Delta Air Lines annual report 2000 [Calendar Year]

Calendar Year 2000 Annual Report
Delta Air Lines, Inc.
Because Delta is changing its
12-month financial reporting
period from a fiscal year ending
June 30 to a calendar year ending
December 31, we gain this addi-
tional opportunity to review with
you the progress our company has
made. Given the pace and signifi-
cance of events in the aviation
industry since our fiscal year
2000 annual report was distrib-
uted in September, this update is
well-timed. It allows us to review
for you both our accomplishments
during calendar year 2000 and the
challenges we face as the industry
moves forward through what is
arguably its most tumultuous
period ever.
Following the crowded summer
travel period which put the spotlight
on the serious air traffic and airport
capacity problems, we are now fac-
ing labor issues, a trend toward
industry consolidation and an eco-
nomic downturn. While Delta's
management team is taking a real-
istic view of these matters, we
also know that over the past three
years we have made good progress
toward well-defined strategic objec-
tives. As a result, we have estab-
lished a strong foundation. We
believe we are prepared to move
through this challenging period and
emerge with the position and
strength necessary to continue
growing profitably.
*Excludes unusual items
SOUND FINANCIAL RESULTS
Delta's performance over the last
year in operational and financial
areas was once again strong, and
the fundamentals of our business
remain solid. During 2000, we:
Earned $897 million* in net
income, the highest of any airline;
Recorded an operating margin of
10.4%*, the fifth consecutive year
of double-digit margins;
Maintained an 8% cost advantage
over the industry average;
Sold 9% of Delta tickets on-line
and launched a new delta.com
Web site;
Announced plans for a major
$1.6 billion terminal expansion
at New York-Kennedy airport;
Grew our international presence
through the SkyTeam alliance and
our successful growth to all major
Latin American cities;
Finished in the top tier of
the major U.S. Department of
Transportation customer service
measures and;
Enplaned 120 million passen-
gers, more than any other air-
line in the world.
These are solid results achieved
despite the significant challenges
we encountered in the course of
the year.
LETTER TO SHAREOWNERS
"We believe we
are prepared to move
through this challenging
period and emerge with
the position and
strength necessary to
continue growing
profitably."
"Delta's advantages
derive from our core
strengths, including
a balanced hub
network with room
for expansion, an 8%
cost advantage over
the industry average
and a workforce that
is 83% union free."
2
WORKING TOWARDS AN
AGREEMENT WITH ALPA
Delta and the Air Line Pilots
Association, International (ALPA),
the union representing Delta's
approximately 9,800 pilots, have
been in contract talks since
September 1999. Progress has
been made during this time, and
Delta's negotiating position has
remained constant: We are commit-
ted to top pay for top performance
for all employee groups, including
pilots. However, Delta must retain
the strategic flexibility needed to
make the decisions and pursue
the options that will allow us to
support this commitment.
Currently, Delta and ALPA are
engaged in an aggressive schedule
of negotiations with the assistance
of federal mediators. Our constant
and primary goal is to reach a con-
tract that is fair and mutually bene-
ficial and to reach it sooner rather
than later.
THE TREND TOWARD
CONSOLIDATION
The most compelling industry
development in the last year has
been the growing trend toward
consolidation. Currently, four of
the seven major hub and spoke
carriers-American Airlines, Trans
World Airlines, United Airlines and
US Airways-are involved in pro-
posed transactions. These propos-
als, if approved, would lead to
basic structural and competitive
changes in the nation's air trans-
portation industry.
Delta is carefully weighing our
response to this potential major
shift in the industry structure. We
have the opportunity to continue
pursuing our goals without a merger
or acquisition, for we believe in our
ability to compete effectively given
our considerable strategic advan-
tages. Delta's advantages derive
from our core strengths, including
a balanced hub network with room
for expansion, an 8% cost advan-
tage over the industry average and
a workforce that is 83% union free.
If we determine that our best
strategic option is to pursue a
merger or acquisition, either now
or in the future, we will do that. You
can be sure that any such step will
be carefully evaluated in view of the
interests of our shareowners and
its capacity to advance and
strengthen our company to the ben-
efit of our customers and employ-
ees. In a service industry such as
ours, the interests of each con-
stituency must be served to ensure
the success of all constituencies.
Shareowners-who provide
the capital Delta requires to
support both customer and
employee needs-want the
superior shareowner value that
comes from a company that suc-
ceeds through high levels of cus-
tomer satisfaction provided by a
dedicated workforce.
Customers-the source of
Delta's income-want a smooth
and seamless travel experience
to the destinations they choose.
Employees-who provide the
travel experience for our cus-
tomers-want to work for a com-
pany that offers the security and
rewards that are associated with
corporate success and that gives
them the tools they need to
serve our passengers' needs.
We know that such transac-
tions have profound implications.
Our commitment to you is that we
will make any related de.cisions
with an unwavering foe.us on serv-
ing the best interests of our con-
stituencies.
THE ECONOMIC OUTLOOK
The economic environment is also
of concern as we enter 2001. Gross
Domestic Product estimates now
show contraction for the first quar-
ter of 2001, and most Wall Street
banks predict flat or negative growth
for the first six months of the year.
While we at Delta do not see
signs of a full recession yet, we
do believe that 2001 will not yield
the level of revenue gains gener-
ated in 2000. As a result, Delta
is managing our company with a
tough-minded focus on costs. We
are confident that Delta has the
cost discipline, cash flow and bal-
ance sheet strength to sustain us
in this uncertain economy.
LOOKING TO THE FUTURE
Going forward, the task before us
is significant as the issues of labor
and consolidation play out against
the backdrop of a slowing economy.
Nonetheless, Delta remains confi-
dent that these event-driven issues
will, for the most part, be resolved
in the next several months as a con-
tract is reached with our pilots, as
decisions are made about the direc-
tion consolidat,
ion will take, and as
the expected upturn of the econ-
omy begins later this year. We
believe these changes will leave
Delta poised to continue growing
profitably from a solid foundation
and a clear strategic focus.
Leo F. Mullin
Chairman and Chief Executive Officer
February 15, 2001
3
Glossary of Defined Terms
Accumulated Postretirement Benefit Obligation-
a measure of the deferred compensation obligation,
other than pensions, that Delta has to its employees
under postretirement welfare benefit plans.
Air Traffic Liability-an estimate of the amount
received for passenger ticket sales and cargo trans-
portation services which have not yet been provided.
As the transportation service is provided by Delta, the
amount is removed from air traffic liability and recog-
nized as revenue.
ASM-Available Seat Mile. 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
transported 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.
ER/SA-The Employee Retirement Income Security
Act of 197 4. This federal law governs employee
benefit and retirement plans.
Net Debt-to-Capital Position-a measure of leverage
which is calculated by dividing net debt by total capi-
talization. Net debt includes short-term and long-term
debt, capital lease obligations and the present value
of operating lease obligations, reduced by cash and
short-term investments. Capital includes net debt
and shareowners' equity, including the Series B ESOP
Convertible Preferred Stock.
Financial
Review
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Shareowners' Equity
Notes to the Consolidated Financial Statements
DELTA A I R L IN ES , IN C .
Non-Fuel CASM-the amount of operating cost
incurred per available seat mile during a reporting
period, excluding aircraft 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 reporting period.
Passenger Mile Yield-the 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 avail-
able seat mile during a reporting period. Also referred
to as unit revenue.
RPM-Revenue Passenger Mile. One revenue-paying
passenger transported one mile. RPMs are calcu-
lated by multiplying the number of revenue passen-
gers by the number of miles they are flown for the
reporting period.
Series B SOP Convertible Preferred Stock-
convertible preferred 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-calculated as current assets
minus current liabilities.
6 Report of Management
14 Report of Independent Public Accountants
16 Consolidated Summary of Operations
17 Officers and Board of Directors
18 Shareowner Information
35
35
36
38
40
19 Delta's Aircraft Fleet Back Cover
5
6
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
2000 COMPARED TO 1999
Net Income and Earnings per Share (EPS)
Our net income excluding the unusual items
described below was $897 million ($6.81 diluted
EPS) in 2000, compared to $1.0 billion ($6. 79
diluted EPS) in 1999. Net income including
unusual items totaled $828 million in 2000 ($6.28
diluted EPS), compared to $1.2 billion in 1999
($8.15 diluted EPS).
This Annual Report includes audited Consolidated
Balance Sheets as of December 31, 2000 and 1999
and audited Consolidated Statements of Income,
Cash Flows and Shareowners' Equity for the years
ended December 31, 2000, 1999 and 1998.
Unusual Items
Our results of operations for 2000 and 1999
include the following unusual items which are
collectively referred to in this Annual Report as
"unusual items. "
2000
Gains:
Gains from the sale of investments totaling $301 mil-
lion ($184 million after tax, or $1.40 diluted EPS).
This includes a pretax cash gain of $73 million from
the sale of 1.2 million shares of the common stock
of priceline.com Incorporated (priceline) and 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.)
A one-time, non-cash gain of $16 million ($10 million
after tax, or $0.07 diluted EPS), related to our equity
investment in WORLDSPAN, L.P. (Worldspan). The
gain represents Delta's share of Worldspan's favor-
able outcome from certain arbitration proceedings.
Charges:
A $100 million charge from the cumulative effect
of a change in accounting principle, net of tax
($0. 77 diluted EPS), resulting from our adoption
of Statement of Financial Accounting Standards
(SFAS) 133, "Accounting for Derivative Instruments
and Hedging Activities, " as amended. SFAS 133
requires us to record all derivative instruments on
the balance sheet at fair value, and to recognize in
the income statement certain non-cash changes in
these fair values. For additional information regard-
ing our implementation of SFAS 133, see Note 3 of
the Notes to the Consolidated Financial Statements.
DELTA AIR LINES , INC .
Non-cash charges for fair value adjustments under
SFAS 133 totaling $159 million ($97 million after
tax, or $0. 7 4 diluted EPS). These charges relate to
derivative instruments we use in our fuel hedging
program and to our equity warrants and other simi-
lar rights in other companies, primarily priceline.
Asset writedowns and other special charges
totaling $108 million ($66 million after tax, or
$0.50 diluted EPS). This includes pretax charges of
$86 million for an early retirement medical option
program and $22 million related to our decision to
close our Pacific gateway in Portland, Oregon.
A charge totaling $7 million ($4 million after tax,
or $0.03 diluted EPS) for the early extinguishment
of certain debt obligations.
1999
Gains:
Gains from the sale of investments totaling
$927 million ($565 million after tax, or $3.83
diluted EPS). This includes the following pretax
cash gains: (1) $711 million from the sale of
11.1 million shares of priceline common stock;
(2) $137 million from the sale of our equity inter-
est in Singapore Airlines Limited; (3) $29 million
from the sale of our equity interest in SAirGroup,
the holding company of Swissair; and (4) $50 mil-
lion from the sale of a portion of our interest in
Equant N.V. (Equant), an international data net-
work services company. (See Note 2 of the Notes
to the Consolidated Financial Statements.)
Charges:
Asset writedowns and other special charges total-
ing $469 million ($286 million after tax, or $1.94
diluted EPS). This includes pretax charges of
$320 million for an asset writedown resulting from
our decision to retire certain aircraft earlier than
previously planned and $149 million for asset
impairment losses and costs incurred to streamline
certain operations. (See Note 8 of the Notes to the
Consolidated Financial Statements.)
A $54 million charge from the cumulative effect
of a change in accounting principle, net of tax
($0.37 diluted EPS), resulting from our January 1,
1999 adoption of SEC Staff Accounting Bulletin
(SAB) 101, "Revenue Recognition in Financial
Statements." SAB 101 required us to change
our method of accounting for the sale of frequent
flyer mileage credits to participating partners.
(See Note 5 of the Notes to the Consolidated
Financial Statements.)
A charge totaling $40 million ($24 million after
tax, or $0.16 diluted EPS) for the early extinguish-
ment of certain long-term debt obligations.
Acquisition of Comair Holdings, Inc. and
ASA Holdings, Inc.
Delta strengthened its competitive posit ion by
acquiring Comair Holdings, Inc. (Comair Holdings) and
ASA Holdings, Inc. (ASA Holdings) in 1999. Comair
Holdings and ASA Holdings are the parent companies
of regional jet carriers Comair, Inc. (Comair) and
Atlantic Southeast Airlines, Inc. (ASA), respectively.
Our consolidated results of operations for 2000
include the results of operations of Comair Holdings
and ASA Holdings for the entire year. Our 1999
consolidated results of operations include the results
of operations of Comair Holdings from November 22,
1999 and ASA Holdings from April 1, 1999.
(See Note 18 of the Notes to the Consolidated
Financial Statements.)
Operating Revenues
(In Millions of Dollars) $l
6
,
7 41
$14,883
$14,312
1998 1999 2000
Operating Revenues
Operating revenues
were $16. 7 billion in
2000, increasing 12%
from $14.9 billion in
1999. Passenger revenues
grew 12% to $15. 7 billion,
reflecting a 6% increase in
RPMs on capacity growth
of 5%, and a 5% increase
in passenger mile yield to
13.86. Excluding Comair
and ASA, RPMs grew 3% on capacity growth of 2%.
North American Passenger Revenues - North American
passenger revenues grew 11% to $13.2 billion. RPMs
increased 6% on capacity growth of 6%, while passen-
ger mile yield increased 4%. The increase in RPMs is
due to the inclusion of Comair and ASA, continued
favorable economic conditions and the expansion of
our fleet. The growth in traffic was partially offset by
flight cancellations due to severe winter weather
conditions and reduced flying by some Delta pilots.
The increase in passenger mile yield was largely a
result of the full-year impact of Comair and ASA and
improved revenue management systems, partially
offset by increased low-fare competition and capac-
ity increases by competitors.
International Passenger Revenues- International
passenger revenues increased 20% to $2.5 billion
during 2000. RPMs rose 7% on capacity growth of
5%, and passenger mile yield increased 12%. RPM
growth is primarily a result of our continuing expan-
sion into Latin America, which resulted in 24% traffic
growth in that region during the year. Increased
passenger mile yield reflects strong demand and
improved revenue management systems.
Cargo and Other Revenues-Cargo revenues increased
4% to $583 million, reflecting a 6% rise in cargo ton
miles partially offset by a 2% decline in ton mile
yield. The increase in cargo ton miles was primarily
caused by overall capacity increases and higher mail
volume from the growth in ~ommerce activity. The
decrease in ton mile yield was due to pricing pres-
sure from industry-wide capacity growth in interna-
tional markets. Other revenues increased 34% to
$501 million, mainly a result of higher revenues from
joint marketing programs, codeshare activity and
administrative service charges.
