ATLANTA, Jan. 18, 2011 /PRNewswire/ -- Delta Air Lines (NYSE: DAL) today reported financial results for the December 2010 quarter. Key points include:
Delta's net income for the December 2010 quarter was $158 million, or $0.19 per diluted share, excluding special items(1). This is a $383 million improvement year over year.
Delta's GAAP net income was $19 million, or $0.02 per diluted share, for the December 2010 quarter.
Delta's net income for 2010 was $1.4 billion, excluding special items. Including $851 million in special items, Delta's net income for 2010 was $593 million.
2010 results include $313 million in profit sharing expense, including $38 million in the December quarter, in recognition of Delta employees' achievements toward meeting the company's financial targets.
Delta's adjusted net debt at the end of 2010 was $15.0 billion, a $2.0 billion reduction from prior year.
Delta ended 2010 with $5.2 billion in unrestricted liquidity.
"Our 2010 results are among the best in Delta's history. They would not have been possible without the dedication and determination of Delta employees worldwide and we are pleased we will pay more than $300 million in profit sharing for 2010," said Richard Anderson, Delta's chief executive officer. "These results are a direct reflection of the success of our merger, cost discipline and debt reduction strategy and give us momentum to deal with the rising fuel prices we face in 2011."
Revenue Environment
Total operating revenue for the December 2010 quarter was $7.8 billion, an increase of $1.0 billion, or 14%, compared to the same period last year.
Passenger revenue increased 15%, or $889 million, compared to the prior year period on 7% higher capacity. Passenger unit revenue (PRASM) increased 8%, driven by a 9% improvement in yield.
Cargo revenue decreased 7%, or $17 million, due to the elimination of freighter operations, partially offset by higher volume and yield.
Other, net revenue increased 14%, or $112 million, primarily due to higher SkyMiles revenue and revenues from ancillary products and services.
Comparisons of revenue-related statistics are as follows:
Increase (Decrease)
4Q10 versus 4Q09
----------------
Change Unit
Passenger
Revenue 4Q10 ($M) YOY Revenue Yield Capacity
--------- --- ------- ----- --------
Domestic 2,927 11 % 5 % 5 % 6 %
Atlantic 1,226 21 % 8 % 10 % 12 %
Pacific 721 47 % 24 % 26 % 18 %
Latin America 364 13 % 19 % 18 % (5) %
---
Total mainline 5,238 17 % 8 % 9 % 8 %
Regional 1,430 9 % 9 % 10 % 0 %
-----
Consolidated 6,668 15 % 8 % 9 % 7 %
"Through the momentum we built in 2010, we expect to maintain our March quarter margins year over year despite more than $350 million in higher costs from the recent steep run-up in fuel prices," said Ed Bastian, Delta's president. "Industry-wide fare increases, combined with growth in Delta's ancillary products and services, will provide a more long-term, revenue-based solution to addressing the high fuel environment."
Cost Performance
In the December 2010 quarter, operating expense increased $644 million year over year due to higher fuel price, volume- and revenue-related expenses, and profit sharing expense, which were partially offset by incremental merger cost synergies.
Consolidated unit cost (CASM[2]), excluding fuel, profit sharing and special items, decreased 2% in the December 2010 quarter on a year-over-year basis, on 7% higher capacity. Consolidated CASM, including fuel, profit sharing and special items, increased 2%.
Non-operating expense excluding special items decreased $67 million due to benefits from Delta's debt reduction initiatives. Including special items, non-operating expense was $36 million lower than in the December 2009 quarter.
Fuel Price and Related Hedges
Delta hedged 58% of its fuel consumption for the December 2010 quarter for an average fuel price(3) of $2.47 per gallon. The table below represents 2011 fuel hedges in place as of Jan. 14, 2011:
1Q11 2Q11 3Q11 4Q11
---- ---- ---- ----
Call options 15% 26% 20% 15%
Collars 19% 9% 12% 0%
Swaps 15% 6% 4% 2%
Total 49% 41% 36% 17%
--- --- --- ---
Average crude call
strike $84 $87 $86 $87
Average crude collar
cap 90 84 89 -
Average crude collar
floor 75 73 76 -
Average crude swap 85 91 83 89
Liquidity Position
As of Dec. 31, 2010, Delta had $5.2 billion in unrestricted liquidity, including $3.6 billion in cash and short-term investments, and $1.6 billion in undrawn revolving credit facilities. During the December 2010 quarter, operating cash flow was $318 million, driven by the company's profitability partially offset by the normal seasonal decline in advance ticket sales. Free cash flow was $52 million in the December 2010 quarter and $1.6 billion for the full year.
