Delta & Northwest Airlines Merger
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Senate Judiciary Committee: Notice of Subcommittee Hearing - 4/24/08 - "An Examination of the
Apr 17, 2008 (Congressional Documents and Publications/ContentWorks via COMTEX) --
Thursday, April 17, 2008
Contact: 202-224-7703
NOTICE OF SUBCOMMITTEE HEARING - The Senate Committee on the Judiciary has scheduled a hearing before the Subcommittee on Antitrust, Competition Policy and Consumer Rights on "An Examination of the Delta-Northwest Merger " for Thursday, April 24, 2008, at 2:00 p.m. in Room 226 of the Senate Dirksen Office Building. Subcommittee Chairman Kohl will preside.
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Delta-Northwest merger agreement has $165M breakup fee - Zibb.com
SAN FRANCISCO, Apr 19, 2008 (Thomson Financial via COMTEX) --
The merger agreement between Delta Air Lines Inc. and Norhtwest Airlines Inc. contains a breakup fee of $165 million, according to a Delta filing with the Securities and Exchange Commission late Friday.
Under the terms of the stock-swap merger agreement, which was announced earlier this week, either air carrier would be required to pay the breakup fee.
Shares of Atlanta-based Delta closed at $8.75, while shares of Eagan, Minn.-based Northwest closed at $9.69. Gabriel Madway gm
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Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
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Companies: Delta Air Lines, Inc. (DALw)
Senate Judiciary Committee SCHEDULE: Week Ahead 4/21/08 to 4/25/08 - Zibb.com
Apr 18, 2008 (Congressional Documents and Publications/ContentWorks via COMTEX) --
Friday, April 18, 2008
Contact: 202-224-7703
Senate Judiciary Committee - Week of April 21 - April 25
NOTICE OF COMMITTEE HEARING POSTPONEMENT - The hearing on "National Security Letters: The Need for Greater Accountability and Oversight " scheduled by the Senate Committee on the Judiciary for Wednesday, April 16, 2008 at 10:00 a.m. has been postponed and will take place on Wednesday, April 23, 2008 at 10:00 a.m. in Room 226 of the Senate Dirksen Office Building.
NOTICE OF EXECUTIVE BUSINESS MEETING - An Executive Business Meeting has been scheduled by the Committee on the Judiciary, for Thursday, April 24, 2008, at 10:00 a.m., in the Senate Dirksen Building, Room 226.
NOTICE OF SUBCOMMITTEE HEARING - The Senate Committee on the Judiciary has scheduled a hearing before the Subcommittee on Antitrust, Competition Policy and Consumer Rights on "An Examination of the Delta-Northwest Merger " for Thursday, April 24, 2008, at 2:00 p.m. in Room 226 of the Senate Dirksen Office Building. Subcommittee Chairman Kohl will preside.
The latest information on hearings, witness lists and agendas can be accessed at http://judiciary.senate.gov/
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Tags: antitrust business consumer executive merger policy schedule senate
Continental likely to look for partners - Zibb.com
Apr 22, 2008 (Datamonitor via COMTEX) --
A loss of $80 million in the first quarter of 2008 and the likely competition from the merger of Delta and Northwest have forced Continental Airlines to reconsider its decision to remain independent, reported MarketWatch.
It has become easier for Continental to consider new deals after Northwest has surrendered its golden share. The golden share could have empowered Northwest to veto any changes in the structure of Continental. Northwest relinquished the share in Continental to join hands with Delta.
MarketWatch quoted Lawrence Kellner, CEO of Continental Airlines, as saying: "As I have consistently said, our preference has been to remain independent as long as the competitive landscape didn't change. However, the landscape is changing. We're reviewing our strategic alternatives, and we'll do what we need to do to continue our success and remain a strong long-term competitor."