I CASM*
9.68
8.80
8.90
1998 1999 2000
* Excludes asset writedowns and other
special charges
Operating Expenses
Excluding asset
writedowns and other
special charges, operating
expenses for 2000 totaled
$15.0 billion , increasing
15% from $13.1 billion in
1999. CASM rose 9% to
9.68, while non-fuel
CASM increased 6% to
8.41. Including asset
writedowns and other spe-
cial charges, operating
expenses increased 11% to $15.1 billion, CASM
increased 6% to 9.75, and non-fuel CASM grew
3% to 8.48. Operating capacity grew 5% to 155 bil-
lion ASMs.
Salaries and related costs increased 15% during
2000. The average number of full-time equivalent
employees increased 13%, primarily due to the inclu-
sion of Comair and ASA. Excluding Comair and ASA,
headcount increased 2%. The increase in salaries
and related costs also reflects salary increases of
3% for pilots on January 1, 2000, and 3% for most
domestic non-union employees on April 1, 2000.
Aircraft fuel expense increased 39% in
2000. The average fuel price per gallon rose 32%
to 67 .38. Total gallons consumed increased 5%
due to increased operations on a 5% inqrease in
capacity. Delta's fuel cost is shown net of fuel
hedge gains of $684 million in 2000 and $79 mil-
lion in 1999. Approximately 67% and 75% of our
aircraft fuel requirements were hedged during
2000 and 1999, respectively.
Depreciation and amortization expense rose
12% in 2000 due to the acquisition of additional air-
craft and ground equipment, as well as the full-year
impact of Comair and ASA. Other selling expenses
increased 10%, primarily caused by higher credit
card charges and booking fee payments from higher
passenger volume.
Passenger commissions expense declined 16%,
due to changes to the travel agent commission rate
structure and our customers' increased use of lower-
7
8
Management's Discussion and Analysis
of Financial Condition and Results of Operations
cost distribution channels such as the Internet.
Internet sales accounted for approximately 9% of
total revenue flown in 2000 compared to 4% in
1999. Contracted services expense increased 17%
in 2000, a result of the inclusion of an entire year
of Comair and ASA, as well as higher costs related
to customer service and technology initiatives.
Landing fees and other rents increased 7%, air-
craft rent expense increased 19%, and aircraft mainte-
nance materials and outside repair expense grew
22%, mainly a result of the inclusion of Comair and
ASA. Passenger service expense decreased 6%,
reflecting process improvements which streamlined
our catering operations. Other costs increased 13%
due to higher professional fees, supply costs and
interrupted operations expenses, as well as the
inclusion of Comair and ASA.
Operating Income and Operating Margin
Excluding asset writedowns and other
special charges, operating income was $1.7 billion
in 2000, compared to $1.8 billion in 1999. Operat-
ing margin decreased to 10.4% during 2000 from
12.0% in 1999.
Operating income including asset writedowns
and other special charges totaled $1.6 billion in
2000 and $1.3 billion in 1999. Operating margin
was 9.8% in 2000, compared to 8.9% in 1999.
Other Income (Expense)
Other expense totaled $88 million during 2000,
compared to other income of $775 million in 1999.
This change is primarily attributable to the following:
gains from the sale of investments in 1999
exceeded gains in 2000 by $626 million (see
Note 2 of the Notes to the Consolidated
Financial Statements);
the fair values of SFAS 133 derivatives were
reduced by $159 million in 2000 (see Note 3
of the Notes to the Consolidated Financial
Statements); and
net interest expense increased $145 million in
2000, due to higher levels of outstanding debt and
higher interest rates.
1999 COMPARED TO 1998
Net Income and Earnings per Share
Net income excluding unusual items totaled
$1.0 billion in 1999 ($6. 79 diluted EPS). Net income
including unusual items was $1.2 billion during 1999
($8.15 diluted EPS), compared to $1.1 billion in
1998 ($6.87 diluted EPS). There were no unusual
items in 1998.
Our 1999 results include the results of operations
of Comair Holdings from November 22, 1999 and of
ASA Holdings from April 1, 1999. (See Note 18 of
the Notes to the Consolidated Financial
Statements.)
DELTA A I R L IN ES , IN C .
Operating Revenues
Operating revenues were $14.9 billion for 1999,
increasing 4% from $14.3 billion in 1998. Passenger
revenue growth of 4% reflects a 3% increase in RPMs
on 3% capacity growth and a 1% increase in passen-
ger mile yield.
North American Passenger Revenues-North American
passenger revenues grew 6% to $11. 7 billion, driven
by a 3% increase in RPMs on capacity growth of 4%
and a 3% rise in passenger mile yield. The increase in
RPMs was a result of favorable economic conditions
and increased traffic, the inclusion of ASA and the
expansion of our fleet. Passenger mile yield grew due
to fare increases during the June 1999 quarter and
improved asset utilization, partially offset by increased
low-fare competition and matching sale fares imple-
mented by a competitor after its pilot strike.
International Passenger Revenues- International
passenger revenues decreased 5% to $2.3 billion
during 1999. A 2% increase in RPMs on capacity
growth of 1% was offset by a 6% decline in passen-
ger mile yield. The increase in RPMs primarily reflects
the addition of new Atlantic routes and continued
expansion into Latin American markets. The decline in
passenger mile yield is primarily a result of increased
competitive pressures due to industry-wide capacity
growth in the Atlantic and Latin American markets.
Demand in the Pacific also decreased during 1999,
driven by the Asian economic slowdown.
Cargo and Other Revenues-Cargo revenues declined
1% to $561 million during 1999, reflecting a 2%
increase in cargo ton miles offset by a 3% decrease in
ton mile yield. Other revenues increased 18%, mainly
a result of higher revenues from codeshare programs.
Operating Expenses
Excluding asset writedowns and other special
charges, operating expenses rose 5% in 1999.
CASM increased 1% to 8.90, and non-fuel CASM
increased 1% to 7.94.
Including asset writedowns and other special
charges, operating expenses increased 8% to
$13.6 billion. CASM increased 5% to 9.22 while
non-fuel CASM grew 5% to 8.26. Operating capacity
rose 3% to 147 billion ASMs.
Salaries and related costs increased 6% due to
7% growth in the average number of full-time equiva-
lent employees and a 2% general salary increase.
Aircraft fuel expense increased 3%, due to a slight
increase in the average fuel price per gallon and a
3% increase in gallons consumed. Our fuel cost in
1999 is net of $79 million in gains resulting from
fuel hedge contracts.
Depreciation and amortization expense rose 17%
due to the acquisition of additional aircraft and ground
equipment, as well as the inclusion of ASA in 1999.
Other selling expenses decreased 1%. Passenger
commissions fell 17%, a result of lower effective
commission rates and increased utilization of lower-
cost distribution channels.
Contracted services expense increased 13%
due to expanded operations into new and existing
markets, contract rate increases and the inclusion
of ASA. Landing fees and other rents rose 8% and
aircraft rent increased 9%, primarily due to expanded
operations and the inclusion of leased aircraft
at ASA. Aircraft maintenance and outside repairs
increased 13%, due to outside repairs expense at
ASA. Passenger service expense increased 1% as
a result of higher supply costs. Other operating
expenses decreased 3%, caused by lower profes-
sional fees and navigation charges.
Operating Income and Operating Margin
Excluding asset writedowns and other special
charges, operating income totaled $1.8 billion in
1999, and operating margin was 12.0%.
Including asset writedowns and other special
charges, operating income totaled $1.3 billion in
1999, compared to $1.8 billion in 1998. Operating
margin was 8.9% in 1999, compared to 12.6% in
1998.
Other Income (Expense)
Other income increased $802 million to $775
million during 1999. The increase was due to gains
from the sale of investments of $927 million, which
were partially offset by increased interest expense
due to higher levels of outstanding debt and a
$40 million loss from the early extinguishment of
debt obligations.
Capital Expenditures
(In Millions of Dollars)
$4,060
$3,055
$2,723
1998 1999 2000
Financial Condition
and Liquidity
2000
Cash and cash
equivalents and short-
term investments
totaled $1.6 billion at
December 31, 2000,
compared to $2.3 billion
at December 31, 1999.
We reinvested $4 billion
into our business during
2000, buying new aircraft,
customer service improvements and technology
upgrades. Our principal sources and uses of cash
during 2000 are summarized below.
Sources
Generated $2.9 billion of cash from operations.
Issued $1.5 billion of secured equipment notes.
Borrowed $301 million from the Development
Authority of Clayton County to prepay bonds that
had been issued to finance certain Delta facili-
ties at Hartsfield Atlanta International Airport.
Generated $336 million from the sale/leaseback
of regional jets and $48 million from the sale of
other flight equipment.
Received $73 million from the sale of priceline
common stock.
Issued 729,426 shares of common stock for
$33 million. These shares were primarily issued
under our broad-based employee stock option plans.
Uses
Invested $3.4 billion in flight equipment and
$634 million in technology and ground property and
equipment.
Paid $972 million on debt and capital lease
obligations.
Repurchased 10.6 million shares of common stock
for $502 million.
Paid $232 million to complete the acquisition of
Comair Holdings.
Paid $40 million in cash dividends on preferred
and common stock.
As of December 31, 2000, we had a negative
working capital position of $2.0 billion. A negative
working capital position is normal for us, primarily
due to our air traffic liability, and does not indicate
a lack of liquidity. We expect to meet our obligations
as they become due through available cash, short-
term investments and internally generated funds, sup-
plemented as necessary by debt financings and
proceeds from aircraft sale and leaseback transac-
tions. At December 31, 2000, we had $1.25 billion
of credit available under our 1997 Bank Credit Agree-
ment. (See Note 7 of the Notes to the Consolidated
Financial Statements.)
Long-term debt and capital lease obligations,
including current maturities, totaled $6.0 billion at
December 31, 2000, compared to $5.0 billion at
December 31, 1999. The increase is primarily due to
our issuance in November 2000 of $1.5 billion princi-
pal amount of secured equipment notes for general
corporate purposes, a portion of which was used to
prepay $500 million that we had borrowed under a
credit facility to acquire ASA Holdings. Shareowners'
equity was $5.3 billion at December 31, 2000 and
$4.9 billion at December 31, 1999.
Our net debt-to-capital position was 71%
at December 31, 2000, compared to 68% at
December 31, 1999. For additional information
9
Management's Discussion and Analysis
of Financial Condition and Results of Operations
regarding Delta's credit agreements and long-term
debt, see Note 7 of the Notes to the Consolidated
Financial Statements.
PRIOR YEARS
1999
During 1999, our principal sources of funds
were $2.6 billion of cash from operations, $5.0 billion
from the issuance of long-term and short-term debt,
and $1.4 billion from the sale of investments and
flight equipment. In addition, we received $104 mil-
lion from the issuance of common stock. We invested
$2.5 billion in flight equipment and $558 million in
ground property and equipment. We also invested
$1.6 billion to acquire Comair Holdings and $700 mil-
lion to acquire ASA Holdings and made payments of
$2.2 billion on debt and capital lease obligations. In
addition, we repurchased $625 million of common
stock and paid $43 million in cash dividends on pre-
ferred and common stock.
1998
During 1998, our principal sources of funds
were $2.7 billion of cash from operations, $402 mil-
lion from the issuance of long-term and short-term
debt, and $168 million from the issuance of common
stock. We invested $2.1 billion in flight equipment
and $633 million in ground property and equipment
and made payments of $400 million on debt and
capital lease obligations. We also repurchased
$694 million of common stock and paid $43 million
in cash dividends on preferred and common stock.
Financial Position
DECEMBER 31, 2000
COMPARED TO DECEMBER 31, 1999
This section discusses certain changes in
our Consolidated Balance Sheets which are not
otherwise discussed in Management's Discuss-
sion and Analysis.
The current portion of fuel hedge contracts at
fair market value totaled $319 million at December
31, 2000. As a result of the adoption of SFAS 133,
fuel hedge derivative contracts are recorded at their
market value and presented separately on our bal-
ance sheet. (See Note 3 of the Notes to the
Consolidated Financial Statements.) Prepaid
expenses and other current assets decreased 29%,
or $220 million, during 2000, a result of adopting
SFAS 133. In accordance with the transition provi-
sions of SFAS 133, premiums paid on fuel hedge
derivative contracts were written off during the
10
D E LTA AIR LIN E S , INC .
period. (See Note 3 of the Notes to the Consolidated
Financial Statements.)
Investments in debt and equity securities
decreased 36%, or $189 million, due to fair value
adjustments of these investments and the sale of
a portion of our priceline common stock.
Investments in associated companies increased
98%, or $110 million, primarily due to higher equity
earnings from Worldspan and an additional investment
in a special purpose subsidiary (see Note 17 of the
Notes to the Consolidated Financial Statements).
Other noncurrent assets increased 60%, or $401 mil-
lion. The increase is a result of the prepayment of
certain lease obligations and fair value adjustments
to long-term fuel hedge contracts.
Accounts payable and miscellaneous accrued
liabilities increased 14%, or $27 4 million. The
increase in accounts payable is mainly due to more
favorable payment terms in 2000. Increased fuel
consumption and rising fuel prices also resulted in
higher payable balances.
Our net deferred tax liability increased $427 mil-
lion. This is a result of a deferred tax provision of
$396 million in 2000 (see Note 6 of the Notes to the
Consolidated Financial Statements) and $31 million
which is primarily attributable to the deferred tax
impact of unrealized gains on marketable equity
securities and derivative instruments and the adop-
tion of SFAS 133.
COMMITMENTS
Estimated future expenditures for aircraft and
engines on firm order as of January 26, 2000 totaled
$9.6 billion. In addition, we have planned capital
expenditures of $622 million for the twelve months
ending December 31, 2001, for airport and facility
improvements and the purchase of ground equipment
and other assets. (See Notes 9 and 10 of the Notes
to the Consolidated Financial Statements for addi-
tional information regarding our lease obligations and
purchase commitments.)
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 deriva-
tive transactions pursuant to stated policies. (See
Notes 3 and 4 of the Notes to the Consolidated
Financial Statements.) Management expects adjust-
ments to the fair value of derivative instruments
accounted for under SFAS 133 to result in ongoing
volatility in earnings and shareowners' equity.
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 miti-
gate our exposure to a particular risk. For these
and other reasons, the actual results of changes in
these prices or rates may differ materially from the
following hypothetical results.
Aircraft Fuel Price Risk
Our results of operations can be significantly
impacted by changes in the price of aircraft fuel.
