Delta Air Lines Reports 2006 Financial Results
Wednesday February 14, 8:00 am ET
Restructuring drives $2.1 billion improvement in operating results for 2006
ATLANTA, Feb. 14, 2007 (PRIME NEWSWIRE) -- Delta Air Lines (Other OTC:DALRQ.PK - News) today reported results for the quarter and year ended December 31, 2006. Key points include: * Delta reported a full-year operating profit of $58 million, a $2.1 billion improvement over 2005, and the company's first annual operating profit since 2000.
* Delta's fourth quarter net loss was $2.0 billion. Excluding reorganization and special items, the fourth quarter net loss was $179 million, a $603 million improvement over the 2005 fourth quarter. (1, 2)
* Delta reached its goal of $3 billion in annual financial improvements -- one year ahead of the originally targeted completion date.
* As of December 31, 2006, Delta had $3.5 billion in cash and cash equivalents, of which $2.6 billion was unrestricted.
Delta reported a net loss of $2.0 billion in the fourth quarter of 2006, compared to a net loss of $1.2 billion in the fourth quarter of 2005. Excluding the reorganization and special items described below, the net loss was $179 million in the fourth quarter of 2006, a $603 million improvement from the fourth quarter of 2005. Operating income for the December 2006 quarter was $6 million, which represents Delta's third consecutive quarterly operating profit.
For the full year 2006, Delta recorded a net loss of $6.2 billion, compared to 2005's full year net loss of $3.8 billion. Excluding reorganization and special items, the net loss was $406 million in 2006, a $1.8 billion improvement over 2005. Delta's operating income of $58 million for 2006 was a $2.1 billion improvement over 2005 and the company's first annual operating profit since 2000.
``A full year operating profit, and the magnitude of the progress it represents, marks a major milestone for Delta. This is testimony to the dedication and hard work of Delta employees,'' said Gerald Grinstein, Delta's chief executive officer. ``With Court approval of the company's Disclosure Statement earlier this month, there is great momentum building towards a successful emergence from Chapter 11 this spring as a strong, healthy and independent global competitor.''
Revenue Performance
For the December 2006 quarter, total passenger revenue increased 5.9% on a 3.6% decrease in capacity. Delta's consolidated passenger unit revenues (PRASM) increased 9.9% in the December 2006 quarter compared to the same period in 2005. Delta's length of haul adjusted PRASM increased 12.1% for the fourth quarter 2006 versus fourth quarter 2005, as compared to the industry (excluding Delta) average PRASM increase of 5.1% over the same period.
For the full year 2006, Delta's consolidated PRASM rose 13.2% compared to the prior year. Delta's length of haul adjusted PRASM increased 17.8% for 2006 versus 2005, as compared to the industry (excluding Delta) average PRASM increase of 10.7% over the same period.
Operating Expense
For the December 2006 quarter, Delta's operating expenses decreased 10.2%, or $471 million, compared to the December 2005 quarter. Driven by its restructuring efforts, Delta's mainline unit costs in the fourth quarter of 2006 decreased by 9.3% as compared to the fourth quarter of 2005. Excluding fuel and special items, mainline unit costs decreased 6.2% over the prior year period.
Despite the $804 million increase in expense due to higher fuel prices in 2006 (3), Delta's operating expenses decreased by $1.1 billion, or 5.9%. Delta's 2006 mainline unit costs decreased by 3.9% in comparison to the prior year. Excluding fuel and special items, mainline unit costs decreased 3.9% for the same period.
Fuel Hedging
Delta recorded $86 million and $108 million in net charges for settled fuel hedge contracts for the December 2006 quarter and the full year, respectively. These charges are reflected in aircraft fuel expense. In addition, the company recorded charges of $14 million and $37 million associated with the ineffective portion of fuel hedges in miscellaneous expense, net, for the December 2006 quarter and full year respectively.
As of February 12, 2007, the company had hedged approximately 52% of its planned fuel consumption for the March 2007 quarter through a combination of swaps and collars at an average cap of $1.95 per gallon and an average floor of $1.88 per gallon. The company is currently forecasting its average fuel price for the March 2007 quarter to be $1.89 per gallon.
For the June 2007 quarter, Delta has hedged approximately 40% of its planned fuel consumption, through a combination of swaps and collars with an average cap of $1.91 per gallon and an average floor of $1.71 per gallon. For the September 2007 quarter, the company has hedged approximately 18% of its planned fuel consumption at an average cap of $1.93 per gallon and an average floor of $1.76 per gallon.
Liquidity
At December 31, 2006, Delta had $3.5 billion in cash, cash equivalents and short-term investments, of which $2.6 billion was unrestricted.