Partnership with other airlines may help Continental deal with mounting fuel costs and make use of better-yielding routes.
http://www.datamonitor.com
Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon
Tags: ceo partnership
Companies: Continental Airlines, Inc. (CAL)
Delta Air Lines Reports March 2008 Quarter Financial Results - Zibb.com
ATLANTA, Apr 23, 2008 (PrimeNewswire via COMTEX) --
Delta Air Lines (NYSE:DAL) today reported results for the quarter ended March 31, 2008. Key points include:
* On April 14, 2008, Delta announced an agreement to merge with Northwest; the transaction will create America's premier global airline, which is expected to generate in excess of $1 billion in annual revenue and cost synergies. * Delta's net loss for the first quarter excluding special items was $274 million, or $0.69 per diluted share, driven by a $585 million year over year increase in the cost of fuel.(1, 2, 3) * Delta's reported net loss for the March 2008 quarter was $6.4 billion, or $16.15 per diluted share. * Special items include a $6.1 billion non-cash goodwill impairment charge from the decline in Delta's market capitalization due to sustained record fuel prices. * As of March 31, 2008, Delta had $3.6 billion in unrestricted liquidity, including $1 billion available under its revolving credit facility.
Merger with Northwest
On April 14, Delta announced that it had reached an agreement to merge with Northwest to become America's premier global airline with the international presence to compete effectively in an industry subject to high fuel prices and intense competition. The merger creates a more durable company that is better positioned to manage through economic cycles, invest in its fleet, and introduce innovative services for customers.
The transaction is expected to create more than $1 billion in sustainable, annual revenue and cost synergies by 2012. Primarily these synergies will be generated by more effective aircraft utilization and a more comprehensive and diversified route system as the combined company reallocates up to 50% of its international and 10% of its domestic fleet to improve profitability. Delta will also benefit from significant cost synergies as it reduces overhead and improves operational efficiency.
The combined carrier will have a more diversified network footprint, with a goal of 50% of its capacity deployed internationally. By reallocating capacity around the world, the company will build a natural hedge against seasonal demand shifts and regional economic weakness, positioning it for long-term success and increasing financial stability.
"Our need to respond to the pressures of dramatically rising fuel costs and a softening U.S. economy drove us to take a closer look at all options to protect Delta's future. The merger with Northwest will create an airline with the size, scale and global presence to weather economic downturns and compete long-term in the global marketplace," said Richard Anderson, Delta's chief executive officer. "I appreciate the hard work of the Delta people and their commitment to ensuring that Delta maintains its leadership position in the industry."
Response to Record Fuel Prices
On March 18, Delta announced that it had aggressively recalibrated its 2008 business plan with a focus on preserving liquidity in light of the significant increase in crude oil prices. The airline reevaluated its capacity, targeting reductions in or cancellations of unprofitable routes, and has already implemented schedule changes to bring down domestic flying. Delta now expects system capacity for the second half of 2008 to be down 0-2% compared to 2007, with domestic capacity down 9-11%.
As a result of the capacity reduction, the company is removing 15-20 mainline and 60-70 regional jet aircraft from its operations by the end of 2008. Delta is continuing to evaluate the fuel and demand environment and will make proactive changes quickly if economic conditions warrant.
Delta is also accelerating revenue and productivity initiatives to help address high fuel costs, as well as reducing capital spending. These measures will provide revenue and cost benefits of $150 million in 2008 (equivalent to $350 million on an annual basis), in addition to the $400 million in productivity initiatives previously announced.
Financial Performance
Delta reported a net loss of $274 million in the first quarter of 2008 compared to a net loss of $6 million in the first quarter of 2007, excluding special and reorganization(4) items. The $268 million year over year increase in net loss was driven by a $585 million increase in costs due to higher fuel price. Delta did not record an income tax benefit in the March 2008 quarter.
Revenue Momentum
Passenger revenue increased 10% in the first quarter of 2008 on a 2% increase in capacity compared to the prior year period, demonstrating Delta's momentum from its network transformation and revenue management initiatives. The increase in passenger revenue was driven by 6% higher yield and 4% higher traffic. Delta's international expansion has contributed significantly to passenger revenue growth, as the airline has launched nearly 90 new international routes since the summer of 2005, including Tel Aviv, Prague, Dubai, London-Heathrow and Shanghai. Delta has grown the percentage of its capacity operating in international markets from 25% in the March 2006 quarter to 33% in the March 2008 quarter. Delta expects more than 40% of capacity to be deployed in international markets by summer 2008.