To manage this risk, we periodically enter into heating
oil derivative contracts, such as forwards and options,
to hedge a portion of our projected annual fuel
requirements. Heating oil prices have a high correla-
tion to aircraft fuel prices, making heating oil deriva-
tives effective in offsetting changes in aircraft fuel
prices. The following table shows our hedged position
for the years ending December 31, 2001 and 2002
based on instruments held at December 31, 2000
and our projected annual aircraft fuel requirements:
Average
Percent Hedged
Hedged Price
2001 46% 54.86
2002 25% 54.41
The fair values of our heating oil derivative instru-
rnents were $449 million at December 31, 2000
and $495 million at December 31, 1999. A 10%
decrease in the average annual price of heating oil
will decrease these fair values by $125 million at
December 31, 2000.
During 2000, aircraft fuel accounted for 13%
of our operating expenses. Based on our projected
aircraft fuel consumption of 2.9 billion gallons for the
twelve months ending December 31, 2001, a 10%
rise in our projected jet fuel prices will increase our
aircraft fuel expense by approximately $110 million
for that period. This analysis includes the effects of
fuel hedging instruments in place at December 31,
2000. Based on our 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 $64 million in 2000. This analysis
includes the effects of fuel hedging instruments in
place during 2000.
For additional information regarding our aircraft
fuel price risk management program, see Note 3 of
the Notes to the Consolidated Financial Statements.
Equity Securities Risk
We have equity interests in SkyWest, priceline,
Equant and other ~ommerce companies. The esti-
mated fair value and aggregate unrealized gain from
these investments was $205 million and $92 million,
respectively, at December 31, 2000. At December 31,
1999, the estimated fair value of our equity interests
totaled $595 million, with an aggregate unrealized
gain of $267 million. The balance sheet risk associ-
ated with these investments is the potential loss in
fair value resulting from a decrease in the price of
their common stock. Based on the market value of
our equity investments at December 31, 2000, a
10% decline in the price of their common stock will
decrease fair value of these instruments by approxi-
mately $21 million.
Delta also has earnings risk associated with
equity warrants and other similar rights in e-commerce
companies, primarily priceline. The fair value of these
warrants and rights, which totaled $11 million at
December 31, 2000, is directly related to changes in
the price of the underlying common stock. This expo-
sure to market risk can create volatility in the fair
value of the financial instruments held, which results
in increased volatility in non-operating earnings under
SFAS 133. Based on the market value of these
investments at December 31, 2000, a 10% decline
in the price of the underlying common stock will not
have a material impact on the fair value of these
investments or on our non-operating earnings. For
additional information regarding our equity invest-
ments, 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 primarily relates to our long-term
debt obligations 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. A 10% decrease in aver-
age annual interest rates would have increased
the estimated fair value of our long-term debt by
$338 million and $279 million at December 31,
2000 and December 31, 1999, respectively. A 10%
11
Management's Discussion and Analysis
of Financial Condition and Results of Operations
increase in average annual interest rates would not
have had a material impact on our interest expense
in 2000, due to the nature of our long-term debt. At
December 31, 2000, 95% of our long-term debt obli-
gations had fixed interest rates.
Market risk associated with our cash portfolio is
the potential change in earnings resulting from a
change in interest rates. Based on our average bal-
ance of cash and cash equivalents and short-term
investments during 2000, a 10% decrease in average
annual interest rates will not have a material impact
on our interest income.
We may use non-leveraged, over-the-counter
financial instruments to manage our interest rate
risk, provided that the notional amount of these
transactions does not exceed 50% of our long-term
debt. Delta had none of these instruments outstand-
ing at December 31, 2000 and 1999.
Foreign Currency Exchange Rate Risk
Delta has revenues and expenses denominated
in foreign currencies and, as a result, is exposed to
foreign currency exchange rate risk. The majority of
our exposure results from transactions denominated
in the Euro, British Pound and Japanese Yen. To
manage exchange rate risk, we net foreign currency
revenues and expenses, to the extent practicable,
to take advantage of natural offsets. We may use
foreign currency option and forward contracts with
maturities of up to 12 months to manage the remain-
ing net exposure. We had none of these instruments
outstanding at December 31, 2000. Based on our
average annual net foreign currency positions during
2000, a 10% adverse change in average annual for-
eign currency exchange rates would not be material
to our Consolidated Financial Statements.
Other Matters
COLLECTIVE BARGAINING MATTERS
12
Our relations with labor unions in the United
States are governed by the Railway Labor Act.
Under that statute, a collective bargaining agree-
ment between an airline and a labor union does not
expire, but instead becomes amendable as of a
stated date. Either party may request the National
Mediation Board (NMB) to appoint a federal mediator
to participate in the negotiations. If no agreement is
reached in mediation, the NMB may determine, at any
time, that an impasse exists and offer binding arbitra-
tion. If either party rejects binding arbitration, a 30-day
"cooling off" period begins. At the end of this 30-
DE LTA AI R LIN ES , INC .
day period, the parties may engage in "self help, "
unless the President of the United States appoints
a Presidential Emergency Board (PEB) to investigate
and report on the dispute. The appointment of a PEB
maintains the "status quo" for an additional 60 days.
If the parties do not reach agreement during this
period, the parties may then engage in "self help."
"Self help" includes, among other things, a strike by
the union or the imposition of proposed changes to
the collective bargaining agreement by the airline.
Delta Pilots
In September 1999, we began negotiations with
the Air Line Pilots Association, International (ALPA),
the union representing our approximately 9,800 pilots,
on a new collective bargaining agreement to replace
the existing pilot contract that became amendable in
May 2000. In December 2000, the NMB appointed
mediators to participate in the negotiations. We and
ALPA have agreed to request the NMB to offer binding
arbitration to the parties on March 1, 2001 if a tenta-
tive agreement has not been reached. The NMB is not
required to grant this request. As discussed above, if
the NMB offers binding arbitration and either party
rejects this offer, a 30-day "cooling off" period begins.
On February 12, 2001, ALPA announced that
Delta pilots had voted to authorize a strike. If a strike
occurs, we plan to cease mainline operations during
the strike. A strike or other job action by our pilots
could have a material adverse impact on our financial
condition and operations. The outcome of our negoti-
ations with ALPA cannot presently be determined.
On December 5, 2000, we filed a lawsuit against
ALPA in the U. S. District Court in Atlanta to stop a
concerted campaign by some pilots to pressure us in
our collective bargaining negotiations with ALPA by
refusing to request overtime (or additional) flying
assignments, and by harassing pilots who submit
such requests. The District Court denied our request
for a preliminary injunction because the District
Court believed there was insufficient evidence to link
ALPA to the illegal job action by some Delta pilots.
We appealed to the U. S. Court of Appeals for the
Eleventh Circuit which, on January 18, 2001, ordered
the District Court to issue an injunction against
ALPA. The Court of Appeals held that unions have an
obligation under the Railway Labor Act to prevent
unlawful job actions by their members. ALPA filed a
petition for a rehearing which the Court of Appeals
denied on February 9, 2001. On February 14, 2001,
the District Court issued an injunction against ALPA.
In December 2000, we canceled approximately
8,700 flights, primarily due to the combination of
severe winter weather and the pilot job action,
which significantly reduced pilot availability for addi-
tional flying. As a result of these flight cancellations,
our operating revenues for the December 2000 quar-
ter were approximately $80 million lower than we
had anticipated. To minimize the impact of the pilot
job action on customers, we have reduced our
domestic schedule for the March 2001 quarter by
2. 7% from the level we had planned.
Other Labor Negotiations
We are also in collective bargaining negotia-
tions with the Transport Workers Union of America
(TWU), which represents our approximately 110 pilot
ground training instructors. Comair is in negotia-
tions with ALPA and the International Brotherhood
of Teamsters (IBT), which represent Comair's approxi-
mately 1,300 pilots and 700 flight attendants, respec-
tively. ASA is in negotiations with the Professional
Airline Flight Control Association (PAFCA), which repre-
sents ASA's approximately 30 flight dispatchers.
The NMB appointed a mediator to participate in the
DeltajTWU negotiations in January 2001; the Com air/
ALPA negotiations in July 1999; and the Comair/lBT
negotiations in April 2000. A mediator has not yet
been appointed to participate in the ASA/PAFCA
negotiations.
The outcome of these collective bargaining nego-
tiations cannot presently be determined. A strike or
other job action could have a material adverse impact
on our financial condition and operations.
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.
United Airlines has entered into an agreement
to acquire US Airways. In addition, American Airlines
has agreed to acquire substantially all the assets
of Trans World Airlines and certain US Airways
assets. These transactions are subject to regulatory
approvals and other conditions. If these transactions
occur, the competitive environment in the airline
industry could significantly change because United
and American would become much larger than other
U.S airlines, including Delta. We are continuing to
review our strategic alternatives. We cannot presently
predict the impact that these pending transactions
could have on us.
Due to seasonal variations in the demand for air
travel, operating results for an interim period are not
necessarily indicative of operating results for an entire
year. In general, demand for air travel is higher in the
June and September quarters, particularly in interna-
tional 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 eco-
nomic conditions, fare levels and weather conditions.
ENVIRONMENTAL AND LEGAL CONTINGENCIES
Delta is a defendant in legal actions relating to
antitrust matters, employment practices, environmental
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 Financial
Statements.
FORWARD-LOOKING INFORMATION
Statements in this Annual Report which are not
purely historical facts, including statements about our
expectations, beliefs, intentions, or strategies for the
future, may be "forward-looking statements" as
defined in the Private Securities Litigation Reform Act
of 1995. Forward-looking statements involve risks
and uncertainties that could cause actual results
to differ materially from historical experience or our
present expectations.
Factors that could cause these differences
include, but are not limited to, general economic con-
ditions; competitive factors in our industry, including
mergers and acquisitions; outcomes of negotiations
on collective bargaining agreements; changes in air-
craft fuel prices; disruptions to operations due to
adverse weather conditions, air traffic control-related
constraints and labor issues; fluctuations in foreign
currency exchange rates; governmental -actions; the
willingness of customers to travel generally and with
us specifically; and the outcome of our litigation.
Caution should be taken not to place undue
reliance on our forward-looking statements, which
are current only as of the date of this Annual
Report. More detailed information about these risks
and uncertainties can be read in Delta's past and
future Forms 10-K and 10-Q and certain Forms 8-K
filed with the Securities and Exchange Commission.
13
Consolidated Balance Sheets
December 31, 2000 and 1999 D E LTA A I R L IN E S , IN C .
ASSETS 2000 1999
(In Millions)
Current Assets:
Cash and cash equivalents $ 1,364 $ 1,623
Short-term investments 243 693
Accounts receivable, net of allowance for
uncollectible accounts of $31 at December 31, 2000
and $39 at December 31, 1999 406 492
Deferred income taxes 345 455
Fuel hedge contracts, at market value 319 -
Prepaid expenses and other 528 748
Total current assets 3,205 4,011
Property and Equipment:
Flight equipment 17,081 14,444
Less: Accumulated depreciation 4,849 4,580
12,232 9,864
Flight equipment under capital leases 484 506
Less: Accumulated amortization 324 279
160 227
Ground property and equipment 4,371 4,008
Less: Accumulated depreciation 2,313 2,186
2,058 1,822
Advance payments for equipment 390 537
Total property and equipment, net 14,840 12,450
Other Assets:
Investments in debt and equity securities 339 528
Investments in associated companies 222 112
Cost in excess of net assets acquired, net of
accumulated amortization of $196 at
December 31, 2000 and $137 at December 31, 1999 2,149 2,060
Operating rights and other intangibles, net of accumulated
amortization of $236 at December 31, 2000 and
$225atDecember31, 1999 102 108
Other noncurrent assets 1,074 673
Total other assets 3,886 3,481
Total assets $21,931 $19,942
14
LIABILITIES AND SHAREOWNERS' EQUITY 2000 1999
(In Millions, Except Share Data)
Current Liabilities:
Current maturities of long-term debt $ 62 $ 670
Current obligations under capital leases 40 42
Accounts payable and miscellaneous accrued liabilities 2,248 1,974
Air traffic liability 1,442 1,491
Accrued salaries and related benefits 1,170 1,070
Accrued rent 283 267
Total current liabilities 5,245 5,514
Noncurrent Liabilities:
Long-term debt 5,797 4,144
Capital leases 99 159
Postretirement benefits 2,026 1,916
Accrued rent 721 720
Deferred income taxes 1,220 903
Other 388 468
Total noncurrent liabilities 10,251 8,310
Deferred Credits:
Deferred gains on sale and leaseback transactions 568 617
Manufacturers' and other credits 290 374
Total deferred credits 858 991
Commitments and Contingencies {Notes 2, 3, 4, 7, 9 and 10)
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 6,405,563 shares at December 31, 2000
and 6,498,921 shares at December 31, 1999 460 468
Unearned compensation under employee stock ownership plan (226) (249)
Total Employee Stock Ownership Plan Preferred Stock 234 219
Shareowners' Equity:
Common stock, $1.50 par value;
450,000,000 shares authorized; 180,764,057 shares
issued at December 31, 2000 and 180,034,631 shares issued
at December 31, 1999 271 270
Additional paid-in capital 3,264 3,222
Retained earnings 4,176 3,377
Accumulated other comprehensive income 360 266
Treasury stock at cost, 57,750,685 shares at December 31, 2000
and 47,141,161 shares at December 31, 1999 {2,728) (2,227)
Total shareowners' equity 5,343 4,908
Total liabilities and shareowners' equity $21,931 $19,942
The accompanying notes are an integral part of these consolidated financial statements.
15
Consolidated Statements of Income
For the years ended December 31, 2000, 1999 and 1998 D E LTA A I R LIN E S , I NC .
