Delta Air Lines, Inc. : Delta Air Lines Announces $379 Million Quarterly Profit and $1.2 Billion Annual Profit, Excluding Special Items

Reports GAAP quarterly profit of $425 millionannual profit of $854 million

Jan 25, 2012

/ -- Delta Air Lines (NYSE: DAL) today reported financial results for the December 2011 quarter.  Key points include:

• Delta's net income for the December 2011 quarter was $379 million, or $0.45 per diluted share, excluding special items(1).  This is a $221 million improvement year over year.  
• Delta's net income for 2011 was $1.2 billion, excluding special items, as the company offset $3 billion higher fuel expense through strong revenue performanceits fuel hedging program.
• Delta's GAAP net income was $425 million, or $0.50 per diluted share, for the December 2011 quarter$854 million for 2011.
• 2011 results include $264million in profit sharing expense, including $89 million in the December quarter, recognizing Delta employees' contributions toward meeting the company's operatingfinancial goals.
• Delta's adjusted net debt at the end of 2011 was $12.9 billion, a $4.1 billion reduction from 2009.

"Delta people pulled together in 2011 to produce a solid profit, strong cash generation,the best operational performance in the industry for our customers.  I want to thank them for their hard work through a challenging yearcongratulate them on earning $264 million in profit sharing$60 million in Shared Rewards for their exceptional performance," said Richard Anderson, Delta's chief executive officer.  "Looking forward to 2012, we will continue our commitment to sustained profitabilitysuperior returns by growingdiversifying our revenues, while taking a disciplined approach to capacity, costscapital spending."

Revenue Environment

Delta's operating revenue grew $610 million, or 8%, in the December 2011 quarter compared to the December 2010 quarter.  Load factor increased to 81.7%,traffic down 3% on a 3.5% decrease in capacity.  

• Passenger revenue increased 8%, or $555 million, compared to the prior year period.  Passenger unit revenue (PRASM) increased 12%, driven by an 11% improvement in yield.  
• Cargo revenue increased 8%, or $20 million, on higher cargo yields.
• Other revenue increased 4%, or $35 million, from higher third-party maintenance revenue.

Comparisons of revenue-related statistics are as follows:

				Increase (Decrease)
				4Q11 versus 4Q10
				Change	Unit
Passenger Revenue		4Q11 ($M)		YOY	Revenue	Yield	Capacity
	Domestic	3,217		9.9 %	13.2 %	10.6 %	(2.9) %
	Atlantic	1,226		-	10.8 %	10.6 %	(9.7) %
	Pacific	819		13.5 %	13.7 %	20.1 %	(0.1) %
	Latin America	404		11.2 %	5.9 %	4.8 %	5.0 %
	Total mainline	5,666		8.2 %	12.3 %	11.6 %	(3.7) %
	Regional	1,557		8.9 %	11.5 %	9.3 %	(2.5) %
	Consolidated	7,223		8.3 %	12.2 %	11.4 %	(3.5) %

"With the December quarter's strong revenue performance, Delta produced a revenue premium to the industryfully covered our fuel cost increasehigher revenues," said Ed Bastian, Delta's president.  "Our revenue momentum has continued into 2012,we are currently seeing our January consolidated passenger unit revenues up 15% year over year."

Fuel

During the December 2011 quarter, market fuel prices increased fuel expense by $515 million, which was partially offset by $150 million of settled fuel hedge gains.  

Excluding mark to market adjustments, Delta's average fuel price(2) was $2.97 per gallon for the December quarter, which includes 17 cents per gallon in settled gains from its fuel hedging program.  On a GAAP basis, which includes mark to market gains on open hedges, the company's average fuel price was $2.79 per gallon.  

Cost Performance

Delta's total operating expense, excluding fuel, was flat in the December 2011 quarter, as the benefits of lower capacity-related costsmaintenance savings were partially offset by higher revenue-related expensesprofit sharing.

The December quarter 2011 consolidated unit cost (CASM(3)), excluding fuel expense, profit sharingspecial items, was 1.8% higher on 3.5% lower capacity compared to the prior year.  On a GAAP basis, which includes fuel, profit sharingspecial items, consolidated CASM increased 6%.

