227
$ 3,121 $ 3,228 $ 3,716 $ 2,833 $2,059 $1,315
$ 1,827 $ 1,467 $ 1,913 $ 1,894 $2,457 $2,596
101,632,020 100,906,544 100,127,682 99,398,196 98,803,558 92,172,220
88,893 87,399 85,085 77,038 69,127 67,240
130,645 131,906 132,282 123,102 104,328 96,463
86,417 85,268 82,406 72,693 62,086 58,987
9.31 9.14 8.81 8.80 8.79 8.90
13.18 13.27 13.23 13.91 13.80 13.63
8.80 9.48 9.20 9.32 9.21 8.44
66.2% 64.6% 62.3% 59.1% 59.5% 61.2%
62.3% 67.2% 65.6% 63.0% 62.6% 1 58.0%
18,150 18,302 18,182 16,625 12,500
13,825
10,142 9,911 9,503 8,361 7,104 6,694
63.37 68.32 66.92 69.03 69.47 65.16
55
Shareowner Information
TRANSFER AGENT, REGISTRAR AND
DIVIDEND PAYING AGENT FOR COMMON STOCK
Registered shareowner inquiries regarding stock
transfers, address changes, lost stock certificates,
dividend payments or account consolidations should
be directed to:
EquiServe/First Chicago Division
P. O. Box 2500
Jersey City, NJ 07303-2500
Telephone (201) 324-1225
www.equiserve.com
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Registered holders of common stock may purchase
additional shares of such stock through automatic
dividend reinvestment or cash contributions under
Delta's Dividend Reinvestment and Stock Purchase
Plan. Inquiries, notices, requests and other commu-
nications regarding participation in the plan should
be directed to:
EquiServe/First Chicago Division
P. O. Box 2598
Jersey City, NJ 07303-2598
Telephone (201) 324-1225
www.equiserve.com
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
133 Peachtree Street, NE
Atlanta, GA 30303
ANNUAL MEETING
The Annual Meeting of Shareowners will be
on Wednesday, October 25, 2000, at 9:00 a.m.,
local time, at the Omni Netherland Plaza Hotel at
35 West Fifth Street, Cincinnati, Ohio.
AVAILABILITY OF FORM 10-K AND
OTHER FINANCIAL INFORMATION
A copy of Delta's Annual Report on Form 10-K for
the fiscal year ended June 30, 2000 will be provided
upon written request. Requests for other financial
documents may also be directed to:
Delta Air Lines, Inc.
Investor Relations, Department 829
P. 0. Box 20706
Atlanta, GA 30320-6001
Telephone (404) 715-2170
56
D E LTA AIR L INE S , IN C.
Company documents filed electronically with the
SEC can also be found online at www.sec.gov.
A copy of this Annual Report can be found at
www.delta.com.
Telephone inquiries related to financial informa-
tion, 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 SHAREOWNERS
As of June 30, 2000, there were 21,435 registered
owners of common stock.
MARKET PRICES AND DIVIDENDS
Cash Dividends
Closing Price of per
Fiscal Year 2000 Common Stock on Common Share
Quarter Ended: High Low
September 30 $63 $46s $0.025
December 31 54s 47s 0.025
March 31 54 43% 0.025
June 30 57.s 49 0.025
Cash Dividends
Closing Price of per
Fiscal Year 1999 Common Stock on Common Share
Quarter Ended: High Low
September 30 $713/22 $4613
/is $0.025
December 31 579/is 4112 0.025
March 31 701
6
49 0.025
June 30 719/is I 55.s I 0.025
AVAILABILITY OF EQUAL EMPLOYMENT OPPORTUNITY REPORT
A copy of Delta's Equal Employment Opportunity
Report is available upon written request. Requests
may be directed to:
Delta Air Lines, Inc.
Equal Opportunity, Department 955
P.O. Box 20706
Atlanta, GA 30320-6001
AVAILABILITY OF ENVIRONMENTAL REPORT
A copy of Delta's Environmental, Health and Safety
Report is available online at www.delta.com.