2000 1999 1998
(In Millions, Except Per Share Data)
Operating Revenues:
Passenger $15,657 $13,949 $13,428
Cargo 583 561 569
Other, net 501 373 315
Total operating revenues 16,741 14,883 14,312
Operating Expenses:
Salaries and related costs 5,971 5,194 4,894
Aircraft fuel 1,969 1,421 1,379
Depreciation and amortization 1,187 1,057 902
Other selling expenses 688 626 632
Passenger commissions 661 784 939
Contracted services 966 824 729
Landing fees and other rents 771 723 670
Aircraft rent 741 622 569
Aircraft maintenance materials and outside repairs 723 594 526
Passenger service 470 498 491
Asset writedowns and other special charges 108 469 -
Other 849 753 778
Total operating expenses 15,104 13,565 12,509
Operating Income 1,637 1,318 1,803
Other Income (Expense):
Interest income (expense}, net (271) (126) (66)
Gains from the sale of investments 301 927 -
Miscellaneous income (expense), net 41 (26) 39
Fair value adjustments of SFAS 133 derivatives (159) - -
Total other income (expense) (88) 775 (27)
Income Before Income Taxes and
Cumulative Effect of Changes in Accounting Principles 1,549 2,093 1,776
Income Taxes Provided (621) (831) (698)
Net Income Before Cumulative Effect of
Changes in Accounting Principles, Net of Tax 928 1,262 1,078
Cumulative Effect of Changes in Accounting Principles,
Net of Tax of $64 million in 2000 and $35 million in 1999 (100) (54) -
Net Income 828 1,208 1,078
Preferred Stock Dividends (13) (12) (11)
Net Income Available to Common Shareowners $ 815 $ 1,196 $ 1,067
Basic Earnings Per Share Before Cumulative Effect of
Changes in Accounting Principles $ 7.39 $ 9.05 $ 7.22
Basic Earnings Per Share $ 6.58 $ 8.66 $ 7.22
Diluted Earnings Per Share Before Cumulative Effect of
Changes in Accounting Principles $ 7.05 $ 8.52 $ 6.87
Diluted Earnings Per Share $ 6.28 $ 8.15 $ 6.87
The accompanying notes are an integral part of these consolidated financial statements.
16
Consolidated Statements of Cash Flows
for the years ended December 31, 2000, 1999 and 1998 DELTA AIR LIN ES , INC.
2000 1999 1998
(In Millions)
Cash Flows From Operating Activities:
Net income $ 828 $1,208 $1,078
Adjustments to reconcile net income to cash
provided by operating activities:
Cumulative effect of change in accounting principle 100 54 -
Asset writedowns and other special charges 108 469 -
Depreciation and amortization 1,187 1,057 902
Deferred income taxes 396 321 309
Fair value adjustments of SFAS 133 derivatives 159 - -
Pension, postretirement and postemployment expense
in excess of (less than) payments (103) 33 101
Dividends in excess of (less than) equity income (28) 48 (57)
Gains on the sale of investments (301) (927) -
Income tax benefit from exercise of stock options 5 21 72
Changes in certain current assets and liabilities:
Decrease (increase) in accounts receivable 86 310 (14)
Decrease (increase) in prepaid expenses and
other current assets 92 (186) (102)
(Decrease) increase in air traffic liability (49) 73 185
Increase in other payables and accrued expenses 373 153 134
Other, net 45 13 118
Net cash provided by operating activities 2,898 2,647 2,726
Cash Flows From Investing Activities:
Property and equipment additions:
Flight equipment, including advance payments (3,426) (2,497) (2,090)
Ground property and equipment (634) (558) (633)
Decrease (increase) in short-term investments, net 456 (367) 365
Proceeds from sale of flight equipment 384 215 17
Proceeds from sale of investments 73 1,167 -
Acquisitions of companies, net of cash acquired (232) (1,922) -
Other, net (17) - -
Net cash used in investing activities (3,396) (3,962) (2,341)
Cash Flows From Financing Activities:
Payments on long-term debt and capital
lease obligations (853) (1,927) (373)
Payments on notes payable, net (119) (250) (27)
Prepayment of long-term lease obligations (215) - -
Cash dividends (40) (43) (43)
Issuance of long-term obligations 1,867 4,496 125
Issuance of short-term obligations 68 515 277
Issuance of common stock 33 104 168
Repurchase of common stock (502) (625) (694)
Net cash provided by (used in) financing activities 239 2,270 (567)
Net Increase (Decrease) in Cash and Cash Equivalents (259) 955 (182)
Cash and cash equivalents at beginning of year 1,623 668 850
Cash and cash equivalents at end of year $1,364 $1,623 $ 668
Supplemental disclosure of cash paid for:
Interest, net of amounts capitalized $ 410 $ 185 $ 139
Income taxes 131 315 282
The accompanying notes are an integral part of these consolidated financial statements.
17
Consolidated Statements of Shareowners' Equity
For the years ended December 31, 2000, 1999 and 1998 DELTA AIR L I N ES , INC .
Accumulated
Additional Other
Common Paid-In Retained Comprehensive Treasury
(In Millions, Except Share Data) Stock Capital Earnings Income Stock Total
Balance at December 31, 1997 $259 $2,851 $1,141 $ 67 $ (911) $3,407
Comprehensive income:
Net income - - 1,078 - - 1,078
Other comprehensive income - - - 58 - 58
Total comprehensive income (See Note 16) 1,136
Dividends on common stock ($0.10 per share) - - (15) - - (15)
Dividends on Series B ESOP Convertible
Preferred Stock allocated shares - - (11) - - (11)
Issuance of 4,880,742 shares of common stock
under dividend reinvestment and stock purchase
plan and stock options ($34.45 per share*) 7 161 - - - 168
Repurchase of 12,533,469 common shares
($55.36 per share*) - - - - (694) (694)
Income tax benefit from exercise of stock options - 72 - - - 72
Transfer of 129,334 shares of common stock
from treasury under stock incentive plan
($42.07 per share*) - - - - 5 5
Other - 6 3 - - 9
Balance at December 31, 1998 266 3,090 2,196 125 (1,600) 4,077
Comprehensive income:
Net income - - 1,208 - - 1,208
Other comprehensive income - - - 141 - 141
Total comprehensive income (See Note 16) 1,349
Dividends on common stock ($0.10 per share) - - (14) - - (14)
Dividends on Series B ESOP Convertible
Preferred Stock allocated shares - - (12) - - (12)
Issuance of 2,381,204 shares of common stock
under dividend reinvestment and stock purchase
plan and stock options ($43.94 per share*) 4 100 - - - 104
Repurchase of 10,971,166 common shares
($56.96 per share*) - - - - (625) (625)
Income tax benefit from exercise of stock options - 21 - - - 21
Transfer of 30,830 shares of common stock
from treasury under stock incentive plan
($59.37 per share*) - - - - (2) (2)
Other - 11 (1) - - 10
Balance at December 31, 1999 270 3,222 3,377 266 {2,227) 4,908
Comprehensive income:
Net income - - 828 - - 828
Other comprehensive income - - - 94 - 94
Total comprehensive income (See Note 16) 922
Dividends on common stock ($0.10 per share) - - (12) - - (12)
Dividends on Series B ESOP Convertible
Preferred Stock allocated shares - - (13) - - (13)
Issuance of 729,426 shares of common stock
under dividend reinvestment and stock purchase
plan and stock options ($44.86 per share*) 1 32 - - - 33
Repurchase of 10,626,104 common shares
($47.26 per share*) - - - - (502) (502)
Income tax benefit from exercise of stock options - 5 - - - 5
Transfers and forfeitures of 16,580 shares of
common stock under stock incentive plan
($52.61 per share*) - - - - 1 1
Other - 5 (4) - - 1
Balance at December 31, 2000 $271 $3,264 $4,176 $360 $(2,728) $5,343
* Average price per share.
The accompanying notes are an integral part of these consolidated financial statements.
18
Notes to the Consolidated Financial Statements
December 31, 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, Comair Holdings, Inc. (Comair
Holdings) and ASA Holdings, Inc. (ASA Holdings), col-
lectively referred to as Delta. Comair Holdings is the
parent of Comair, Inc. (Comair) and ASA Holdings is
the parent of Atlantic Southeast Airlines, Inc. (ASA).
We have eliminated all intercompany transactions.
The results of operations of companies purchased
are included from the date of acquisition. These con-
solidated financial statements have been prepared
in accordance with accounting principles generally
accepted in the United States.
Change in Year End- Effective December 31,
2000, we changed our year end from June 30
to December 31. Accordingly, this Annual Report
includes audited Consolidated Balance Sheets as
of December 31, 2000 and 1999, and audited
Consolidated Statements of Income, Cash Flows
and Shareowners' Equity for the years ended
December 31, 2000, 1999 and 1998.
Use of Estimates-We are required to make estimates
and assumptions when preparing our financial state-
ments in conformity with accounting principles gener-
ally accepted in the United States. These estimates
and assumptions affect the amounts reported in our
financial statements 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 lia-
bility 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
DE LTA AIR LIN ES , INC.
can be significant, are included in the Consolidated
Statements of Income in the period that the evalua-
tions are completed.
Long-Lived Assets- We record our property and
equipment at cost and depreciate these assets on
a straight-line basis to their estimated residual val-
ues over their respective estimated useful life. 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%-40% of cost. Purchased international route author-
ities are amortized over the lives of the authorities as
determined by their expiration dates. Permanent route
authorities with no stated expiration dates are amor-
tized over 40 years. Our cost in excess of net assets
acquired (goodwill) is amortized over 40 years and is
primarily related to our acquisitions of Comair Holdings
and ASA Holdings in 1999 and Western Air Lines, Inc.
in 1986.
Interest Capitalized-We capitalize interest paid on
advance payments used to acquire new aircraft and to
construct ground facilities as an additional cost of the
related assets. Interest is capitalized at our weighted
average interest rate on long-term debt or, if applica-
ble, the interest rate related to specific borrowings.
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 undiscounted cash
flows estimated to be generated by those assets are
less than their carrying amounts. If an impairment
occurs, the amount of the impairment recognized is
determined by estimating the fair value of the assets
and recording a provision for loss if the carrying value
is greater than the fair value.
19
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
20
Investments in Associated Companies-We use the
equity method to account for our 40% ownership inter-
est in WORLDSPAN, L.P. , a computer reservations
system. Our equity earnings from this investment
totaled $59 million in 2000, $30 million in 1999 and
$15 million in 1998. We accounted for our invest-
ments in Comair Holdings and ASA Holdings under
the equity method until November 22, 1999 and
April 1, 1999, respectively.
Frequent Ryer Program-Delta records an estimated
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.
Delta also sells mileage credits in the SkyMiles
program to participating partners such as credit card
companies, hotels and car rental agencies. For infor-
mation regarding our accounting for these mileage
credits, see Note 5.
Deferred Gains on Sale and Leaseback Transactions-
We amortize deferred gains on the sale and lease-
back 'of property and equipment under operating
leases over the lives of these leases. The gain amor-
tization is 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 air-
craft 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 year incurred.
Advertising expense in 2000, 1999 and 1998
was $151 million, $143 million and $122 million,
respectively.
Foreign Currency Remeasurement-We generally
remeasure assets and liabilities denominated in for-
eign currencies 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 for-
eign exchange gains and losses as a component of
DELTA A I R L IN ES , INC .
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-Delta accounts for
stock-based compensation 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 is equal
to or greater than the fair market value of our common
stock on the grant date (see Note 15).
Fair Value of Financial Instruments-The fair
values of our cash equivalents and short-term
investments approximate their cost. The estimated
fair values of other financial instruments, including
debt and risk management instruments, have been
determined using available market information and
valuation methodologies, primarily discounted cash
flow analysis.
New Accounting Standards-During 2000, we
adopted SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities, " as amended
(see Note 3). In September 2000, SFAS 140,
"Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" was
issued. The adoption of SFAS 140 does not currently
have an impact on our consolidated financial state-
ments (see Note 17). During 1999, we adopted Staff
Accounting Bulletin (SAB) 101, "Revenue Recognition
in Financial Statements" (see Note 5) and 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 Financial
Statements.
2. Marketable and Other Equity Securities
Marketable Equity Securities
Delta's equity' investment in SkyWest, Inc. is
classified as an available-for-sale equity security
under SFAS 115, "Accounting for Certain Investments
in Debt and Equity Securities. " The fair value of this
investment was $179 million at December 31, 2000
and $87 million at December 31, 1999. Our cost
basis of this investment is $14 million.
During 1999, we sold our equity interests in
Singapore Airlines and SAirGroup, recognizing pretax
gains of $137 million and $29 million, respectively.
Accumulated other comprehensive income
includes the aggregate unrealized gains from our
outstanding investments, net of the related deferred
tax provision.
priceline.com Inc.
During 1998, Delta entered into an agreement
with priceline.com Incorporated (priceline) allowing
ticket inventory provided by Delta to be sold through
priceline's Internet-based e-commerce system. In
consideration for this agreement, we received a war-
rant to purchase up to 18.6 million shares of price-
line common stock for $0.93 per share. We did not
recognize the value of the warrant in our consoli-
dated financial statements in 1999 or 1998 because
its estimated fair value was not material. The war-
rant became fully exercisable on July 25, 1999.
We exercised the warrant in 1999. As a result, we
acquired 18.3 million shares of priceline common
stock. We sold 11.1 million of these shares for a pre-
tax cash gain of $711 million in 1999, and 1.2 million
of these shares for a pretax cash gain of $73 million
in 2000.
On November 17, 1999, Delta and priceline
amended their original agreement. As a result of the
amendment, Delta received (1) the right to exchange
six million shares of priceline common stock for
six million shares of priceline convertible preferred
stock (exchange right); and (2) a new warrant to
acquire up to 5.5 million shares of priceline common
stock for $56.63 per share (new warrant).
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 is being recognized in income ratably over a
three year period beginning November 17, 1999.
Under our agreement with priceline, we are required
to provide priceline access to unpublished fares.
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 liquidation preference of $59.93 per share plus
accrued and unpaid dividends; (2) are convertible
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 dividends; 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 in 2000. On
October 1, 2000, Delta received 549,764 shares
of priceline common stock as a dividend on the
preferred stock.
On November 2, 2000, Delta and priceline
amended the new warrant (1) to reduce the number
of shares underlying the new warrant from 5.5 mil-
lion to 4. 7 million; (2) to reduce Delta's per share
purchase price for those shares from $56.63 to
$4. 72; and (3) to provide that Delta may not sell
or otherwise transfer more than 50% of the new war-
rant or the underlying shares until November 2, 2001.
The new warrant became exercisable in full on
January 1, 2001, and expires on November 17,
2004. The amendment of the new warrant did
not have a material impact on our Consolidated
Financial Statements.
At December 31, 2000, Delta owned six million
shares of priceline convertible preferred stock, a war-
rant to purchase up to 4. 7 million shares of priceline
common stock for $4. 72 per share and 589,831
shares of priceline common stock. The convertible
preferred stock, the new warrant 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 registra-
tion rights relating to the underlying shares of price-
line common stock.
See Note 3 for additional information regard-
ing the accounting for our priceline investment.
Equant, N. V.
During 1999, we sold a portion of our equity
interest in Equant, realizing a pretax cash gain of
$50 million. At December 31, 2000, we owned
540,852 depository certificates that are convertible,
subject to certain conditions, into common stock of
Equant. Our equity interest is recorded at its nominal
cost on our Consolidated Balance Sheets. The
shares of Equant common stock underlying these
certificates had an estimated fair market value of
$14 million and $61 million at December 31, 2000
and 1999, respectively.