"Delta's solid cost performance, in an environment of 25% higher market fuel prices, came as a result of our cost reduction initiativesbenefits from our fuel hedging program," said Hank Halter, Delta's chief financial officer.  "We are focused on total cost productivity, including fuel,implementing the structural initiatives needed to return our non-fuel costs to our targeted level."

Liquidity Position

As of December 31, 2011, Delta had $5.4 billion in unrestricted liquidity, including $3.6 billion in cashshort-term investments$1.8 billion in undrawn revolving credit facilities.  

Cash from operations during the December 2011 quarter was $1.2 billion, as the company's profitabilityworking capital initiatives were partially offset by the normal seasonal decline in advance ticket sales.  The purchase of $675 million of SkyMiles by American Express is included in Delta's cash from operations for the December 2011 quarter.

Capital expenditures during the December 2011 quarter were $400 million, including $230 million in aircraft, partsmodifications.  The quarter's expenditures also include Delta's $100 million investment in GOLthe $15 million net expenditure associatedthe company's slot transactionthe related slot divestitures.

During the quarter, Delta's debtcapital lease payments were $725 million, which includes $435 million from the early retirement of debt.  At December 31, 2011, Delta's adjusted net debt was $12.9 billion.  The company has now achieved more than $4 billion of its $7 billion debt reduction target since 2009remains on track for $10 billion adjusted net debt in 2013.

Company Highlights

Delta has a strong commitment to employees, customersthe communities it serves.  Key accomplishments in 2011 include:

• Recognizing the achievements of Delta employees toward meeting the company's financialoperational goals$325 million of incentives, including $264 million in employee profit sharing$60 million in Shared Rewards;
• Significantly improving its operational performance, resulting in an on-time arrival rate of more than 83%, a 25% reduction in lost bags,more than 35% fewer customer complaints compared to 2010;
• Closing on its slot trade agreementUS Airways, allowing Delta to build the leading network position at New York-LaGuardia,over 250 daily departures by summer 2012;
• Receiving recognition from leading publications, including being named Fortune's Most Admired Airline, best airline for business by Business Travel News, best domestic airline by Travel Weekly, and top tech-friendly airline by PC World;
• Reaching agreements to strengthen its network position through enhanced alliancesinvestments in AeromexicoGOL, which will give Delta unique access to Latin America's two largest aviation markets; and
• Extending Delta's community involvement, including over $2 million raised by Delta employees for United Way.

Special Items

• a $164 million mark to market gain primarily for open fuel hedges settling in future periods.  Open hedges will continue to fluctuate in valueDelta will record future changes in market value until the hedges settle;
• a $43 million gain associatedthe divestiture of slots at New York-LaGuardiaWashington-Reagan National in conjunctionthe company's slot transaction;
• an $81 million charge for impairment of intangible assetsgrounded aircraft associatedDelta's capacity reductions; and
• an $80 million charge for severanceother items, including the loss on early extinguishment of debt.

• $88 million in merger-related expenses;
• $31 million from a loss on early extinguishment of debt; and
• $20 million in costs related to the consolidation of operations at Cincinnati/Northern Kentucky International Airport.

March 2012 Quarter Guidance

Following are Delta's projections for the March 2012 quarter.

	1Q 2012 Forecast
Operating margin	2 - 4%
Fuel price, including taxeshedges net of premiums	$3.16
Capital expenditures	$450 million
Total liquidity at end of period	$5.5 billion
	1Q 2012 Forecast (compared to 1Q 2011)
Consolidated unit costs - excluding fuel expense	Up 3 - 5%
System capacity	Down 3 - 5%
Domestic	Down 2 - 4%
International	Down 4 - 6%

Other Matters

Includedthis press release are Delta's unaudited Consolidated Statements of Operations for the threetwelve months ended Dec. 31, 20112010; a statistical summary for those periods; selected balance sheet data as of Dec. 31, 20112010;a reconciliation of certain non-GAAP financial measures.