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Delta's Aircraft Fleet
Mainline Aircraft Fleet
Delta's modern and efficient aircraft fleet is at the center of our
operations. Delta has entered into a long-term aircraft purchase
agreement with The Boeing Company (Boeing), which covers firm
orders, options and rolling options for certain aircraft through cal-
endar year 2017. This agreement supports Delta's plan for disci-
plined growth, aircraft rationalization and fleet replacement. It
also provides Delta flexibility to adjust scheduled aircraft deliv-
eries or substitute between aircraft models and aircraft types.
The majority of the aircraft under firm order from Boeing will be
used to replace older aircraft.
Delta's long-term plan is to reduce aircraft family types from
seven to three . We believe fleet standardization will improve
reliability and produce long-term cost savings. We plan to
Aircraft Fleet at June 30, 2000
Aircraft Type
B-727-200
8-737-200
8-737-300
8-737-800
8-757-200
8-767-200
8-767-300
8-767-300ER
B-777-200
L-1011-1
L-1011-250
Owned
90
1
24
70
15
4
50
7
7
5
L-1011-500 7
MD-11 8
MD-88 63
MD-90 16
EM8-120 51
ATR-72 4
CRJ-100/ 200 22
Total 444
Aircraft Delivery Schedule at June 30, 2000*
D E LT A A IR LI N E S, I NC .
retire (1) our remaining L-1011 aircraft by August 2001; (2)
our B-727 fleet by the end of 2005; and (3) our MD-90 fleet
and owned MD-11 aircraft over the next seven to nine years.
In fiscal 1999, we entered into an agreement to sell our B-
727 fleet, with deliveries occurring through 2005.
Regional Jet Aircraft
In July 2000, ASA and Comair entered into purchase agreements
with Bombardier, Inc. to purchase a total of 94 Canadair Regional
Jet (CRJ) aircraft, including 69 CRJ-200 aircraft with a mix of
40, 44 and 50 seats, and 25 CRJ-700 aircraft with 70 seats.
ASA and Comair also received options to purchase an additional
406 CRJ aircraft through 2010.
Capital
45
3
48
Leased
Operating
10
8
23
41
24
8
7
57
14
15
110
317
Total
100
54
26
24
111
15
28
58
7
7
5
7
15
120
16
65
19
132
809
Average
Age
22.3
15.6
13.6
0.8
9.6
17.1
10.4
4.5
0.8
19.2
17.6
19.6
6.4
10.0
4.6
10.1
6.0
2.8
10.1
Delivery in Calendar Year Ending
Aircraft on Firm Order
8-737-600/ 700/ 800
8-757-200
8-767-300/300ER
8-767-400
8-777-200
CRJ-100/ 200
CRJ-700
Total
Aircraft on Option at June 30, 2000*
Aircraft on Option **
8-737-600/700/800
8-757-200
8-767-300/300ER
8-767-400
8-777-200
CRJ-100/200
CRJ-700
Total
Remainder
of 2000
16
7
12
16
51
Remainder
of 2000
-
-
-
-
-
-
-
-
2001
27
3
1
4
34
2
71
2002
18
5
1
29
20
73
2003
10
1
22
12
45
Delivery in Calendar Year Ending
2001 2002 2003
3 5 7
- 9 11
- 2 2
- 5 5
- 5 5
- 12 28
- - -
3 38 58
* Includes regional jet orders and options under purchase agreements entered into in July 2000.
=-
After
2003
37
4
2
23
66
After
2003
45
-
7
14
10
191
165
432
I
=
Total
108
10
1
21
6
103
57
306
Total
60
20
11
24
20
231
165
531
Rolling
Options
256
74
14
16
27
387
** Aircraft options have scheduled delivery slots , while rolling options replace options and are assigned delivery slots as options expire or are exercised .
A .Delta
Delta Air Lines, Inc.
P.O. Box 20706
Atlanta, Georgia 30320-6001
(404) 715-2600
www.delta.com