3. Adoption of SFAS 133
On July 1, 2000, we adopted SFAS 133, as
amended. SFAS 133 requires us to record on the
balance sheet all derivative instruments at fair
value and to recognize certain non-cash changes
in these fair values in the income statement.
SFAS 133 impacts the accounting for our fuel
hedging program and our holdings of equity war-
rants and other similar rights in other companies.
21
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
The impact of adopting SFAS 133 on our
Consolidated Statements of Income is summarized
as follows (in millions):
22
Write-off of
fuel hedge
contract premiums
Ineffective
portion of fuel
hedge contracts
Fair value
adjustment of
equity rights
Total pretax
Total after tax
Fuel Hedging
Income (Expense)
For the
Six Months Ended
December 31, 2000
$ -
5
(164)
(159)
$ (97)
Cumulative
Effect at
July 1, 2000
$(143)
16
(37)
(164)
$(100)
Total
$(143)
21
(201)
(323)
$(197)
Our results of operations can be significantly
impacted by changes in the price of aircraft fuel. To
manage this risk, we periodically purchase forwards,
options and other similar non-leveraged derivative
instruments, which may have maturities of up to 36
months. Because there is not a readily available mar-
ket for derivatives in aircraft fuel, we use heating oil
contracts to manage our exposure to the movement
of aircraft fuel prices. The changes in the market
value of our heating oil contracts (also referred to as
"fuel hedge contracts ") have a high correlation to
changes in aircraft fuel prices and therefore, qualify
as cash flow hedges under SFAS 133. We do not enter
into fuel hedge contracts for speculative purposes.
Upon adoption of SFAS 133 on July 1, 2000, we
recorded the fair market value of our fuel hedge con-
tracts on our Consolidated Balance Sheets. On an
ongoing basis, we adjust our balance sheet to reflect
the current fair market value of our fuel hedge con-
tracts. The related gains or losses on these contracts
are deferred in shareowners' equity (as a component
of other comprehensive income). These deferred
gains and losses are recognized in income in the
period in which the related aircraft fuel purchases
being hedged are consumed and recognized in
expense. However, to the extent that the change in
the value of the fuel hedge contract does not perfectly
offset the change in the value of the aircraft fuel
purchase being hedged, the ineffective portion of
the hedge is immediately recognized in income. In cal-
culating the ineffective portion of our hedge per-
formance under SFAS 133, we include all changes
DELTA AIR LIN ES , INC .
in the time value component related to any option
premiums paid and recognize the amount in income
during the life of the contract. The ineffective por-
tion of the hedge returns, including those related
to time value, are included in our Consolidated
Statements of Income as fair value adjustments of
SFAS 133 derivatives. At December 31, 2000, our
fuel hedge contracts had an estimated short-term
value of $319 million and an estimated long-term
fair value of $130 million, with unrealized gains of
$268 million, net of tax, recorded in accumulated
other comprehensive income.
Equity Warrants and Other Similar Rights
We own equity warrants and other similar
rights in certain companies, primarily priceline. At
December 31, 2000, our equity warrant and other
similar rights in priceline consisted of the following:
(1) an option to convert our six million shares of
priceline preferred stock into priceline common stock
on a one-for-one basis; and (2) a warrant which gives
us the right to purchase up to 4. 7 million shares
of priceline common stock at $4. 72 per share. At
December 31, 2000, the fair market value of our
priceline warrant was $0.8 million.
SFAS 133 requires us to account for the value of
the option to convert priceline preferred stock into
priceline common stock as a stand-alone equity right,
and to record any change in fair value in current
period earnings. At December 31, 2000, the value of
our priceline preferred stock was $117 million, includ-
ing its conversion feature which had an estimated
fair value of $0.2 million. The value of the priceline
preferred stock, excluding the conversion feature, is
accounted for as an available-for-sale debt security
and is recorded at its amortized cost in investments
in equity securities on our Consolidated Balance
Sheets in accordance with SFAS 115. The change in
market values of the equity conversion feature of our
priceline preferred stock, our priceline warrant and
our warrants in other e-commerce companies is
recorded in our Consolidated Statements of Income
as fair value adjustments of SFAS 133 derivatives.
For additional information regarding our investment
in priceline, see Note 2.
4. Risk Management
Interest Rate Risk
Our exposure to market risk due to changes
in interest rates primarily relates to our long-term
debt obligations and cash portfolio.
Market risk associated with our long-term debt is
the potential change in fair value resulting from a
change in interest rates. Market risk associated with
our cash portfolio is the potential change in our earn-
ings resulting from a change in interest rates.
From time to time, we may enter into interest
rate hedging transactions, provided that the notional
amount of these transactions does not exceed
50% of our long-term debt. We did not have any
interest rate hedging contracts at December 31,
2000 and 1999.
Foreign Currency Exchange Risk Management
Delta is subject to foreign currency exchange risk
because we have revenues and expenses denomi-
nated in foreign currencies, primarily the Euro, the
British Pound and the Japanese Yen. To manage
exchange rate risk, we net foreign currency revenues
and expenses, to the extent practicable. From time
to time, we may also enter into foreign currency
options and forward contracts with maturities of up
to 12 months. We did not have any foreign currency
hedging contracts at December 31, 2000. The esti-
mated fair value of our foreign currency hedging con-
tracts was not material at December 31, 1999. We
do not enter into foreign currency hedging contracts
for speculative purposes.
Credit Risk Management
To manage credit risk associated with our fuel
price and foreign currency exchange risk manage-
ment programs, we select counterparties based on
their credit ratings and limit our exposure to any one
counterparty under defined guidelines. We also moni-
tor the market position of these programs and our
relative market position with each counterparty. The
credit exposure related to these programs was not
significant at December 31, 2000 and 1999.
Our accounts receivable are generated largely
from the sale of passenger airline tickets and cargo
transportation services to customers who are eco-
nomically and geographically dispersed. In addition,
our accounts receivable are generally short-term in
duration. Therefore, we believe we have no signifi-
cant concentration of credit risk.
At December 31, 2000, we held six million
shares of priceline preferred stock, which are subject
to credit risk. See Note 2 for a further description
of our priceline preferred stock.
Fuel Price Risk Management
See Note 3 for information regarding our fuel
hedging program.
5. Adoption of SAB 101
On January 1, 1999, Delta adopted SAB 101,
which changed the method of accounting for the
sale of mileage credits in the SkyMiles program
to participating partners such as credit card compa-
nies, hotels and car rental agencies. Under the new
accounting method, a portion of the revenue from
the sale of mileage credits is deferred until 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.
Our adoption of SAB 101 resulted in a cumula-
tive effect charge of $54 million, net of tax ($89 mil-
lion, pretax). SAB 101 decreased operating income
by $13 million, net of tax ($21 million, pretax), and
$23 million, net of tax ($38 million, pretax), for 2000
and 1999, respectively.
Unaudited pro forma results assuming retroac-
tive application of the change in accounting principle
for 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
$ 928
$7.39
$7.05 .
1999
$1,262
$ 9.05
$ 8.52
1998
$1,069
$ 7.16
$ 6.81
For comparative purposes, our unaudited
proforma results excluding application of the change
in accounting principle for 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
$ 941
$7.50
$7.15
1999
$1,285
$ 9.22
$ 8.68
1998
$1,078
$ 7.22
$ 6.87
23
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
6. 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 December 31, 2000 and 1999:
(In Millions) 2000 1999
Deferred Tax Assets:
Postretirement benefits $ 821 $ 773
Other employee benefits 304 338
Gains on sale and
leaseback transactions 206 286
Rent expense 221 216
Spare parts repair expense 164 160
Other 361 324
Total deferred tax assets $2,077 $2,097
Deferred Tax Liabilities:
Depreciation and amortization $2,337 $2,083
Unrealized gains on
marketable securities
and fuel hedge contracts 230 170
Other 385 292
Total deferred tax liabilities $2,952 $2,545
7. Long-Term Debt
DE L TA AI R L IN ES , IN C .
Income taxes provided in 2000, 1999 and 1998
consisted of:
(In Millions) 2000 1999 1998
Current taxes $(230) $(515) $(393)
Deferred taxes (396) (321) (309)
Tax benefit of dividends
on allocated Series B
ESOP Convertible
Preferred Stock 5 5 4
Income taxes provided $(621) $(831) $(698)
The following table presents the principal reasons
for the difference between the effective tax rate and
the United States federal statutory income tax rate for
2000, 1999 and 1998:
2000 1999 1998
U.S. federal statutory
income tax rate 35.0% 35.0% 35.0%
State taxes, net of federal
income tax effect 3.4 3.7 3.4
Meals and entertainment 1.1 0.8 0.8
Amortization 1.0 0.3 0.2
Municipal bond interest (0.2)
Other, net (0.2) (0.1) (0.1)
Effective income tax rate 40.1% 39.7% 39.3%
The following table summarizes our long-term debt, including current maturities, at December 31, 2000 and 1999:
(In Millions)
Secured
7. 779% Equipment Notes due November 18, 2005
7 .379% Equipment Notes due in installments through May 18, 2010
7.92% Equipment Notes due November 18, 2010
7.57% Equipment Notes due November 18, 2010
Unsecured
1999 Bank Credit Agreement, repaid November 2000
8.10% Series C Guaranteed Serial ESOP Notes,
due in installments between 2002 and 2009
6.65% Medium-Term Notes, Series C, due March 15, 2004
7. 7% Notes due December 15, 2005
7.9% Notes due December 15, 2009
9. 75% Debentures due May 15, 2021
Development Authority of Clayton County, loan agreement,
Series 2000A $65 million due on June 1, 2029, 4. 7% interest; Series 20008 $116 million due on
May 1, 2035, 4.8% interest; and Series 2000C $120 million due on May 1, 2035, 4.8% interest*
8.3% Notes due December 15, 2029
8.125% Notes due July 1, 2039
Other debt due 2001 to 2022; interest rates of 5.30% to 10.375%
Total
Less: Current maturities
Total long-term debt
2000
$ 239
341
182
738
290
300
500
499
106
301
1,000
538
825
5,859
62
$5,797
Our secured debt is secured by first mortgage liens on a total of 44 Boeing aircraft delivered new to Delta from January 1999 through October 2000.
These aircraft had an aggregate net book value of approximately $1. 7 billion at December 31, 2000.
The 8.125% Notes due 2039 are redeemable by Delta, in whole or in part, at par on or after July 1 , 2004.
* Our variable interest rate long-term debt is shown using interest rates in effect at December 31, 2000.
1999
$
500
290
300
500
500
158
1,000
538
1,028
4,814
670
$4,144
The fair value of our debt was $5.8 billion and $4. 7 billion at December 31, 2000 and 1999, respectively.
24
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.
The 1997 Bank Credit Agreement contains nega-
tive covenants that place certain limits on our ability
to secure 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 outstand-
ing 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 December 31, 2000, there were no borrowings
or letters of credit outstanding under the 1997 Bank
Credit Agreement.
Series C ESOP Notes
At December 31, 2000, there were outstanding
$290 million principal amount of the Delta Family-
Care Savings Plan's Series C Guaranteed Serial ESOP
Notes (Series C ESOP Notes). 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 noteholders
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 applica-
ble, 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, interest
and make whble premium amounts on the Series C
ESOP Notes are paid under the letter of credit. At
December 31, 2000, the letter of credit totaled
$418 million, covering the $290 million outstanding
principal amount of the Series C ESOP Notes,
approximately one year of interest on the notes and
$95 million of make whole premium amounts.
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
ratings. 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
December 31, 2000, our long-term senior unsecured
debt was rated Baa3 and BBB-, respectively.
Development Authority of Clayton County Bonds
In June 2000, the Development Authority of
Clayton County (Development Authority) issued
$301 million principal amount of bonds in three series
with scheduled maturities between 2029 and 2035.
The proceeds of this sale were used to refund bonds
that had been issued to finance certain Delta facil-
ities at Hartsfield Atlanta International Airport. The new
bonds are secured by the Development Authority's
pledge of revenues derived by the Development
Authority under related loan agreements between
Delta and the Development Authority.
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 pay-
ment of the purchase price of bonds tendered for pur-
chase, are presently paid under three irrevocable,
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 a letter of
credit to purchase bonds that have been tendered for
purchase, Delta may convert its repayment obliga-
tions to a loan that becomes due and payable on the
earlier of (1) the date the related bonds are remar-
keted; or (2) the June 8, 2003 expiration date of
the related letter of credit. Unless an existing letter
of credit is extended, a mandatory tender for pur-
chase of the related bonds will occur on the fifth day
prior to the expiration of such letter of credit. In
these circumstances, Delta could seek to replace
25
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
the expiring letter of credit with a new letter of credit
from an alternate credit provider and remarket the
related bonds.
Covenants and Change in Control Provisions
The Letter of Credit Facility and the Reimburse-
ment Agreement contain negative covenants and a
change in control provision that are similar to or less
restrictive than the corresponding provisions in our
1997 Bank Credit Agreement.
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 13).
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 dividends,
loans or advances. At December 31, 2000, approxi-
mately $285 million of ASA's net assets were subject
to these restrictions and approximately $199 million
of net assets were available for distribution by ASA
to Delta under the most restrictive of these provisions.
Future Maturities
At December 31, 2000, the scheduled maturi-
ties of our long-term debt for the next five years are
as follows:
Years Ending December 31,
(In Millions)
2001
2002
2003
2004
2005
After 2005
Total
Principal
Amount
$ 62
129
69
617
555
4,427
$5,859
Capitalized interest totaled $45 million,
$48 million and $40 million for the years ended
December 31, 2000, 1999 and 1998, respectively.
8. Asset Writedowns and Other Special Charges
In 2000, we recorded pretax charges totaling
$108 million ($66 million after tax, or $0.53 basic
and $0.50 diluted EPS) for the following:
26
We offered an early retirement medical option to
allow eligible Delta employees to retire with contin-
ued medical coverage without paying certain early
retirement medical premiums. Approximately 2,500
employees elected to participate. As a result of this
program, we recorded a pretax charge of $86 mil-
lion in the quarter ended June 30, 2000.
DEL TA AI R L IN ES , IN C .
We decided to close our Pacific gateway in
Portland, Oregon. As a result of this decision, we
recorded a pretax restructuring charge of $22 mil-
lion, primarily for idle facilities, in the quarter ended
September 30, 2000.
