On a combined basis:
• Both consolidated and mainline unit cost (CASM(4)), excluding fuel expense and special items, increased 2% year over year in the September 2009 quarter due to higher pension expense.
• Non-operating expenses excluding special items increased $23 million in the September 2009 quarter primarily due to non-cash debt discount amortization.
"Despite our significant capacity reductions, Delta successfully mitigated unit cost pressures through improved productivity, strong cost discipline and accelerating our merger synergies," said Hank Halter, chief financial officer. "While we have additional cost pressures in the fourth quarter from new capacity reductions, we expect to offset most, if not all, of this impact."
Liquidity Position
As of Sept. 30, 2009, Delta had $5.8 billion in unrestricted liquidity, including $5.5 billion in cash, cash equivalents and short-term investments and $300 million available in an undrawn revolving credit facility.
During the September 2009 quarter, Delta completed $2.1 billion in new financing transactions, addressing 40% of 2010 debt maturities and generating $600 million in incremental liquidity. The new financing consisted of $1.35 billion of secured notes, a $500 million revolving credit facility and a $250 million term loan facility, all of which were secured by the airline's Pacific routes and related assets.
During the quarter, the company made $1.2 billion of debt and capital lease payments which includes $900 million for the Northwest bank credit facility. In addition the company amended Northwest's revolving credit facility to reduce the total borrowing capacity from $500 million to $300 million.
Capital expenditures during the quarter were approximately $150 million, which includes $75 million for investments in aircraft, parts and modifications.
Merger with Northwest
Through the first three quarters of 2009, Delta has achieved $500 million in synergy benefits from its merger with Northwest Airlines, reaching its 2009 target ahead of plan. The company now expects to generate $700 million in total merger synergies in 2009. Synergies achieved to date include improved revenue from increased market share and Delta's affinity card agreement. In addition, cost reductions have been achieved from streamlined overhead, facilities and technology, elimination of dedicated freighter flying and supply chain savings.
The company is on track in its integration efforts and expects to obtain a Single Operating Certificate by the end of 2009. Recent achievements include:
• Creating the world's largest airline loyalty program by combining the Northwest WorldPerks program and Delta SkyMiles;
• Relocating the Northwest System Operations Center from Minneapolis to Delta's Operations Control Center in Atlanta;
• Transitioning reservations agents in five pre-merger Northwest call centers to the Delta Reservations system;
• Continuing pilot and flight attendant training to prepare for single carrier operations;
• Renegotiating more than 600 corporate contracts to date, generating incremental business traffic;
• Re-branding more than 240 airports to provide consistent Delta branding at more than 98% of airports served worldwide; and
• Painting more than 230 pre-merger Northwest aircraft in the Delta livery.
Fuel Price and Related Hedges
Delta hedged 53% of its fuel consumption for the September 2009 quarter, which resulted in $226 million in realized fuel hedge losses and premiums for the period. As a result, Delta's average fuel price(5) for the September 2009 quarter was $2.13 per gallon, which includes $0.11 per gallon associated with fuel hedge losses.
The table below represents the fuel hedges Delta had in place as of Oct. 16, 2009:
4Q09 1Q10 2Q10 3Q10
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Call options 22% 24% 11% 3%
Collars - 3% - -
Swaps 17% 1% - -
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Total 39% 28% 11% 3%
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Avg. crude call strike $82 $67 $68 $91
Avg crude collar cap - 68 - -
Avg crude collar floor - 60 - -
Avg. crude swap $63 $69 - -