Originally Posted by
Jack Bauer
One area I think you are getting confused with is operating profit vs a loss in conjunction with write offs. Guys have alluded to this in posts above. The special charges you keep hearing about are a smart way to reduce tax liability and the Delta tax guys take as many write offs as possible. Now don't be confusing write offs as being actual cash losses. Ideally we wouldn't have any special charges (ie early retirement payoffs, early termination of contracts, etc) and just have huge net profits. Although that does not exist right now the silver lining is that if Delta were to quit taking write downs for tax reasons we would be showing a slight net profit.
One other thing that has skewed the numbers for a while is the merger with NWA. Numbers from one year to the next are not apples to apples comparisons as you integrate large volumes of another carrier. 2010 to 2011 will finally get the company to a point where you can compare year to year to see how things are really progressing.
The biggest thing as pilots that we want is to be profitable (net profit even with any write downs) like for example one billion per year 2011 to 2012 since the new contract for pay etc will be due then and it will be easier to get "restoration" to contract 2000 plus (ie a 777 Captain makes $330 per hour and a 757 FO makes $180 per hour) if the numbers are crunching really well. This also opens up more growth, moving up the latter and hiring guys like you if you are still gunning for Delta by then. Clear as mud?
Operating income is all income created by flying planes around. Operating expense is what it costs to fly planes around. Operating profit/loss is the difference between the two.
Overall profit/loss is the operating profit/loss adjusted for interest expense, taxes, and special charges.
In this quarter we had about $7.5 b in operating income and about $7.3 b in operating expense. That gave us a $200 mm operating profit. That operating expense included the one time charges for merger expenses and the early retirement costs as they are both operating expenses.
We had about $315 mm in net interest expenses and about $80 mm in the one time write down on debt. That gives us about a $180 mm loss before taxes. We about a $20 mm rebate from taxes (don't ask me how) and the net loss was $160 mm or so.
Note that borrowing money changes your cash balance but does not affect profit/loss except for the interest charges. Paying back debt does not affect profit/loss except for reducing interest charges.
Since borrowing or paying down debt doesn't affect profit/loss, you can develop different numbers for carriers based on their aircraft ownership. That is why you see people talk about EBITDAR which is earnings before Interest, Taxes, Depreciation, Amortization, and Rent. This eliminates differences in aircraft ownership costs (owned outright, owned but mortgaged, capital lease, operating lease) and allows carriers to be compared on an equal basis.