Based on the most recently available ATA data, Delta's consolidated length of haul adjusted passenger unit revenue (PRASM) was 101% of industry average PRASM (excluding Delta), up from 86% in 2005 when the company began its network restructuring. This represents the first quarter in eight years that Delta has exceeded industry average.
Delta's selection of unique and distinct markets has allowed the company to grow international unit revenues and capacity at double digit rates. Delta's international PRASM grew 13% year over year in the March 2008 quarter, with strong yield gains in the trans-Atlantic and Latin markets. Domestic PRASM increased 6% on a capacity decline of 2%. Consolidated system PRASM improved more than 7% to 11.36 cents.
Comparisons of revenue related statistics by geographic region are as follows:
March 2008 Quarter vs. March 2007 Quarter
-------------------------------------------
Latin
Domestic America Atlantic Pacific
--------- --------- --------- ---------
Passenger Revenue 4.8% 15.7% 29.5% 47.7%
Passenger Unit Revenue 6.5% 16.8% 11.8% 3.5%
Yield 4.8% 8.4% 13.9% 14.5%
Traffic 0.1% 7.5% 13.6% 29.0%
Capacity (1.5)% (0.2)% 15.8% 42.8%
Load Factor 1.3 pts 5.8 pts (1.4) pts (8.2) pts
Non-passenger revenue was also strong in the first quarter. Revenue from Cargo operations increased 20% compared to the March 2007 quarter. Other net revenues grew $133 million, or 33%, primarily due to an increase in passenger fees and charges, revenue from SkyMiles, and maintenance services provided to third parties.
Cost Discipline
Excluding special items described below, Delta's operating expenses increased 20%, or $825 million compared to the first quarter of 2007, largely due to the $585 million increase in costs due to higher fuel prices. The remainder of the increase in operating expense was due primarily to fresh start accounting, salary and benefit enhancements for Delta's employees and the cost of increased capacity versus the prior year quarter. For the March 2008 quarter, non-operating expenses declined 20%, or $32 million, due primarily to lower effective interest rates (including the impact of fresh start reporting) and interest earned on higher average cash balances, which were partially offset by FAS 133 mark-to-market on hedges.
Delta's mainline unit cost (CASM(5)) excluding special items increased 16% to 11.64 cents compared to the prior year period, reflecting the significant increase in fuel costs. Excluding fuel expense, mainline CASM increased 4% to 7.31 cents compared to the March quarter of 2007.
"We have moved quickly to mitigate the short-term impact of higher fuel prices by further reducing domestic capacity and taking a disciplined approach to costs and cash flow. These actions have offset more than 50% of the fuel price impact," said Edward Bastian, Delta's president and chief financial officer. "However, we clearly need to do more. Merging with Northwest will generate over $1 billion in annual synergies, providing a more durable financial foundation for the future and giving Delta a stronger platform for profitable, long-term growth."
Special and Reorganization Items
Delta recorded special items of $6.1 billion in the March 2008 quarter, including 1) a $6.1 billion non-cash goodwill impairment charge due to a decline in Delta's market capitalization caused by sustained record fuel prices and 2) a $16 million charge for severance for the previously announced voluntary workforce reduction programs.
Upon emergence from bankruptcy, Delta recorded a $12 billion goodwill balance under fresh start accounting. The valuation of goodwill was predicated on the company's market value at that point of $9.4 billion. A key assumption in that valuation was the price of fuel of $70 per barrel. Crude oil recently traded over $117 per barrel, with refining spreads in the $20-$30 range, significantly impacting Delta's single largest operating expense and future projected discounted cash flows.
Based on the difference between Delta's book equity and an updated stand-alone valuation reflecting current fuel and economic assumptions, prepared in connection with Delta's recently announced merger with Northwest, Delta recorded a non-cash goodwill impairment charge of $6.1 billion.
In the March 2007 quarter, Delta recorded reorganization expenses totaling $124 million.