Cash used in investing during the quarter was $266 million, which included $178 million for investments in aircraft, parts and modifications, as the company began the previously announced investment in its fleet, including winglets, flat-bed seats and enhanced in-seat entertainment.
Debt payments in the December 2010 quarter were $1.3 billion and the company issued $987 million of debt, primarily to refinance a portion of its aircraft debt maturities. During the quarter, Delta completed a $474 million debt offering and received $270 million in proceeds. The remaining $204 million will be held in escrow until additional aircraft are refinanced, including 10 aircraft in Delta's 2001-1 enhanced equipment trust certificates, which mature in September 2011.
At Dec. 31, Delta's adjusted net debt was $15.0 billion, a $2.0 billion reduction from Dec. 31, 2009.
"Through the hard work of the Delta team, we ended 2010 with flat non-fuel unit costs and a $2 billion reduction in adjusted net debt, meeting two of our key financial commitments for the year," said Hank Halter, Delta's chief financial officer. "To mitigate the pressure on our business from higher fuel prices in 2011, we remain committed to maintaining a competitive cost structure and paying down debt."
Company Highlights
Delta has a strong commitment to employees, customers and the communities it serves. Key accomplishments in 2010 include:
Accruing more than $300 million in employee profit sharing, in recognition of the achievements of all Delta employees toward meeting the company's financial targets;
Taking major steps toward resolving remaining representation issues, as Delta employees in five elections voted to keep the direct relationship and culture that Delta has maintained over the decades;
Implementing a more than $2 billion investment - Delta's largest product investment in a decade - in improved products, services and airport facilities through 2013, including an expanded international terminal in New York-JFK;
Full flat-bed seats in BusinessElite and individual in-seat entertainment throughout both cabins on all transoceanic aircraft; expanding Wi-Fi to all two-class jets; and improving fuel efficiency by adding winglets to 44 more aircraft in Delta's fleet;
Celebrating the 10th anniversary of SkyTeam; welcoming Vietnam Airlines and TAROM, Romania's flag carrier, into SkyTeam; and supporting the applications of China Eastern, Aerolineas Argentinas' and Garuda Indonesia to join SkyTeam;
Extending Delta's reach through alliance and codeshare partnerships, including the addition of Alitalia to Delta's industry-leading joint venture with Air France-KLM; signing a new codeshare agreement with Hawaiian Airlines that will offer Delta's customers access to connecting flights within the Hawaiian Islands; and announcing plans to codeshare with GOL airlines, a Brazilian carrier;
Expanding Delta's network to offer customers the routes they want worldwide by announcing more frequencies between Delta's U.S. gateways and London-Heathrow; new service to Tokyo-Haneda and the Pacific island of Palau; and increased service to Africa, Shanghai, Manila, Beijing, Guangzhou and Reykjavík, Iceland;
Launching a dedicated customer service channel enabling customers to contact Delta in real-time through @DeltaAssist on Twitter; and
Furthering Delta's commitment to the communities it serves by raising $1 million in donations for Martin Luther King Jr. National Memorial in Washington, D.C.; pledging $1 million to Atlanta's National Center for Civil and Human Rights and $2 million to Grady Health Foundation in Atlanta; and building houses with Habitat for Humanity in nine U.S. states and Chile.
Special Items
Delta recorded special items totaling $139 million in the December 2010 quarter, including:
$88 million in merger-related expenses;
$31 million from a loss on extinguishment of debt; and
$20 million in costs related to the consolidation of operations at Cincinnati/Northern Kentucky International Airport.
Delta recorded special items totaling a net $200 million credit in the December 2009 quarter, including:
$121 million in primarily merger-related expenses; and
$321 million non-cash tax benefit related to the impact of fuel hedges in other comprehensive income.
March 2011 Quarter Guidance
Following are Delta's projections for the March 2011 quarter.
1Q 2011 Forecast
----------------
Operating margin 1 - 3%
Fuel price, including taxes and hedges $2.60
Capital expenditures $375 million
Total liquidity at end of period $5.3 billion
1Q 2011 Forecast
(compared to 1Q
2010)
-----------------
Consolidated unit costs - excluding fuel
expense Flat - up 2 %
System capacity Up 5 - 7 %
Domestic Flat - up 2 %
International Up 12 - 14 %
Mainline capacity Up 6 - 8 %
Domestic Flat - up 2 %
International Up 12 - 14 %
Last edited by forgot to bid; 01-18-2011 at 04:01 AM.