About Delta

Delta Air Lines serves more than 160 million customers each year. With an industry-leading carriers offer service to 357 destinations in 67 countries on six continents. Headquartered in Atlanta, Delta employs more than 75,000 employees worldwideoperates a mainline fleet of more than 700 aircraft. A founding member of the global alliance, Delta participates in the industry's leading . Including its worldwide alliance partners, Delta offers customers more than 13,000 daily flights,hubs in , , , , , , , , frequent flier program, the world's largest airline loyalty program; the award-winning service;more than 50 Delta in airports worldwide. Delta is investing more than $2 billion through 2013 in airport facilitiesglobal products, servicestechnology to enhance the customer experience in the airon the ground. Customers can check in for flights, print boarding passes, check bagsreview flight status at .

End Notes

(1) Note A to the attached Consolidated Statements of Operations provides a reconciliation of non-GAAP financial measures used in this releaseprovides the reasons management uses those measures.

(2) Average fuel price per gallon, adjusted: Delta's December 2011 quarter average fuel price of $2.97 per gallon reflects the consolidated cost per gallon for mainlineregional operations, including contract carrier operations,includes the impact of fuel hedge contractsoriginal maturity dates in the December 2011 quarter.  Settled hedge gains for the quarter were $150 million, or 17 cents per gallon.  The fuel price has been adjusted for $164 million in mark-to-market gains recorded in periods other than the settlement period.

(3) CASM - Ex: Delta excludes from consolidated unit cost ancillary businesses which are not related to the generation of a seat mile, including aircraft maintenancestaffing services which Delta provides to third partiesDelta's vacation wholesale operations (MLT).  The amounts excluded were $216 million$847 million for the December 2011 quarter2011, respectively.  Management believes this methodology provides a more consistentcomparable reflection of Delta's consolidated operations.

Forward-looking Statements

Statements in this investor update that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995.  All forward-looking statements involve a number of risksuncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projectionsstrategies reflected in or suggested by the forward-looking statements.  These risksuncertainties include, but are not limited to, the cost of aircraft fuel; the impact of significant funding obligationsrespect to defined benefit pension plans; the impact of posting collateral in connectionour fuel hedge contracts;  the impact that our indebtedness may have on our financialoperating activitiesour ability to incur additional debt; the restrictions that financial covenants in our financing agreements will have on our financialbusiness operations; labor issues; interruptions or disruptions in service at one of our hub airports; our increasing dependence on technology in our operations; our ability to retain managementkey employees; the ability of our credit card processors to take significant holdbacks in certain circumstances; the possible effects of accidents involving our aircraft; the effects of weather, natural disastersseasonality on our business; the effects of terrorist attacks;competitive conditions in the airline industry.  

Additional information concerning risksuncertainties that could cause differences between actual resultsforward-looking statements is contained in our SecuritiesExchange Commission filings, including our Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2010.  Caution should be taken not to place undue reliance on our forward-looking statements, which represent our views only as of Jan. 25, 2012,which we have no current intention to update.

DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
		Three Months Ended Dec. 31,
(in millions, except per share data)		2011		2010		$ Change		% Change
Operating Revenue:
	Passenger:
	Mainline	$  5,666		$  5,238		$  428		8%
	Regional carriers	1,557		1,430		127		9%
	Total passenger revenue	7,223		6,668		555		8%
	Cargo	256		236		20		8%
	Other	920		885		35		4%
	Total operating revenue	8,399		7,789		610		8%
Operating Expense:
	Aircraft fuelrelated taxes	2,020		1,928		92		5%
	Salariesrelated costs	1,711		1,708		3		-%
	Contract carrier arrangements(1)	1,328		1,180		148		13%
	Aircraft maintenance materialsoutside repairs	367		395		(28)		(7)%
	Passenger commissionsother selling expenses	393		364		29		8%
	Contracted services	383		393		(10)		(3)%
	Depreciationamortization	382		372		10		3%
	Landing feesother rents	306		313		(7)		(2)%
	Passenger service	169		180		(11)		(6)%
	Aircraft rent	74		82		(8)		(10)%
	Profit sharing	89		38		51		NM
	Restructuringother items	88		108		(20)		(19)%
	Other	363		434		(71)		(16)%
	Total operating expense	7,673		7,495		178		2%
Operating Income		726		294		432		NM
Other (Expense) Income:
	Interest expense, net	(218)		(219)		1		-%
	Amortization of debt discount, net	(52)		(46)		(6)		13%
	Loss on extinguishment of debt	(30)		(31)		1		(3)%
	Miscellaneous, net	(9)		23		(32)		NM
	Total other expense, net	(309)		(273)		(36)		13%
Income Before Income Taxes		417		21		396		NM
Income Tax Benefit (Provision)		8		(2)		10		NM
Net Income		$  425		$  19		$  406		NM
Basic Earnings per Share		$  0.51		$  0.02
Diluted Earnings per Share		$  0.50		$  0.02
Basic Weighted Average Shares Outstanding		840		836
Diluted Weighted Average Shares Outstanding		845		845
(1) Contract carrier arrangements expense includes $494 million$384 million for the three months ended Dec. 31, 20112010, respectively, for aircraft fuelrelated taxes.

DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
		Year Ended Dec. 31,
(in millions, except per share data)		2011		2010		$ Change		% Change
Operating Revenue:
	Passenger:
	Mainline	$  23,864		$  21,408		$  2,456		11%
	Regional carriers	6,393		5,850		543		9%
	Total passenger revenue	30,257		27,258		2,999		11%
	Cargo	1,027		850		177		21%
	Other	3,831		3,647		184		5%
	Total operating revenue	35,115		31,755		3,360		11%
Operating Expense:
	Aircraft fuelrelated taxes	9,730		7,594		2,136		28%
	Salariesrelated costs	6,894		6,751		143		2%
	Contract carrier arrangements(1)	5,470		4,305		1,165		27%
	Aircraft maintenance materialsoutside repairs	1,765		1,569		196		12%
	Passenger commissionsother selling expenses	1,682		1,509		173		11%
	Contracted services	1,642		1,549		93		6%
	Depreciationamortization	1,523		1,511		12		1%
	Landing feesother rents	1,281		1,281		-		-%
	Passenger service	721		673		48		7%
	Aircraft rent	298		387		(89)		(23)%
	Profit sharing	264		313		(49)		(16)%
	Restructuringother items	242		450		(208)		(46)%
	Other	1,628		1,646		(18)		(1)%
	Total operating expense	33,140		29,538		3,602		12%
Operating Income		1,975		2,217		(242)		(11)%
Other (Expense) Income:
	Interest expense, net	(901)		(969)		68		(7)%
	Amortization of debt discount, net	(193)		(216)		23		(11)%
	Loss on extinguishment of debt	(68)		(391)		323		(83)%
	Miscellaneous, net	(44)		(33)		(11)		33%
	Total other expense, net	(1,206)		(1,609)		403		(25)%
Income Before Income Taxes		769		608		161		26%
Income Tax Benefit (Provision)		85		(15)		100		NM
Net Income		$  854		$  593		$  261		44%
Basic Earnings per Share		$  1.02		$  0.71
Diluted Earnings per Share		$  1.01		$  0.70
Basic Weighted Average Shares Outstanding		838		834
Diluted Weighted Average Shares Outstanding		844		843
(1) Contract carrier arrangements expense includes $2.1 billion$1.3 billion for the twelve months ended Dec. 31, 20112010, respectively, for aircraft fuelrelated taxes.