In 1999, we recorded pretax charges totaling
$469 million ($286 million after tax, or $2.07 basic
and $1.94 diluted EPS) for the following:
We accelerated the planned retirement of our 16
MD-90 aircraft and eight owned MD-11 aircraft
over the next six to eight years as part of our
fleet simplification strategy. As a result of this
decision, we reviewed these fleet types for impair-
ment, 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 factors in the
markets in which these aircraft operate. These air-
craft were written down to their fair values, as esti-
mated by management, using published sources
and bids received from third parties. Due to this
impairment analysis, we recorded a pretax asset
writedown of $320 million in the quarter ended
December 31, 1999.
We changed our business practice regarding the
disposal of surplus aircraft parts and entered into
an agreement to sell all of our existing surplus air-
craft 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.
We implemented certain technology initiatives
which resulted in an abandonment of certain
legacy hardware and software assets. We also
decided to streamline certain administrative
processes. Accordingly, we recorded a pretax
charge of $42 million in the quarter ended
September 30, 1999. We also remeasured the
useful lives of certain technology assets that are
still in use but that will be replaced earlier than
originally planned. The effect of the remeasure-
ment on depreciation expense was immaterial.
9. Lease Obligations
Delta leases aircraft, airport terminal and mainte-
nance 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 $1.3 billion, $1.1 billion and
$1.0 billion in 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 an asset 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
December 31, 2000, our minimum rental commit-
ments under capital leases and operating leases with
initial or remaining terms in excess of one year:
Years Ending December 31, Capital Operating
(In Millions) Leases Leases
2001 $ 51 $ 1,204
2002 39 1,218
2003 29 1,189
2004 21 1,153
2005 14 1,138
After 2005 17 9,218
Total minimum lease payments 171 $15,120
Less: Amounts of lease payments
which represent interest 32
Present value of future minimum
capital lease payments 139
Less: Current obligations under
capital leases 40
Long-term capital lease obligations $ 99
As of December 31, 2000, we operated 328 air-
craft under operating leases and 48 aircraft under
capital leases. These leases have remaining terms
ranging from six months to 18 years.
Certain municipalities have issued special facil-
ity 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 $2.0 billion of
operating lease rental commitments for such pay-
ments. Delta has purchased irrevocable direct-pay
letters of credit totaling $104 million to support
some of these obligations.
10. Purchase Commitments and Contingencies
Future expenditures for aircraft and engines on
firm order as of January 26, 2001 are estimated to
be $9.6 billion. The following table shows the timing
of these commitments:
Years Ending December 31,
(In Billions)
2001
2002
2003
2004
2005
After2005
Total
Amount
$2.3
2.0
2.0
1.9
1.0
0.4
$9.6
We have joint marketing and Delta Connection
carrier agreements with two regional jet operators
under which Delta schedules certain regional jets
operated by those airlines, sells the seats on those
flights and retains the related revenues. We pay
those airlines an amount that is based on their
cost of operating those flights plus a specified mar-
gin. We estimate that these payments will total
approximately $200 million for the twelve months
ending December 31, 2001. The joint marketing
agreements expire in 2010, but we may terminate
these agreements prior to their expiration dates 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, environmen-
tal issues, property 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 insur-
ance industry and based on Delta's experience.
Approximately 17% of our employees, including
all of our pilots, are covered by collective bargaining
agreements. The outcome of our collective bargain-
ing negotiations with unions cannot presently be
determined. A strike or other job action could have
a material adverse impact on our financial condition
and operations. See "Collective Bargaining Matters"
on page 12 of Management's Discussion and
Analysis for additional unaudited information on this
subject.
11. 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
27
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
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.
As discussed in Note 1, we changed our year end
from June 30 to December 31 and elected to restate
our financial statements in order to provide compara-
bility between periods. This change does not require a
remeasurement of prior pension or postretirement
obligations. Therefore, with the exception of net peri-
odic costs, the financial data presented in this note
has not been restated for the change in year end.
Defined Benefit Pension Plans
Our qualified defined benefit pension plans meet
or exceed ERISA's minimum funding requirements
as of December 31, 2000.
The following table shows the change in projected
benefit obligation for our defined benefit pension plans
for the six months ended December 31, 2000 and the
twelve months ended June 30, 2000 and 1999:
Twelve Twelve
Six Months Months Months
Ended Ended Ended
December 31, June 30, June 30,
(In Millions) 2000 2000 1999
Projected benefit obligation
at beginning of period $8,901 $8,872 $8,342
Service cost 121 251 240
Interest cost 354 644 585
Actuarial loss (gain) 156 (402) 158
Benefits paid (269) (491) (456)
Plan amendments 27 3
Projected benefit obligation
at end of period $9,263 $8,901 $8,872
We used the following actuarial assumptions
to determine the actuarial present value of our pro-
jected benefit obligation:
September 30, March 31, March 31,
___________
2_0--'-0--'-0-~ 2000 1999
Weighted average
discount rate 8.25% 8.25% 7.25%
Rate of increase
in future
compensation levels 5.35% 4.93% 4.43%
Expected long-term rate of
return on plan assets 10.00% 10.00% 10.00%
The following table shows the change in the fair
value of our defined benefit pension plan assets for
28
DELTA AIR L IN ES , IN C .
the six months ended December 31, 2000 and the
twelve months ended June 30, 2000 and 1999:
Twelve Twelve
Six Months Months Months
Ended Ended Ended
December 31, June 30, June 30,
(In Millions) 2000 2000 1999
Fair value of plan assets at
beginning of period $10,721 $ 9,020 $9,121
Actual return on plan assets (80) 2,144 310
Employer contributions 26 48 45
Benefits paid (269) (491) (456)
Fair value of plan assets
at end of period $10,398 $10,721 $9,020
The prepaid pension cost recognized for these
plans on our Consolidated Balance Sheets at
December 31, 2000 and June 30, 2000 and 1999
is computed as follows:
December 31, June 30, June 30,
(In Millions) 2000 2000 1999
Funded status $1,135 $1,820 $148
Unrecognized net
actuarial gain (1,558) (2,301) (607)
Unrecognized transition
obligation 58 58 60
Unrecognized
prior service cost 55 57 37
Contributions made between
measurement date
and year end 12 14 12
Intangible asset (8) (9) (13)
Other comprehensive income (2) (1) (2)
Accrued pension cost
recognized in the
Consolidated Balance Sheets $ (308) $ (362)
Net periodic pension cost for the years ended
December 31, 2000, 1999 and 1998 included the
following components:
(In Millions) 2000 1999 1998
Service cost $ 250 $239 $224
Interest cost 686 599 582
Expected return on
plan assets (924) (794) (731)
Amortization of prior
service cost 4 4 4
Recognized net actuarial
(gain) loss (22) 1 (2)
Amortization of
net transition obligation 2 2 2
Net periodic
pension cost $ (4) $ 51 $ 79
Delta also sponsors non-qualified pension plans
which are funded from current assets. The accu-
mulated benefit obligation of these plans totaled
$413 million at September 30, 2000, $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 the years ended December 31, 2000, 1999
and 1998, we recognized expense of $63 million,
$56 million and $52 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 the
accompanying Consolidated Statements of Income,
totaled $69 million, $61 million and $49 million in
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 divi-
dends 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 outstand-
ing when we compute diluted earnings per share. At
December 31, 2000, 3,213,999 shares of Series B
ESOP Convertible Preferred Stock were allocated to
participants' accounts and 3,181,870 shares were
held by the ESOP for future allocations.
Other Plans-ASA, Comair and DAL Global Services,
Inc. sponsor defined contribution retirement plans for
eligible employees. Eligible personnel may contribute
a portion of their earnings to the plans through payroll
deduction. These plans did not have a material impact
on our Consolidated Financial Statements in 2000,
1999 and 1998.
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.
The following table shows the change in our
accumulated postretirement benefit obligation (APBO)
for the six months ended December 31, 2000 and
the twelve months ended June 30, 2000 and 1999:
Twelve Twelve
Six Months Months Months
Ended Ended Ended
December 31, June 30, June 30,
(In Millions) 2000 2000 1999
APBO at beginning of period $1,749 $1,612 $1,627
Service cost 18 38 37
Interest cost 70 117 112
Benefits paid (46) (80) (71)
Actuarial gain (11) (52) (65)
Substantive plan change 28 (28)
Special termination benefits 86
APBO at end of period $1,780 $1,749 $1,612
The special termination benefits reflected in
the above table relate to the early retirement med-
ical option offered to certain Delta employees (see
Note 8).
We used the following actuarial assumptions to
determine the actuarial present value of our APBO:
September 30, March 31, March 31,
_ _ _ _ _ _ _ _ _ _ _ 2::..:0:...::0-=-0--1 2000 1999
Weighted average
discount rate
Assumed health care
cost trend rate*
8.25%
7.00%
8.25%
7.00%
7.25%
5.50%
* 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 September 30, 2000 would
have the following effects:
(In Millions) 1% Increase
Increase (decrease) in
total service and interest cost $ 12
Increase (decrease) in the APBO $188
1% Decrease
$ (8)
$(157)
29
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
The following table shows the calculation of the
accrued postretirement benefit cost recognized on our
Consolidated Balance Sheets at December 31, 2000
and June 30, 2000 and 1999:
December 31, June 30, June 30,
(In Millions) 2000 2000 1999
Funded status $(1,780) $(1,749) $(1 ,612)
Unrecognized net
gain (loss) (64) (51) 1
Unrecognized
prior service cost (283) (302) (371)
Contributions made between
measurement date
and year end 22 20 17
Accrued postretirement
benefit cost recognized
in the Consolidated
Balance Sheets $(2,105) $(2 ,082) $(1 ,965)
Our net periodic postretirement benefit cost
for the years ended December 31, 2000, 1999
and 1998 included the following components:
(In Millions)
Service cost
Interest cost
Amortization of prior
service cost
Recognized net actuarial
(gain) loss
Other
Net periodic postretirement
benefit cost
2000
$ 37
129
(40)
$126
1999 1998
$ 35 $ 38
106 117
(38) (42)
(1)
(4) (5)
$ 99 $107
Postemp/oyment Benefits-Delta provides certain other
welfare benefits to eligible former or inactive employ-
ees after employment but before retirement, primarily
as part of the disability and survivorship plans.
Postemployment benefit income (expense)
was $51 million in 2000, $12 million in 1999, and
$(29) million in 1998. We include the amount funded
in excess of the liability in other noncurrent assets
on our Consolidated Balance Sheets. Future period
expenses will vary based on actual claims experi-
ence 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 serv-
ice costs resulting from amendments affecting the
benefits of retired and inactive employees.
30
D E LTA AIR LIN ES , INC .
We regularly 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.
12. Earnings Per Share
We calculate basic EPS by dividing the income
available to common shareowners by the weighted
average number of common shares outstanding.
Diluted EPS includes the dilutive effects of stock
options and convertible securities. The following table
shows our computation of basic and diluted EPS:
Years Ended December 31,
(In Millions, except per share data) 2000 1999 1998
Basic:
Net income before cumulative
effect of changes in
accounting principles $ 928 $1,262 $1,078
Dividends on allocated
Series B ESOP
Convertible
Preferred Stock (13) (12) (11)
Income available to
common shareowners $ 915 $1,250 $1,067
Weighted average
shares outstanding 123.8 138.0 147.8
Basic earnings per share
before cumulative
effect of changes in
accounting principles $ 7.39 $ 9.05 $ 7.22
Diluted:
Net income before cumulative
effect of changes in
accounting principles $ 928 $1,262 $1,078
Adjustment to net income
assuming conversion of
allocated Series B ESOP
Convertible Preferred Stock (5) (4) (4)
Income available to
common shareowners $ 923 $1,258 $1,074
Weighted average
shares outstanding 123.8 138.0 147.8
Additional shares assuming:
Exercise of stock options 1.6 4.7 4.1
Conversion of allocated
Series B ESOP Convertible
Preferred Stock 5.4 4.7 4.4
Conversion of
performance-based
stock units 0.2 0.2
Weighted average shares
outstanding as adjusted 131.0 147.6 156.3
Diluted earnings per share
before cumulative
effect of changes in
accounting principles $ 7.05 $ 8.52 $ 6.87
13. Common and Preferred Stock
As discussed below, we have reserved shares of stock for the exercise of stock options and for other
stock-based awards; for the conversion of our Series B ES0P Convertible Preferred Stock; and in connection
with our Shareowner Rights Plan.
Shares of Common Stock Reserved For Stock Options and Other Stock-Based Awards
To more closely align the interests of directors, officers and other employees with the interests of our
shareowners, Delta maintains certain plans which provide for the issuance of common stock in connection
with the exercise of stock options and for other stock-based awards. The following table includes information
about these plans, including the number of shares of common stock reserved for issuance under each such
plan at December 31, 2000.
Plan
Total Shares
Authorized
for Issuance
Non-Qualified
Stock Options
Granted Shares Issued
11,391,153
Shares
Reserved
for Future
Issuance
Broad-based employee stock option plans1
Delta 2000 Performance Compensation Plan2
Non-Employee Directors' Stock Plan3
Non-Employee Directors' Stock Option Plan4
49,400,000
16,000,000
500,000
250,000
49,400,000
92,458
N/A
55,500
31,058
37,720,440
16,000,000
468,942
250,000
1 In 1996, shareowners approved broad-based pilot and non-pilot stock option plans. Under these two plans, we granted eligible employees non-qualified
stock options to purchase a total of 49.4 million shares of common stock in three approximately equal installments on October 30, 1996, 1997 and
1998. These stock options (1) have an exercise price equal to the fair market value of the common stock on the grant date; (2) are generally exercisable
beginning one year and ending ten years after the grant date; (3) are forfeited upon termination of employment in certain circumstances; and (4) are not
transferrable other than due to the employee's death. No additional stock options may be granted under these plans.
2 On October 25, 2000, shareowners approved this new plan, which amends and restates a prior plan. No awards have been, or will be, granted under
the prior plan since that date. At December 31, 2000, there were 12. 7 million shares of common stock reserved for awards (primarily non-qualified
stock options) that were outstanding under the prior plan. The new plan authorizes the grant of stock options, and a limited number of other stock awards,
up to a total of 16 million shares of common stock when the new plan was adopted. The new plan provides that shares reserved for awards under the
plans which are forfeited, settled in cash rather than stock, or withheld, plus shares tendered to Delta in connection with such awards, may be added back
to the shares available for future grants.
3 In 1995, shareowners approved this plan, which provides that a portion of each non-employee director's annual retainer will be paid in shares of common
stock. It also permits non-employee directors to elect to receive all or a portion of their cash compensation for service as a director in shares of common
stock at current market prices.
4 On October 22, 1998, the Board of Directors approved this plan. Each non-employee director receives an annual grant of a non-qualified stock option which, at
the time of grant, is intended to have a present value equal to approximately twice the cash portion of the current annual cash retainer of $20,000.