Liquidity Position
During the quarter, Delta issued $733 million in debt, a portion of which was used to refinance Delta's 2003-1 EETC maturity. Delta had approximately $550 million in net capital expenditures during the March 2008 quarter, with approximately $500 million for investments in aircraft, parts and modifications to improve Delta's international product and position the airline for continued international growth.
At the end of the March 2008 quarter, Delta had $2.8 billion in cash, cash equivalents and short-term investments, of which $2.6 billion was unrestricted. Delta has an additional $1 billion available under its revolving credit facility, resulting in a total of $3.6 billion in unrestricted liquidity at quarter end. As of March 31, 2008, Delta had $103 million in auction-rate securities classified as short-term investments on its balance sheet.
Fuel Hedging
During the March 2008 quarter, Delta hedged 27% of its fuel consumption, resulting in an average fuel price of $2.85 per gallon. Delta realized $46 million in gains on fuel hedge contracts settled during the quarter.
As of April 18, 2008, Delta had the following fuel hedges in place for estimated 2008 consumption:
Jet Fuel
Percent Equivalent
Hedged Cap
------------------------
Q2 2008 49% $2.79
Q3 2008 44% $2.84
Q4 2008 25% $2.92
March 2008 Quarter Highlights
During the first quarter, Delta continued its international expansion and made targeted investments in its products, services, and employees to deliver an industry-leading customer experience. Highlights include, Delta:
* Made strong improvements to its operational performance -- reducing involuntary denied boardings by nearly 50%, improving baggage performance by 3.6%, and ranking first among the network carriers in on-time performance, including a first place ranking in on-time performance at its hubs in Atlanta, New York-JFK, and Cincinnati for the month of February; * Launched the joint venture with Air France, including three new trans-Atlantic routes connecting London-Heathrow to Los Angeles, Atlanta and New York-JFK, filling a key position in Delta's portfolio by connecting our international gateways in Atlanta and New York to one of the world's premier business airports; * Continued its commitment to Delta employees -- awarded $158 million in profit sharing in recognition of 2007 financial results, instituted benefits enhancements on January 1, contributed $25 million to employee pensions, and paid $6 million in Shared Rewards for achieving operational goals; * Enhanced Atlanta's position as a powerful Asian gateway by beginning the first-ever nonstop flight between Atlanta and Shanghai, complementing existing service to Tokyo and Seoul; * Celebrated being the first U.S. carrier to add the world's longest range commercial jetliner to its fleet by taking delivery of two of the eight Boeing 777-200LR aircraft expected to be delivered through 2009. With the new aircraft, Delta strengthens its ability to connect customers and cargo between virtually any two cities around the globe, nonstop; * Ranked as the top U.S. carrier to Latin America by readers of Latin Trade magazine and second overall on the magazine's "best of" list. Latin Trade readers also gave Delta the highest ranking in ticketing and boarding experience, and second highest ranking in frequent flier program among traditional network carriers in the U.S. and Latin America; * Provided SkyMiles members with more ways to redeem their miles by initiating a "Pay with Miles" program in partnership with American Express, expanding access to Medallion(tm) Marketplace, growing the SkyMiles online auction program, and enhancing the Award Travel search calendar on delta.com; and * Enhanced customers' onboard experience by expanding the popular food for sale program, EATS, beginning April 1 to all flights within the U.S. of 750 miles or more and select flights between the U.S. and destinations in the Caribbean and Latin America.
