Hedge fund manager's brief, informal, review of Delta's 10K: (not my work)

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DAL's 2011 10-K is out (attached). I've delved into it, and it's really weak on the detailed info that DAL used to publish in the past (like changes to the Connection Carrier agreements and termination dates).

Noteworthy in DAL's calendar 2011 results is that their Pax & Cargo operations revenue ($31.3B) was about $1.8B short of expenses ($33.1B), ref. pg. 48 (.pdf file pg. 55). The only reason DAL made a profit in 2011 was due to their $3.8B in "other" income (bag fees, outside MRO business, etc.).

In other news, DAL didn't park any more DC-9s in the fourth quarter, they're still at 24, so we'll have to wait and see how long it takes for those to leave... Mainline is now down to 707 aircraft, approx. 50 aircraft less than when DAL and NWA merged, nearly four years ago. While DCI is down over 100 aircraft, net; Comair and Mesaba combined, have lost north of 200 aircraft since their respective "bankruptcies". Also, while not mentioned specifically there-in, all of MSA's Saabs have now been removed from DCI revenue service, and DAL will be removing the last of the 12 SKW Brasilias (pro-rate operation) by the end of May (~ 3 months away).

If you're interested, pages 20, 26, 27, 63, and 64 (.pdf file pgs. 26, 32, 33, 72, and 73) detail DAL's five-year $1.2B JFK expansion program, and states that they're spending $100M at LGA to renovate and consolidate the DAL and USAir terminals into their NE domestic hub.

Next, and this is revealing, take a look at pg. 72 (.pdf file pg. 81), for Delta's discussion of lease obligations. The first table is their capital lease obligations (rent-to-own). Note how their values decrease with time, and then for the period beyond 2016 (2017 and subsequent) it totals only $323M - less than the value of two years' worth of capital lease payments at the 2016 rate. This points to either a shedding of airframes, or the completion of the capital leases. The very next table does point to a substantial shedding of airframes. Look at the second table on that page ,"Operating Leases" (rent and return). Note that the third column in this table is the projected value of the operating lease expenses for DCI, going forward. While the Republic CPA for the 24 CHQ E-145s terminates in mid-2016, reflected by the 11% reduction in Delta's DCI operating lease expenses in that year, note that the value of the DCI operating lease expenses beyond 2016 (2017 and subsequent) totals only $928M - substantially less than the value of two years' worth of operating lease payments at the reduced 2016 rate of $449M. This projection supports their prior statements regarding the removal of ALL of PCL/MSA's CRJ-200 aircraft by year-end 2017. While ASA/XJT and SKW have a defined wind-down of aircraft lease returns through September 8, 2020, PCL/MSA's CRJ-200 fleet loses its entire CPA on December 31, 2017. Those 141 aircraft comprise 71% of PCL/MSA's jet fleet, and would leave them with just 57 CRJ-900s (assuming PCL doesn't file for bankruptcy protection, and reject the CPA for the 16 pre-merger PCL -900s).

Exhibit "A" on .pdf file pg. 127 (Exhibit 10.17, page 11) shows the DCI completion and A14 goals for 2012.

Finally, if you've ever wondered how DAL mgt.'s bonuses are calculated, exhibits 10.15 and 10.17 (.pdf file pgs. 104 - 127) detail those specifics for you.