On January 30, 2007, Delta announced that it had obtained commitments for a $2.5 billion exit financing facility, a significant step in the company's plan to exit bankruptcy. The exit facility will be co-led by six financial institutions -- JPMorgan, Goldman Sachs & Co., Merrill Lynch, Lehman Brothers, UBS, and Barclays Capital -- and will consist of a $1 billion first-lien revolving credit facility, a $500 million first-lien Term Loan A, and a $1 billion second-lien Term Loan B. The facility will be secured by substantially all of the first-priority collateral securing Delta's existing Debtor-In-Possession (DIP) facilities.
Restructuring Progress
On February 7, 2007, the Bankruptcy Court, with no creditors objecting, approved Delta's Disclosure Statement and authorized the company to begin soliciting approval from its creditors for the Plan of Reorganization. The Unsecured Creditors Committee supports Delta's Plan of Reorganization and recommends that creditors vote in favor of the Plan. A confirmation hearing for the Bankruptcy Court to consider approval of the Plan of Reorganization has been scheduled for April 25, 2007.
Delta remains on course to emerge from Chapter 11 in Spring 2007 as a strong, competitive, independent airline. As of December 31, 2006, the company had achieved its full $3 billion goal of annual financial improvements through revenue improvements and cost reductions, reaching its goal one year ahead of schedule. Delta made the following progress against its restructuring benchmarks:
* Attain a best-in-class cost structure -- The company achieved the lowest mainline non-fuel CASM of the network carriers with 2006 mainline CASM excluding fuel and special items of 7.20 cents.
* Improve unit revenue performance -- Delta's length of haul adjusted PRASM was 93% of industry average, up substantially from 86% in 2005.
* Eliminate cash bleed and repair the balance sheet -- Delta generated $1.2 billion of free cash flow, its first positive free cash flow since 1998.
* Restore profitability -- The company recorded its first annual operating profit since 2000.
``By executing on all aspects of our restructuring plan -- increasing liquidity, improving unit revenues and reducing unit costs, while simultaneously investing in our network and product -- we exceeded our goals for 2006 and positioned Delta to become a fierce competitor in this industry,'' said Edward H. Bastian, Delta's executive vice president and chief financial officer. ``Because of the strength and determination of the entire Delta team, we expect this momentum to continue into 2007 and beyond.''
Wednesday February 14, 8:00 am ET
Restructuring drives $2.1 billion improvement in operating results for 2006
ATLANTA, Feb. 14, 2007 (PRIME NEWSWIRE) -- Delta Air Lines (Other OTC:DALRQ.PK - News) today reported results for the quarter and year ended December 31, 2006. Key points include: * Delta reported a full-year operating profit of $58 million, a $2.1 billion improvement over 2005, and the company's first annual operating profit since 2000.
* Delta's fourth quarter net loss was $2.0 billion. Excluding reorganization and special items, the fourth quarter net loss was $179 million, a $603 million improvement over the 2005 fourth quarter. (1, 2)
* Delta reached its goal of $3 billion in annual financial improvements -- one year ahead of the originally targeted completion date.
* As of December 31, 2006, Delta had $3.5 billion in cash and cash equivalents, of which $2.6 billion was unrestricted.
Delta reported a net loss of $2.0 billion in the fourth quarter of 2006, compared to a net loss of $1.2 billion in the fourth quarter of 2005. Excluding the reorganization and special items described below, the net loss was $179 million in the fourth quarter of 2006, a $603 million improvement from the fourth quarter of 2005. Operating income for the December 2006 quarter was $6 million, which represents Delta's third consecutive quarterly operating profit.
For the full year 2006, Delta recorded a net loss of $6.2 billion, compared to 2005's full year net loss of $3.8 billion. Excluding reorganization and special items, the net loss was $406 million in 2006, a $1.8 billion improvement over 2005. Delta's operating income of $58 million for 2006 was a $2.1 billion improvement over 2005 and the company's first annual operating profit since 2000.
``A full year operating profit, and the magnitude of the progress it represents, marks a major milestone for Delta. This is testimony to the dedication and hard work of Delta employees,'' said Gerald Grinstein, Delta's chief executive officer. ``With Court approval of the company's Disclosure Statement earlier this month, there is great momentum building towards a successful emergence from Chapter 11 this spring as a strong, healthy and independent global competitor.''
Revenue Performance
For the December 2006 quarter, total passenger revenue increased 5.9% on a 3.6% decrease in capacity. Delta's consolidated passenger unit revenues (PRASM) increased 9.9% in the December 2006 quarter compared to the same period in 2005. Delta's length of haul adjusted PRASM increased 12.1% for the fourth quarter 2006 versus fourth quarter 2005, as compared to the industry (excluding Delta) average PRASM increase of 5.1% over the same period.