June 2008 Quarter and Full Year 2008 Guidance
The company projects the following for the June 2008 quarter and full year 2008:
2Q 2008 Forecast 2008 Forecast
------------- --------------
Operating margin, excluding
special items 3 - 5% 2 - 4%
Fuel price, including taxes
and hedges $3.10 $3.02
2Q 2008 Forecast 2008 Forecast
(compared (compared
to 2Q 2007) to 2007)
------------- --------------
Mainline unit costs - excluding
fuel and related taxes and
special items Up 1 - 2% Flat
System capacity Up 0 - 2% Flat
Domestic Down 5 - 7% Down 6 - 8%
International Up 15 - 17% Up 14 - 16%
Mainline capacity Up 1 - 3% Up 0 - 2%
Domestic Down 6 - 8% Down 6 - 8%
International Up 15 - 17% Up 15 - 17%
Ancillary Businesses
Delta's ancillary businesses include TechOps, the largest airline Maintenance Repair and Overhaul (MRO) organization in North America, serving more than 100 aviation and airline customers around the world, and DAL Global Services, which provides general aviation services, training and technical services, and staffing to airlines including Delta. Delta continues to grow these businesses and both TechOps MRO and DAL Global Services increased revenues and margins year over year. The following table provides summarized financial information about these businesses for the first quarter of 2008.
Three Months Ended
March 2008
-------------------------
(in millions) TechOps DAL Global
(MRO) Services
-------------------------
Operating Revenue $122 $ 61
Operating Margin 13.8% 5.8%
Other Matters
Included with this press release are Delta's Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007; a statistical summary for those periods; selected balance sheet data as of March 31, 2008 and December 31, 2007; and a reconciliation of certain non-GAAP financial measures.
About Delta
Delta Air Lines operates service to more worldwide destinations than any airline with Delta and Delta Connection flights to 306 destinations in 58 countries. Delta has added more international capacity than any major U.S. airline during the last two years and is the leader across the Atlantic with flights to 37 trans-Atlantic markets. To Latin America and the Caribbean, Delta offers more than 517 weekly flights to 57 destinations. Delta's marketing alliances also allow customers to earn and redeem SkyMiles on nearly 16,409 flights offered by SkyTeam and other partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. Including its SkyTeam and worldwide codeshare partners, Delta offers flights to 474 worldwide destinations in 104 countries. Customers can check in for flights, print boarding passes and check flight status at delta.com.
The Delta Air Lines, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=1825
Endnotes
1 In connection with its emergence from bankruptcy on
April 30, 2007, Delta adopted fresh start reporting in accordance
with American Institute of Certified Public Accountants' Statement
of Position 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code." The adoption of fresh
start reporting resulted in Delta's becoming a new entity for
financial reporting purposes. Accordingly, Delta's consolidated
financial statements after April 30, 2007 are not comparable to
its financial statements for any period prior to emergence.
References in this press release to "Successor" refer to Delta on
or after May 1, 2007, giving effect to fresh start reporting.
References to "Predecessor" refer to Delta prior to May 1, 2007.
2 Note 1 to the attached Consolidated Statements of Operations
provides a reconciliation of certain non-GAAP financial measures
used in this release and provides the reasons management uses
those measures.
3 Includes fuel prices paid under our contract carrier arrangements.
4 Reorganization items refers to revenues, expenses, gains or losses
that we realized or incurred due to our reorganization under
Chapter 11 of the U.S. Bankruptcy Code. In accordance with GAAP,
these items are separately classified in the Predecessor's
Consolidated Statements of Operations.
5 Delta excludes from mainline unit costs expenses for aircraft
maintenance and staffing services which the Company provides to
third parties because these expenses are not related to the
generation of a seat mile. Similarly, Delta excludes from
passenger unit revenues, and includes in other revenue, revenues
received for providing aircraft maintenance and staffing services
to third parties. Management believes these classifications
provide a more consistent and comparable reflection of Delta's
mainline operations.
Statements in this news release 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 risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections and strategies reflected in or suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the cost of aircraft fuel; the impact that our indebtedness will have on our financial and operating activities and our ability to incur additional debt; the restrictions that financial covenants in our financing agreements will have on our financial and business 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 management and key employees; the ability of our credit card processors to take significant holdbacks in certain circumstances; the effects of terrorist attacks; and competitive conditions in the airline industry.