Series B ESOP Convertible Preferred Stock
Each outstanding share of Series B ES0P
Convertible Preferred Stock pays a cumulative cash
dividend of 6% per year; 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,
plus accrued and unpaid dividends. The Series B
ES0P Convertible 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 plus accrued and unpaid
dividends, payable in cash or common stock. We
cannot pay cash dividends on common stock until
all cumulative dividends on the Series B ES0P
Convertible Preferred Stock have been paid. The
conversion rate, conversion price and voting rights of
the Series B ESOP Convertible Preferred Stock are
subject to adjustment in certain circumstances.
All shares of Series B ES0P Convertible
Preferred Stock are held of record by the trustee
of the Delta Family-Care Savings Plan (See Note 11).
At December 31, 2000, 10,989,384 shares of
common stock were reserved for issuance for
the conversion of the Series B ES0P Convertible
Preferred Stock.
Shareowner Rights Plan
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
31
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
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 per-
son acquires, or makes a tender or exchange offer
that would result in the person acquiring, beneficial
ownership 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 acquir-
ing 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
15. Stock Options and Awards
D E LTA AIR L IN ES , INC.
before a person becomes the beneficial owner of 15%
or more of our common stock. At December 31, 2000,
2,250,000 shares of preferred stock were reserved
for issuance under the Shareowner Rights Plan.
14. Common Stock Repurchases
We repurchased 10.6 million shares of common
stock for $502 million in 2000. In 1999, we repur-
chased 11.0 million shares of common stock for
$625 million, which included five million shares held
by Singapore Airlines. These repurchases were
made under certain now completed stock buyback
programs, and the ongoing common stock repur-
chase authorization described below.
In 1996, our Board of Directors authorized us to
repurchase up to 49.4 million shares of common
stock issued under our broad-based employee stock
option plans (See Note 13). As of December 31,
2000, we had repurchased 21.6 million shares of
common stock under the authorization. We are
authorized to repurchase the remaining shares as
employees exercise their stock options under those
plans. Repurchases are subject to market condi-
tions and may be made in the open market or in
privately negotiated transactions.
The following table summarizes all stock option and stock appreciation rights (SAR) activity during 2000,
1999 and 1998:
Stock Options
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at end of year
Stock options exercisable at year end
s hares
(000)
4 7,859
3,914
(725)
(683)
5 0,365
4 6,309
2000
Weighted
Average
Exercise Shares
Price (000)
$48 47,663
52 3,395
41 (2,410)
53 (789)
48 47,859
$48 44,615
1999 1998
Weighted Weighted
Average Average
Exercise Shares Exercise
Price (000) Price
$47 31,892 $43
58 20,896 51
44 {4,955) 34
49 (170) 50
48 47,663 47
$47 27 ,557 $44
The following table summarizes information about stock options outstanding and exercisable at December 31, 2000:
Range of
Exercise
Prices
$26-$34
$35-$41
$42-$63
32
Number
Outstanding
(000)
211
7,580
42,574
Stock Options Outstanding
Weighted
Average
Remaining Life
(Years)
4
6
7
Weighted
Average
Exercise Price
$26
35
51
Stock Options Exercisable
Number
Exercisable
(000)
211
7,580
38,518
Weighted
Average
Exercise Price
$26
35
51
The estimated fair values of stock options
granted in 2000, 1999 and 1998 were derived
using the Black-Scholes stock option pricing model.
The exercise price for stock options, and the base
measuring price of tandem stock appreciation rights
(which were granted prior to 1993), is the fair market
value of the common stock on the grant date.
The following table shows our assumptions and
the weighted average fair values of stock options:
Stock Options Granted
Assumption 2000 1999 1998
Risk-free interest rate 6.2% 6.0% 4.4%
Average expected life of
stock options (in years) 7.5 7.5 4.9
Expected volatility of
common stock 26.9% 26.7% 26.2%
Expected annual dividends
on common stock $0.10 $0.10 $0.10
Weighted average fair value
of stock options $ 23 $ 26 $ 16
The following table shows what our net income
and earnings per share would have been for 2000,
1999 and 1998 had we accounted for our stock
option plans under the fair value method of SFAS 123,
"Accounting for Stock-Based Compensation:"
(In Millions) 2000 1999 1998
Net Income:
As reported $828 $1,208 $1,078
As adjusted for the
fair value method
under SFAS 123 801 1,147 994
Basic earnings per share:
As reported $6.58 $ 8.66 $ 7.22
As adjusted for the
fair value method
under SFAS 123 6.36 8.23 6.66
DIiuted earnings per share:
As reported $6.28 $ 8.15 $ 6.87
As adjusted for the
fair value method
under SFAS 123 6.07 7.75 6.42
Under SFAS 123, we are not required to include
stock options granted before 1996 as compensation
in determining pro forma net income. Therefore, the
pro forma effects of SFAS 123 on net income and
earnings per share for the periods presented may
not be representative of the pro forma effects of
SFAS 123 in future years.
After December 31, 2000, we granted stock
options covering a total of 2.4 million shares of
common stock under the Delta 2000 Performance
Compensation Plan, with an exercise price of $45.94.
16. Comprehensive Income
Comprehensive income includes unrealized
gains and losses on marketable equity securities
and changes in the fair value of certain derivative
instruments which qualify for hedge accounting.
Comprehensive income totaled $0.9 billion, $1.3 bil-
lion-and $1.1 billion for 2000, 1999 and 1998,
respectively. The difference between net income
and comprehensive income for 2000, 1999 and
1998 is detailed in the following table:
.,_~n_et-
i~-
-
,~-
-
~n-~"-~-------$
2
-~-~-~--1
$t;~:
Realization of gains from
the sale of investments
Unrealized gain on
marketable equity
securities
Unrealized gain on
derivative instruments
Total other
comprehensive income
Income tax effect on other
comprehensive income
Total other comprehensive
income, net of
income taxes
Comprehensive income,
net of income taxes
(301) (877)
16 1,108
439
154
(60)
94
$ 922
231
(90)
141
$1,349
1998
$1,078
95
95
(37)
58
$1,136
As of December 31, 2000, we had recorded
$268 million, net of tax, as unrealized gains on
open fuel hedge contracts in accordance with
SFAS 133. This amount is included in unrealized
gains on derivative instruments in the table above.
We anticipate that $196 million, net of tax, will be
realized during 2001 as the related contracts settle.
Upon the adoption of SFAS 133 on July 1, 2000,
we recorded unrealized fuel hedge gains of $416 mil-
l ion. We anticipate $289 million of that total will be
realized during the 12 months ending July 1, 2001.
For additional information on the adoption of
SFAS 133, see Note 3.
17. Sale of Receivables
During 1999, we entered into an agreement
under which we sold a defined pool of our accounts
receivable, on a revolving basis, through a special
purpose, 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 subsidiary'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.
33
Notes to the Consolidated Financial Statements
December 31, 2000, 1999 and 1998
As part of the agreement, the subsidiary is
required to pay fees to a third party based on the
amounts invested by the third party. For 2000 and
1999, these fees were $22 million and $10 million,
respectively. The fees are included in other income
(expense) under miscellaneous (expense) income,
net in our Consolidated Statements of Income.
As part of this transaction, Delta funded $83 mil-
lion to the subsidiary to purchase additional receiv-
ables in June 2000. The principal amount of the
promissory note was $92 million and $171 million at
December 31, 2000 and 1999, respectively, and is
included as accounts receivable on our Consolidated
Balance Sheets.
18. Business Acquisitions
We acquired a majority interest in Comair Holdings
in November 1999 and completed our acquisition of
that company in January 2000 for a total purchase
price of $1.8 billion. Prior to this acquisition, we owned
22% of the outstanding common stock of Comair
Holdings. Our Consolidated Financial Statements in this
Annual Report include Comair Holdings' balance sheet
as of December 31, 2000 and 1999 and its results of
operations from November 22, 1999.
We acquired a majority interest in ASA Holdings
in March 1999, and completed our acquisition of that
company in April 1999 for a total purchase price of
$700 million. Prior to this acquisition, we owned 28%
of the outstanding common stock of ASA Holdings.
Our Consolidated Financial Statements in this Annual
Report include ASA Holdings' balance sheets as of
December 31, 2000 and 1999 and its results of
operations from April 1, 1999.
We used the purchase method of accounting to
record the acquisition of Comair Holdings and ASA
20. Quarterly Financial Data (Unaudited)
D E LTA A I R LIN ES , INC.
Holdings. The purchase price of the shares acquired
was allocated to the assets acquired and the liabili-
ties assumed based on estimated fair values at the
respective acquisition date for both Comair Holdings
and ASA Holdings. Based on the allocation, the total
costs of the acquisitions exceeded the estimated fair
values of the underlying net assets by $1.45 billion
and $534 million for Comair Holdings and ASA
Holdings, respectively. These amounts are being amor-
tized on a straight-line basis over a 40 year period.
19. Geographic Information
SFAS 131 requires us to disclose certain infor-
mation about our operating segments. Operating
segments are defined as components of an enter-
prise with separate financial information which is eval-
uated regularly by the chief operating decision maker
and is used in resource allocation and performance
assessments. We are managed as a single business
unit that provides air transportation of passengers
and cargo. Our operating revenues by geographic
region for 2000, 1999 and 1998 are summarized in
the following table:
(In Millions) 2000 1999 1998
North America $14,004 $12,259 $11,555
Atlantic 1,988 1,930 2,125
Pacific 297 319 322
Latin America 452 375 310
Total $16 741 $14,883 $14,312
Operating revenues are assigned to a specific
geographic region based on the origin and destina-
tion of each flight segment. Our tangible assets
consist primarily of flight equipment, which is mobile
across geographic markets. Accordingly, assets are
not allocated to specific geographic regions.
The following table summarizes our unaudited quarterly results of operations for 2000 and 1999 (in mil-
lions, except per share data):
2000
Operating revenues
Operating income
Net income
Basic earnings per share*
Diluted earnings per share*
Mar. 31
$3,911
$ 343
$ 217
$ 1.68
$ 1.61
Three Months Ended
June 30 Sept. 30 Dec. 31
$4,469 $4,345 $4,016
$ 606 $ 510 $ 178
$ 460 $ 133 $ 18
$ 3 .73 $ 1.05 $ 0.12
$ 3.51 $ 1.01 $ 0.12
Three Months Ended
1999 Mar. 31 June 30 Sept. 30 Dec. 31
Operating revenues $3,469 $3,907 $3,829 $3,678
Operating income $ 350 $ 630 $ 336 $ 2
Net income $ 159 $ 357 $ 344 $ 348
Basic earnings per share* $ 1.10 $ 2.53 $ 2.46 $ 2.60
Diluted earnings per share* $ 1.03 $ 2.35 $ 2.33 $ 2.48
34
* The sum of the quarterly earnings per share does not equal the annual earnings per share due to changes in average shares outstanding. The results
presented are net of the cumulative effect of changes in accounting principles.
Report of Management
The integrity and objectivity of the information
presented in this Annual Report are the responsibil-
ity of Delta management. The financial statements
contained 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 assessed on an ongoing basis
through a program of internal audits. These controls
include the selection and training of Delta's man-
agers, organizational arrangements that provide a
division of responsibilities, and communication pro-
grams explaining our policies and standards. We
believe this system provides reasonable assurance
that transactions are executed in accordance with
management's authorization; that transactions are
appropriately recorded to permit preparation of finan-
cial statements which, in all material respects, are
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 December 31,
2000 and 1999, and the related consolidated state-
ments of income, cash flows and shareowners' equity
for each of the three years in the period ended
December 31, 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 per-
form 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 disclo-
sures in the financial statements. An audit also
includes assessing the accounting principles used
and significant estimates made by management, as
well as evaluating the overall financial statement
DELTA AIR L IN ES , I C .
presented in conformity with 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 independent
public accountants, the internal auditors and man-
agement to discuss internal accounting control, audit-
ing and financial reporting matters.
M. Michele Burns
Executive Vice President
and Chief Financial Officer
~o(i ~ -
Chairman and
Chief Executive Officer
DELTA AIR LINES , INC .
presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Delta Air Lines, Inc.
and subsidiaries as of December 31, 2000 and
1999, and the consolidated results of their opera-
tions and their cash flows for each of the three
years in the period ended December 31, 2000, in
conformity with accounting principles generally
accepted in the United States.
As discussed in Note 3 to the consolidated
financial statements, effective July 1, 2000, Delta Air
Lines, Inc. changed its method of accounting for
derivative instruments and hedging activities. As dis-
cussed in Note 5 to the consolidated financial state-
ments, effective January 1, 1999, Delta Air Lines, Inc.
changed its method of accounting for the sale of
mileage credits to participating partners in its fre-
quent flyer program.
~~ L-z:P
Atlanta, Georgia
January 26, 2001
35
36
Consolidated Summary of Operations
DELTA AIR LINES , IN C .
For they d d D
ears en e b 31
ecem er
' 2000~ 1999-2 1998 19973
(In Millions, Except Per Share Data)
Operating revenues $16,741
Operating expenses 15,104
$14,883
13,565
$14,312
12,509
$13,868
12,240
Operating income (loss) 1,637
Interest income (expense), net' (271)
Miscellaneous income, net8
342
Fair value adjustments of SFAS 133 derivatives (159)
1,318
{126)
901
-
1,803
(66)
39
-
1 ,628
(98)
13
-
Income {loss) before income taxes 1,549
Income tax benefit {provision) (621)
Amortization of investment tax credits -
2,093
{831)
-
1,776
{698)
-
1,543
(609)
-
Net income {loss) before cumulative effect of
change in accounting principle 928
Net income {loss) after cumulative effect of
1,262 1,078 934
change in accounting principle 828
Preferred stock dividends (13)
1,208
(12)
1,078
(11)
934
(10)
Net income {loss) attributable to common shareowners $ 815 $ 1,196 $ 1,067 $ 924
Earnings {loss) per share before cumulative
effect of change in accounting principle
Basic $ 7.39 $ 9.05 $ 7.22 $ 6.28
Diluted $ 7.05 $ 8.52 $ 6.87 $ 6.02
Earnings {loss) per share
Basic $ 6.58 $ 8.66 $ 7.22 $ 6.28
Diluted $ 6.28 $ 8.15 $ 6.87 $ 6.02
Dividends declared per common share $ 0.10 $ 0.10 $ 0.10 $ 0.10
Other Financial and Statistical Data
DELTA A I R LINES , INC.