For the full year 2006, Delta's consolidated PRASM rose 13.2% compared to the prior year. Delta's length of haul adjusted PRASM increased 17.8% for 2006 versus 2005, as compared to the industry (excluding Delta) average PRASM increase of 10.7% over the same period.
Operating Expense
For the December 2006 quarter, Delta's operating expenses decreased 10.2%, or $471 million, compared to the December 2005 quarter. Driven by its restructuring efforts, Delta's mainline unit costs in the fourth quarter of 2006 decreased by 9.3% as compared to the fourth quarter of 2005. Excluding fuel and special items, mainline unit costs decreased 6.2% over the prior year period.
Despite the $804 million increase in expense due to higher fuel prices in 2006 (3), Delta's operating expenses decreased by $1.1 billion, or 5.9%. Delta's 2006 mainline unit costs decreased by 3.9% in comparison to the prior year. Excluding fuel and special items, mainline unit costs decreased 3.9% for the same period.
Fuel Hedging
Delta recorded $86 million and $108 million in net charges for settled fuel hedge contracts for the December 2006 quarter and the full year, respectively. These charges are reflected in aircraft fuel expense. In addition, the company recorded charges of $14 million and $37 million associated with the ineffective portion of fuel hedges in miscellaneous expense, net, for the December 2006 quarter and full year respectively.
As of February 12, 2007, the company had hedged approximately 52% of its planned fuel consumption for the March 2007 quarter through a combination of swaps and collars at an average cap of $1.95 per gallon and an average floor of $1.88 per gallon. The company is currently forecasting its average fuel price for the March 2007 quarter to be $1.89 per gallon.
For the June 2007 quarter, Delta has hedged approximately 40% of its planned fuel consumption, through a combination of swaps and collars with an average cap of $1.91 per gallon and an average floor of $1.71 per gallon. For the September 2007 quarter, the company has hedged approximately 18% of its planned fuel consumption at an average cap of $1.93 per gallon and an average floor of $1.76 per gallon.
Liquidity
At December 31, 2006, Delta had $3.5 billion in cash, cash equivalents and short-term investments, of which $2.6 billion was unrestricted.
On January 30, 2007, Delta announced that it had obtained commitments for a $2.5 billion exit financing facility, a significant step in the company's plan to exit bankruptcy. The exit facility will be co-led by six financial institutions -- JPMorgan, Goldman Sachs & Co., Merrill Lynch, Lehman Brothers, UBS, and Barclays Capital -- and will consist of a $1 billion first-lien revolving credit facility, a $500 million first-lien Term Loan A, and a $1 billion second-lien Term Loan B. The facility will be secured by substantially all of the first-priority collateral securing Delta's existing Debtor-In-Possession (DIP) facilities.
Restructuring Progress
On February 7, 2007, the Bankruptcy Court, with no creditors objecting, approved Delta's Disclosure Statement and authorized the company to begin soliciting approval from its creditors for the Plan of Reorganization. The Unsecured Creditors Committee supports Delta's Plan of Reorganization and recommends that creditors vote in favor of the Plan. A confirmation hearing for the Bankruptcy Court to consider approval of the Plan of Reorganization has been scheduled for April 25, 2007.
Delta remains on course to emerge from Chapter 11 in Spring 2007 as a strong, competitive, independent airline. As of December 31, 2006, the company had achieved its full $3 billion goal of annual financial improvements through revenue improvements and cost reductions, reaching its goal one year ahead of schedule. Delta made the following progress against its restructuring benchmarks:
* Attain a best-in-class cost structure -- The company achieved the lowest mainline non-fuel CASM of the network carriers with 2006 mainline CASM excluding fuel and special items of 7.20 cents.
* Improve unit revenue performance -- Delta's length of haul adjusted PRASM was 93% of industry average, up substantially from 86% in 2005.
* Eliminate cash bleed and repair the balance sheet -- Delta generated $1.2 billion of free cash flow, its first positive free cash flow since 1998.
* Restore profitability -- The company recorded its first annual operating profit since 2000.
``By executing on all aspects of our restructuring plan -- increasing liquidity, improving unit revenues and reducing unit costs, while simultaneously investing in our network and product -- we exceeded our goals for 2006 and positioned Delta to become a fierce competitor in this industry,'' said Edward H. Bastian, Delta's executive vice president and chief financial officer. ``Because of the strength and determination of the entire Delta team, we expect this momentum to continue into 2007 and beyond.''
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