Forward-looking statements in the press release that relate to our proposed merger transaction with Northwest Airlines Corporation include, without limitation, our expectations with respect to the synergies, costs and charges and capitalization, anticipated financial impacts of the merger transaction and related transactions; approval of the merger transaction and related transactions by shareholders; the satisfaction of the closing conditions to the merger transaction and related transactions; and the timing of the completion of the merger transaction and related transactions. Factors that may cause the actual results to differ materially from the expected results include, but are not limited to, the possibility that the expected synergies will not be realized, or will not be realized within the expected time period, due to, among other things, (1) the airline pricing environment; (2) competitive actions taken by other airlines; (3) general economic conditions; (4) changes in jet fuel prices; (5) actions taken or conditions imposed by the United States and foreign governments; (6) the willingness of customers to travel; (7) difficulties in integrating the operations of the two airlines; (8) the impact of labor relations, and (9) fluctuations in foreign currency exchange rates. Other factors include the possibility that the merger does not close, including due to the failure to receive required stockholder or regulatory approvals, or the failure of other closing conditions.
Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in Delta's Securities and Exchange Commission filings, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2007. Caution should be taken not to place undue reliance on Delta's forward-looking statements, which represent Delta's views only as of Apr. 23, 2008, and which Delta has no current intention to update.
Additional Information About the Merger and Where to Find It
In connection with the proposed merger, Delta will file with the Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 that will include a joint proxy statement of Delta and Northwest that also constitutes a prospectus of Delta. Delta and Northwest will mail the joint proxy statement/prospectus to their stockholders. Delta and Northwest urge investors and security holders to read the joint proxy statement/prospectus regarding the proposed merger when it becomes available because it will contain important information. You may obtain copies of all documents filed with the SEC regarding this transaction, free of charge, at the SEC's website (www.sec.gov). You may also obtain these documents, free of charge, from Delta's website (www.delta.com) under the tab "About Delta" and then under the heading "Investor Relations" and then under the item "SEC Filings." You may also obtain these documents, free of charge, from Northwest's website (www.nwa.com) under the tab "About Northwest" and then under the heading "Investor Relations" and then under the item "SEC Filings and Section 16 Filings."
DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
(Successor) (Predecessor)
Three Months Ended
March 31,
------------------
(in millions except per share data) 2008 2007 Percent
Change
---------------------------
OPERATING REVENUE:
Passenger:
Mainline $ 3,061 $ 2,783 10%
Regional affiliates 1,039 947 10%
Cargo 134 112 20%
Other, net 532 399 33%
------------------
Total operating revenue 4,766 4,241 12%
OPERATING EXPENSE:
Aircraft fuel and related taxes 1,422 948 50%
Salaries and related costs 1,091 971 12%
Contract carrier arrangements 896 717 25%
Depreciation and amortization 297 291 2%
Contracted services 254 243 5%
Aircraft maintenance materials and
outside repairs 268 238 13%
Passenger commissions and other
selling expenses 225 220 2%
Landing fees and other rents 179 190 -6%
Passenger service 84 71 18%
Aircraft rent 64 70 -9%
Impairment of goodwill 6,100 -- NM
Restructuring and related items 16 -- NM
Other 131 127 3%
------------------
Total operating expense 11,027 4,086 170%
------------------
OPERATING (LOSS) INCOME (6,261) 155 NM
OTHER (EXPENSE) INCOME:
Interest expense (147) (200) -27%
Interest income 27 10 170%
Miscellaneous, net (9) 29 NM
------------------
Total other expense, net (129) (161) -20%
------------------
LOSS BEFORE REORGANIZATION ITEMS, NET (6,390) (6) NM
REORGANIZATION ITEMS, NET -- (124) NM
------------------
LOSS BEFORE INCOME TAXES (6,390) (130) NM
INCOME TAXES -- -- NM
------------------
NET LOSS $(6,390) $ (130) NM
==================
BASIC AND DILUTED LOSS PER SHARE $(16.15) NM NM
==================
WEIGHTED AVERAGE SHARES USED IN BASIC AND
DILUTED LOSS PER SHARE CALCULATION: 395.6 NM NM
==================
DELTA AIR LINES, INC.