DELTA AIR LINES, INC.
Statistical Summary
(Unaudited)
	Three Months Ended Dec. 31,						Year Ended Dec. 31,
	2011		2010		Change		2011		2010		Change
Consolidated
Revenue passenger miles (millions)	44,975		46,233		(3)%		192,767		193,169		-%
Available seat miles (millions)	55,034		57,027		(3)%		234,656		232,684		1%
Passenger mile yield (cents)	16.06		14.42		11%		15.70		14.11		11%
Passenger revenue per available seat mile (cents)	13.12		11.69		12%		12.89		11.71		10%
Operating cost per available seat mile (cents)	13.94		13.14		6%		14.12		12.69		11%
CASM-Ex - See Note A (cents)	8.67		8.52		2%		8.53		8.27		3%
Passenger load factor	81.7%		81.1%		0.6 pts		82.1%		83.0%		(0.9) pts
Fuel gallons consumed (millions)	901		936		(4)%		3,856		3,823		1%
Average price per fuel gallon, adjusted - See Note A	$ 2.97		$ 2.47		20%		$ 3.05		$ 2.33		31%
Number of aircraft in fleet, end of period	775		815		(40)		775		815		(40)
Full-time equivalent employees, end of period	78,392		79,684		(2)%		78,392		79,684		(2)%
Mainline
Revenue passenger miles (millions)	39,035		40,267		(3)%		168,282		168,180		-%
Available seat miles (millions)	47,483		49,286		(4)%		203,450		200,814		1%
Operating cost per available seat mile (cents)	12.71		12.14		5%		12.98		11.62		12%
CASM-Ex - See Note A (cents)	7.90		7.75		2%		7.76		7.46		4%
Fuel gallons consumed (millions)	727		758		(4)%		3,133		3,094		1%
Average fuel price per gallon, adjusted - see Note A	$ 2.92		$ 2.46		19%		$ 3.01		$ 2.32		30%
Number of aircraft in fleet, end of period	707		722		(15)		707		722		(15)

Note:  except for full-time equivalent employeesnumber of aircraft in fleet, consolidated data presented includes operations under Delta's contract carrier arrangements.

DELTA AIR LINES, INC.
Selected Balance Sheet Data
		Dec. 31,		Dec. 31,
(in millions)		2011		2010
		(Unaudited)
Cashcash equivalents		$ 2,657		$ 2,892
Short-term investments		958		718
Restricted cash, cash equivalentsshort-term investments         (short-termlong-term)		348		447
Total assets		43,499		43,188
Total debtcapital leases, including current maturities		13,791		15,252
Total stockholders' equity (deficit)		(1,396)		897

Note A: The following tables show reconciliations of non-GAAP financial measures.  The reasons Delta uses these measures are described below.

• Delta sometimes uses information that is derived from its Condensed Consolidated Financial Statements, but that is not presented in accordanceaccounting principles generally accepted in the U.S. ("GAAP"). Certain of this information are considered "non-GAAP financial measures" under the U.S. SecuritiesExchange Commission rules.  The non-GAAP financial measures should be considered in addition to results prepared in accordanceGAAP, but should not be considered a substitute for or superior to GAAP results.

• Delta is unable to reconcile certain forward-looking projections to GAAP, including projected consolidated non-fuel cost per available seat mile (CASM), as the nature or amount of special items cannot be estimated at this time.

• Delta excludes special items because management believes the exclusion of these items is helpful to investors to evaluate the company's recurring operational performance.

• Delta adjusts for mark to market ("MTM") adjustments for fuel hedges recorded in periods other than the settlement period in order to evaluate the company's financial results in the period shown.

• Delta presents consolidatedmainline CASMoperating expense excluding fuel expenserelated taxes because management believes the volatility in fuel prices impacts the comparability of year-over-year financial performance.

• Delta presents consolidatedmainline CASM excluding ancillary businesses not associatedthe generation of a seat mile.  These businesses include aircraft maintenancestaffing services Delta provides to third partiesDelta's vacation wholesale operations.

• Delta excludes profit sharing expense from consolidatedmainline CASM because management believes the exclusion of this item provides a more meaningful comparison of the Company's CASM to the airline industry.

• Delta uses adjusted total debt, including aircraft rent, in addition to long-term adjusted debtcapital leases, to present estimated financial obligations. Delta reduces adjusted total debt by cash, cash equivalents,short-term investments, resulting in adjusted net debt to present the amount of additional assets needed to satisfy the debt.

• Delta presents net capital expenditures because management believes this metric is helpful to investors to evaluate the company's investing activities.