For the years ended December 31, 20001 19992 1998 1997 3
(Financial Data In Millions)
Total assets $21,931 $19,942 $14,727 $13,137
Long-term debt and capital leases
(excluding current maturities) $ 5,896 $ 4,303 $ 1,720 $ 1,692
Shareowners' equity $ 5,343 $ 4,908 $4,077 $ 3,407
Shares of Common Stock outstanding at year end 123,013,372 132,893,470 141,514,262 149,037,632
Revenue passengers enplaned (Thousands) :U.9,930 110,083 105,304 103,233
Available seat miles (Millions) 154,974 147,073 142,154 138,831
Revenue passenger miles (Millions) 112,998 106,165 103,342 99,689
Operating revenue per available seat mile 10.80 10.12 10.07 9.99
Passenger mile yield 13.86 13.14 12.99 13.04
Operating cost per available seat mile 9.75 9 .22 8.80 8.82
Passenger load factor 72.91% 72.18% 72.70% 71.81%
Breakeven passenger load factor 65.29% 65.37% 62.94% 62.78%
Available ton miles (Millions) 22,925 21,245 20,312 19,462
Revenue ton miles (Millions) 13,058 12,227 12,052 11,644
Operating cost per available ton mile 65.88 63.85 61.58 62.89
' Includes pretax income of $51 million of unusual items, net, ($0.25 basic and $0.24 diluted after-tax earnings per share), excluding the cumulative effect of a change in
accounting principle (see Note 8).
' Includes pretax income of $418 million of unusual items, net ($1.85 basic and $1. 73 diluted after-tax earnings per share), excluding the cumulative effect of a change in
accounting principle (see Note 8).
3 Includes $52 million in pretax restructuring and other unusual charges ($0.35 basic and $0.34 diluted after-tax earnings per share).
Includes $829 million in pretax restructuring and other unusual charges ($6.49 basic and $5.25 diluted after-tax earnings per share).
Includes $414 million in pretax restructuring charges ($4.10 after-tax earnings per share).
Includes $194 million in pretax restructuring charges ($1.94 after-tax earnings per share).
' Includes interest income.
Includes gains from the sale of investments.
All share and earnings per share amounts for years prior to 1999 have been restated to reflect the two-for-one common stock split that became effective on November 2, 1998.
19964 1995 19945 19936 1992 1991 1990
$12,898 $12,218 $12,044 $11,808 $11,580 $10,020 $8,707
12,324 11,174 12,259 11,954 12,432 10,277 8,935
574 1,044 (215) (146) (852) (257) (228)
(125) (263) (192) (289) (121) (140) (57)
(30) 74 (8) 60 36 31 44
- - - - - - -
419 855 (415) (375) (937) (366) (241)
(171) (344) 140 149 332 115 72
- - - - 5 11 15
248 511 (275) (226) (600) (240) (154)
248 511 (161) (226) (1,187) (240) (154)
(42) (88) (98) (110) (65) (20) (21)
$ 206 $ 423 $ (259) $ (336) $ (1,252) $ (260) $ (175)
$ 1.62 $ 4.15 $ (3.70) $ {3.36) $ (6.70) $ (2.74) $ (1.91)
$ 1.62 $ 3.35 $ (3.70) $ {3.36) $ (6.70) $ (2.74) $ (1.91)
$ 1 .62 $ 4.15 $ (2.57) $ (3.36) $ (12.61) $ (2.74) $ (1.91)
$ 1 .62 $ 3.35 $ (2.57) $ (3.36) $ (12.61) $ (2.74) $ (1.91)
$ 0.10 $ 0.10 $ 0.10 $ 0 .10 $ 0.60 $ 0.60 $ 0 .60
19964 1995 19945 19936 1992 1991 1990
$12,026 $11,998 $11,384 $11,600 $10,156 $9,083 $7,327
$ 2,045 $ 2,981 $ 3,051 $ 3,433 $ 2,491 $2,494 $1,494
$ 2,470 $ 2,079 $ 1,611 $ 1,785 $ 2,699 $2,258 $2,040
146,281,410 102,343,078 101,215,994 100,415,724 99,471,880 98,838,570 84,749,280
97,281 86,992 89,054 85,032 83,117 74,281 65,871
133,714 130,176 130,367 132,921 131,389 111,420 99,777
93,929 85,168 86,357 82,860 80,496 67,269 58,982
9.65 9.39 9.24 8.88 8.81 8.99 8.73
12.91 13.37 12.98 13.67 13.33 13.91 13.82
9.22 8.58 9.40 8.99 9.46 9 .22 8.95
70.25% 65.43% 66.24% 62.34% 61.27% 60.37% 59.11%
66.91% 59.43% 67.51% 63.14% 66.13% 62.03% 60.77%
18,489 18,047 18,109 18,375 17,956 14,885 13,095
10,806 9,927 10,117 9,601 9,263 7,704 6,732
66.65 61.92 67.70 65.06 69.24 69.04 68.23
37
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.
Chief Information Officer-Delta Air Lines, 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.
Edward H. Bastian
Senior Vice President-Finance and Controller
David S. Bushy
Senior Vice President-Flight Operations
Frederick W. P. Buttrell
Senior Vice President-Strategy and Business Development
Vincent F. Caminiti
Senior Vice President-e-Business
Anthony N. Charaf
Senior Vice President-Delta Air Logistics
Lamar Chesney
Senior Vice President-Supply Chain
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
Gerald A. Bemis
Vice President-Line Maintenance Operations
38
Harlan R. Bennett
Vice President-Revenue Management
Harold L. Bevis
Vice President-Public Affairs
Doug W. Blissit
Vice President-Network Analysis
John W. Boatright
Vice President-Properties and Facilities
Maureen Dunphy Brady
Vice President-Customer Service
W. Martin Braham
Vice President-DAL Global Services
Walter A. Brill
Vice President-Associate General Counsel
Robert T. Cirulnick
Vice President-Finance-Customer Service
Paulette L. Corbin
Vice President-Airport Customer Service-West
Richard N. Cordell
Vice President-Atlanta Customer Service-Central
Jack A. Daulton
Vice President-Corporate Security
Terry M. Erskine
Vice President-Employee Relations
Jeffrey T. Fisher
Vice President-Finance-Marketing
Hank Halter
Vice President-Finance-Operations
Todd Helvie
Vice President-Corporate Tax
Subodh Karnik
Vice President-Finance-Corporate Development
Leslie P. Klemperer
Vice President-Associate General Counsel and Assistant Secretary
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-Base, Engine and Component Maintenance
Patrice G. Miles
Vice President-Consumer Marketing
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
David 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
Patrick H. Wildenburg, Jr.
Vice President-Global Sourcing and e-Business-82B
Lemuel R. Wimbish
Vice President-Atlanta Worldport
Michael M. Young
Vice President-Community Affairs
Dean C. Arvidson
Assistant Secretary
Susan T. Hudson
Assistant Secretary
Board Of Directors
Edwin L. Artzt
Non-Executive Chairman of the Board, Spalding Holdings
Corporation; retired Chairman of the Board and Chief
Executive 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 Executive Officer, The
Travelers Corporation
R. Eugene Cartledge
Non-Executive Chairman of the Board, Generac Portable
Products Inc.; Retired Chairman of the Board and
Chief Executive Officer, Union Camp Corporation
Mary Johnston Evans
Director of Household International, Inc.; Moody's Corporation
and Sunoco, Inc.
George M.C. Fisher
Retired Chairman of the Board and Chief Executive Officer,
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
John F. Smith, Jr.
Chairman of the Board and retired Chief Executive Officer,
General Motors Corporation; Chairman of Catalyst
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
Delta Board Council Representatives
Richard C. Buckalew
Operational Support/Clerical
Michele F. Chase
Field and Cargo Sales
Theresa M. Hicks
Supervisory/ Administrative
Paul A. Letourneau
Technical Operations
Representative of Air Line Pilots Association, International
Captain Mark D. Halsor-
Associate non-voting member of the Board of Directors
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
R. Eugene Cartledge
Mary Johnston Evans
John F. Smith, Jr.
Corporate Governance
Mary Johnston Evans, Chairman
James L. Broadhead
Gerald Grinstein
John F. Smith, Jr.
Andrew J. Young
Corporate Strategy
R. Eugene Cartledge, Chairman
Edwin L. Artzt
James L. Broadhead
Edward H. Budd
Gerald Grinstein
Executive
Gerald Grinstein, Chairman
Edwin L. Artzt
James L. Broadhead
Edward H. Budd
R. Eugene Cartledge
Mary Johnston Evans
Andrew J. Young
Finance
Edwin L. Artzt, Chairman
Edward H. Budd
R. Eugene Cartledge
David R. Goode
Gerald Grinstein
Personnel & Compensation
Edward H. Budd, Chairman
George M.C. Fisher
David R. Goode
Gerald Grinstein
William M. Morey
Reservation Sales and City Ticket Offices
Larry J. Stites
Airport Customer Service and Air Logistics
Dale C. Williams
In-Flight Service
39
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:
First Chicago Trust Company of New York
a Division of EquiServe
P. 0. Box 2500
Jersey City, New Jersey 07303-2500
Telephone (201) 324-1225
www.equiserve.com
DIRECTSERVICETM INVESTMENT PROGRAM
Investors may purchase Delta common stock under
this program, which is sponsored and administered
by First Chicago Trust Company of New York, a
Division of EquiServe. All correspondence and inquiries
concerning the program should be directed to:
The DirectSERVICE Investment Program
c/o EquiServe
P. 0. Box 2598
Jersey City, New Jersey 07303-2598
Telephone (201) 324-1225
www.equiserve.com
ANNUAL MEETING
The Annual Meeting of Shareowners will be held on
Thursday, April 26, 2001 at 9:00 a.m., local time at
The Grand America Hotel, 555 South Main Street,
Salt Lake City, Utah.
AVAILABILITY OF FORM 10-K AND
OTHER FINANCIAL INFORMATION
A copy of Delta's Annual Report on Form 10-K
for the year ended December 31, 2000, and other
financial documents, are available on-line at
www.delta.com . To receive materials by mail, call
(866) 240-0597 or mail requests to:
Delta Air Lines, Inc.
Investor Relations, Department 829
P. 0. Box 20706
Atlanta, Georgia 30320-6001
Company documents filed electronically with the
SEC can also be found on the SEC's Web site
www.sec.gov. A copy of this Annual Report can be
found on Delta's Web site www.delta.com .
40
INVESTOR RELATIONS
Telephone inquiries related to financial information,
other than requests for financial documents, may be
directed to Delta Investor Relations at (866) 715-2170.
D E L T A AIR LIN E S, INC .
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
COMMON STOCK
Listed on the New York Stock Exchange under the
ticker symbol DAL.
NUMBER OF SHAREOWNERS
As of December 31, 2000, there were 21,194
registered owners of common stock.
MARKET PRICES AND DIVIDENDS
Cash Dividends
Closing Price of per
Year 2000 Common Stock Common Share
Quarter Ended: High Low
March 31 54.75 43.63 0.025
June 30 57.06 49.00 0.025
September 30 57.50 44.38 0.025
December 31 50.19 40.38 0.025
Cash Dividends
Closing Price of per
Year 1999 Common Stock Common Share
Quarter Ended: High Low
March 31 70.94 49.00 0.025
June 30 71.56 55.44 0.025
September 30 63.13 46.19 0.025
December 31 54.44 47.56 0.025
AVAILABILITY OF EQUAL EMPLOYMENT OPPORTUNITY REPORT
A copy of Delta's Equal Employment Opportunity
Report is available without charge upon written
request. Requests may be directed to:
Delta Air Lines, Inc.
Equal Opportunity, Department 955
P.O. Box 20706
Atlanta, Georgia 30320-6001
AVAILABILITY OF ENVIRONMENTAL REPORT
A copy of Delta's Environmental Report is available
on-line at www.delta.com or upon written request.
Requests may be directed to:
Delta Air Lines, Inc.
Corporate Communications, Department 978
P.O. Box 20706
Atlanta, Georgia 30320-6001
I
i
I
I~
0
Q.
lJ.J
a::
....I
<!
:::)
1
!
:'.5
lJ.J
I
Q.
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
calendar year 2017. This agreement supports Delta's plan for
disciplined growth, aircraft rationalization and fleet replacement.
It also provides Delta flexibility to adjust scheduled aircraft deliver-
ies 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 retire
Aircraft Fleet at December 31, 2000
Aircraft Type
B-727-200
B-737-200
B-737-300
B-737-800
B-757-200
B-767-200
8-767-300
8-767-300ER
8-767-400
B-777-200
L-1011-1
L-1011-250
L-1011-500
MD-11
MD-88
MD-90
EM8-120
ATR-72
CRJ-100/200
Total
Owned
72
1
40
77
15
4
49
12
7
6
5
4
8
63
16
49
4
23
455
Aircraft Delivery Schedule at December 31, 2000
DELTA A I R L I NES , I NC .
(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 six to eight years. In 1999, we entered into
an agreement to sell our B-727 fleet, with deliveries occurring
through 2005.
Regional Jet Aircraft Fleet
In July 2000, ASA and Comair entered into purchase agreements
with Bombardier, Inc. to purchase a total of 94 Canadian 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.
Leased Average
Capital Operating Total Age
- 10 82 22.4
45 8 54 16.1
3 23 26 14.1
- - 40 0.9
- 41 118 9.5
- - 15 17.6
- 24 28 10.9
- 8 57 5.0
- - 12 0.2
- - 7 1.3
- - 6 19.7
- - 5 18.1
- - 4 19.9
- 7 15 6.9
- 57 120 10.5
- - 16 5.1
- 11 60 10.6
- 15 19 6.5
- 124 147 2.8
48 328 831 9.6
Delivery in Calendar Year Ending
Aircraft on Firm Order 2001
8-737-600/700/800 27
8-757-200 3
8-767-300/300ER 2
8-767-400 6
8-777-200 -
CRJ-100/200 34
CRJ-700 2
Total 74
Aircraft on Option at December 31, 2000
Aircraft on Option* 2001
8-737-600/700/800 -
8-757-200 -
8-767-300/300ER -
8-767-400 -
8-777-200 -
CRJ-100/200 -
CRJ-700 -
Total -
2002 2003 2004
18 10 16
- - -
- - -
3 - -
1 1 -
29 22 2
20 12 23
71 45 41
Delivery in Calendar Year Ending
2002 2003 2004
4 7 8
5 12 3
- 2 2
2 5 5
2 5 5
12 28 32
- - 5
25 59 60
After
2004
21
-
-
-
4
-
-
25
After
2004
41
-
7
12
8
159
160
387
Total
92
3
2
. 9
6
87
57
256
Total
60
20
11
24
20
231
165
531
Rolling
Options
252
70
12
13
24
371
* 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