Statistical Summary
(Unaudited)
(Successor) (Predecessor)
Three Months Ended
March 31,
------------------
2008 2007 Change
-------- -------- --------
Consolidated:
Revenue Passenger
Miles (millions) (1) 28,205 27,213 3.6%
Available Seat Miles
(millions) (1) 36,092 35,279 2.3%
Passenger Mile Yield (1) 14.54c 13.71c 6.1%
Passenger Revenue per Available
Seat Mile (PRASM)(1) 11.36c 10.57c 7.5%
Operating Cost Per Available
Seat Mile (CASM) (1)
- see Note 1 30.17c 11.29c 167.2%
CASM excluding Special Items
- see Note 1 13.23c 11.29c 17.2%
CASM excluding Special Items and
Fuel Expense and Related Taxes
- see Note 1 9.29c 8.60c 8.0%
Passenger Load Factor (1) 78.1% 77.1% 1.0 pts
Fuel Gallons Consumed (millions) 500 491 1.8%
Average Price Per Fuel Gallon,
Net of Hedging Activity $ 2.85 $ 1.93 47.7%
Number of Aircraft in Fleet,
End of Period 584 578 1.0%
Full-Time Equivalent Employees,
End of Period 55,382 52,260 6.0%
Mainline:
Revenue Passenger Miles (millions) 23,795 22,994 3.5%
Available Seat Miles (millions) 30,270 29,554 2.4%
Operating Cost Per Available
Seat Mile (CASM)
- see Note 1 31.84c 10.01c 218.1%
CASM excluding Special Items
- see Note 1 11.64c 10.01c 16.3%
CASM Excluding Special Items and
Fuel Expense and Related Taxes
- see Note 1 7.31c 7.05c 3.7%
Number of Aircraft in Fleet,
End of Period 451 440 2.5%
(1) Includes the operations under our contract carrier agreements of
Atlantic Southeast Airlines, Inc.; Chautauqua Airlines, Inc.;
Freedom Airlines, Inc.; Shuttle America Corporation and SkyWest
Airlines, Inc. for all periods presented, and ExpressJet
Airlines, Inc. and Pinnacle Airlines, Inc. for the three months
ended March 31, 2008.
DELTA AIR LINES, INC.
Selected Balance Sheet Data
(Successor)
March 31, December 31,
-----------------------
2008 2007
-------- --------
(Unaudited)
(in millions)
Cash and cash equivalents $ 2,492 $ 2,648
Short-term investments 103 138
Restricted cash, including noncurrent 233 535
Total assets 26,755 32,423
Total debt and capital leases,
including current maturities 9,119 9,000
Total shareowners' equity 3,951 10,113
Fleet Information
Our active fleet, orders, options and rolling options at March 31, 2008 are summarized in the following table. Options have scheduled delivery slots. Rolling options replace options and are assigned delivery slots as options expire or are exercised.
Current Fleet
---------------------------
Aircraft Capital Operating Average Rolling
Type Owned Lease Lease Total Age Orders Options Options
---------------------------------------------------------------------
B-737-700 -- -- -- -- -- 10 -- --
B-737-800 71 -- -- 71 7.4 2 (1) 60 120
B-757-200 67 35 17 119 16.5 -- -- --
B-757-200ER -- 2 15 17 10.2 -- -- --
B-767-300 4 -- 17 21 17.2 -- -- --
B-767-300ER 50 -- 9 59 12.1 -- 7 --
B-767-400ER 21 -- -- 21 7.1 -- 12 --
B-777-200ER 8 -- -- 8 8.2 -- -- --
B-777-200LR 2 -- -- 2 0.1 6 29 12
MD-88 63 33 21 117 17.7 -- -- --
MD-90 16 -- -- 16 12.3 -- -- --
CRJ-100 25 13 49 87 10.6 -- -- --
CRJ-200 5 -- 12 17 5.8 -- 12 --
CRJ-700 17 -- -- 17 4.4 -- 16 --
CRJ-900 12 -- -- 12 0.4 11 (2) 30 --
---------------------------------------------------------------------
Total 361 83 140 584 12.5 29 166 132
=====================================================================
(1) Excludes 34 remaining aircraft which we have entered into
definitive agreements to sell to third parties immediately
following delivery of these aircraft to us by the manufacturer.