	Three Months Ended Dec. 31,				Year Ended Dec. 31,
(in millions)	2011		2010		2011		2010
Net income	$ 425		$ 19		$ 854		$ 593
Items excluded:
MTM adjustments for fuel hedges recorded in periods other than the settlement period	(164)		-		26		-
Loss on extinguishment of debt	30		31		68		391
Restructuringother items	88		108		242		450
Other	-		-		-		10
Net income excluding special items	$ 379		$ 158		$ 1,190		$ 1,444

		Three Months Ended
		Dec. 31, 2011
Net income per diluted share		$0.50
Items excluded:
MTM adjustments for fuel hedges recorded in periods other than the settlement period		(0.19)
Loss on extinguishment of debt		0.04
Restructuringother items		0.10
Net income per diluted share excluding special items		$ 0.45

(in billions)	Dec. 31, 2011			Dec. 31, 2009
Debtcapital lease obligations	$ 13.8			$ 17.2
Plus: unamortized discount, net from purchase accountingfresh start reporting	0.6			1.1
Adjusted debtcapital lease obligations		$ 14.4			$ 18.3
Plus: 7x last twelve months' aircraft rent		2.1			3.4
Adjusted total debt		16.5			21.7
Less: cash, cash equivalentsshort-term investments		(3.6)			(4.7)
Adjusted net debt		$ 12.9			$17.0

	Three Months Ended Dec. 31,				Year Ended Dec. 31,
	2011		2010		2011		2010
Average price per fuel gallon including fuel expense incurred under contract carrier arrangements	$2.79		$2.47		$3.06		$2.33
MTM adjustments for fuel hedges recorded in periods other than the settlement period	0.18		-		(0.01)		-
Average price per fuel gallon, adjusted	$2.97		$2.47		$3.05		$2.33
Settled fuel hedge gains	0.17		-
Average price per fuel gallon excluding hedging activities	$3.14		$2.47

	Three Months Ended Dec. 31,				Year Ended Dec. 31,
	2011		2010		2011		2010
Mainline average price per fuel gallon	$2.69		$2.46		$3.02		$2.32
MTM adjustments for fuel hedges recorded in periods other than the settlement period	0.23		-		(0.01)		-
Mainline average price per fuel gallon, adjusted	$2.92		$2.46		$3.01		$2.32

	Three Months Ended Dec. 31,
(in millions)	2011		2010
Operating expense	$7,673		$7,495
Items excluded:
Aircraft fuelrelated taxes	(2,020)		(1,928)
Aircraft fuelrelated taxes included within contract carrier arrangements	(494)		(384)
Operating expense excluding fuel	$5,159		$5,183

	Three Months Ended Dec. 31,				Year Ended Dec. 31,
	2011		2010		2011		2010
CASM (cents)	13.94		13.14		14.12		12.69
Items excluded:
Aircraft fuelrelated taxes	(4.86)		(4.05)		(5.00)		(3.82)
Ancillary businesses	(0.39)		(0.31)		(0.37)		(0.28)
MTM adjustments for fuel hedges recorded in periods other than the settlement period	0.30		-		(0.01)		-
Profit sharing	(0.16)		(0.07)		(0.11)		(0.13)
Restructuringother items	(0.16)		(0.19)		(0.10)		(0.19)
CASM-Ex (cents)	8.67		8.52		8.53		8.27

	Three Months Ended Dec. 31,				Year Ended Dec. 31,
	2011		2010		2011		2010
Mainline CASM (cents)	12.71		12.14		12.98		11.62
Items excluded:
Aircraft fuelrelated taxes	(4.47)		(3.78)		(4.63)		(3.57)
Ancillary businesses	(0.40)		(0.32)		(0.37)		(0.29)
MTM adjustments for fuel hedges recorded in periods other than the settlement period	0.35		-		(0.01)		-
Profit sharing	(0.19)		(0.08)		(0.13)		(0.16)
Restructuringother items	(0.10)		(0.21)		(0.08)		(0.14)
Mainline CASM-Ex (cents)	7.90		7.75		7.76		7.46

		Three Months Ended
(in millions)		Dec. 31, 2011
Flight equipment, including advance payments (GAAP)		$  231
Ground propertyequipment, including technology (GAAP)		137
Adjustments:
Proceeds from flight equipmentfacilities		(56)
GOL investment		100
Total capital expenditures		$  412

SOURCE Delta Air Lines

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