(2) Excludes 10 remaining aircraft orders we assigned to a regional
air carrier in April 2007.
Note 1: The following tables show reconciliations of certain financial measures. The reasons Delta uses these measures are described below.
* Delta excludes reorganization related and special items because management believes the exclusion of these items is helpful to investors to evaluate the Company's recurring operational performance; * Delta presents length of haul adjusted PRASM excluding charter revenue because management believes this provides a more meaningful comparison of the Company's PRASM to the industry; * Delta presents mainline cost per available seat mile (CASM) excluding fuel expense and related taxes because management believes high fuel prices mask the progress achieved toward its business plan targets; and * Delta's CASM excludes $136 million and $104 million for the three months ended March 31, 2008 and 2007, respectively, in expenses related to Delta's providing aircraft maintenance and staffing services to third parties because these costs are not associated with the generation of a seat mile.
In connection with its emergence from bankruptcy on April 30, 2007, Delta adopted fresh start reporting in accordance with American Institute of Certified Public Accountants' Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." The adoption of fresh start reporting resulted in Delta's becoming a new entity for financial reporting purposes. Accordingly, Delta's consolidated financial statements after April 30, 2007 are not comparable to its financial statements for any period prior to emergence. References in this press release to "Successor" refer to Delta on or after May 1, 2007, giving effect to fresh start reporting. References to "Predecessor" refer to Delta prior to May 1, 2007.
(Successor) (Predecessor)
Three Three
Months Ended Months Ended
March 31, March 31,
2008 2007
------------ ------------
(in millions, except per share data)
Net loss $(6,390) $ (130)
Items excluded:
Impairment of goodwill 6,100
Restructuring and related items 16 --
Reorganization items, net -- 124
------------ ------------
Total items excluded 6,116 124
------------ ------------
Net loss excluding special and
reorganization related items $ (274) $ (6)
============ ============
Basic and diluted weighted
average shares outstanding 395.6
Basic and diluted loss per share
excluding special and reorganization
related items $ (0.69)
============
(Successor)
Three
Months Ended
March 31,
2008
------------
(in millions)
Total Operating Expense $11,027
Items excluded:
Impairment of goodwill (6,100)
Restructuring and related items (16)
------------
Total items excluded (6,116)
------------
Total operating expense excluding
special items $ 4,911
============
(Successor)
Three
Months Ended
March 31,
2008
------------
PRASM 11.36c
Adjustment for other airline revenue
and certain other revenue 0.40
PRASM excluding other airline
revenue and certain other revenue 11.76c
------------
Length of haul adjustment (0.46)
Length of haul adjusted PRASM
excluding other airline revenue
and certain other revenue 11.30c
============
Industry average PRASM 11.24c
Percentage of industry average 101%
============
(Successor) (Predecessor)
Three Three
Months Ended Months Ended
March 31, March 31,
2008 2007
------------ ------------
CASM 30.55c 11.58c
Items excluded:
Aircraft maintenance to third parties (0.29) (0.20)
Staffing services to third parties (0.09) (0.09)
------------ ------------
CASM excluding items not related to
generation of a seat mile 30.17c 11.29c
Items excluded:
Impairment of goodwill (16.90) --
Restructuring and related items (0.04) --
------------ ------------
Total items excluded (16.94) --
CASM excluding special items 13.23c 11.29c
Fuel expense and related taxes (3.94) (2.69)
------------ ------------
CASM excluding fuel expense and
related taxes and special items 9.29c 8.60c
============ ============
Mainline CASM 32.29c 10.36c
Items excluded:
Aircraft maintenance to third parties (0.34) (0.24)
Staffing services to third parties (0.11) (0.11)
------------ ------------
Mainline CASM excluding items not
related to generation of a seat mile 31.84c 10.01c
Items excluded:
Impairment of goodwill (20.15) --
Restructuring and related items (0.05) --
------------ ------------
Total items excluded (20.20) --
------------ ------------
Mainline CASM excluding special items 11.64c 10.01c
Fuel expense and related taxes (4.33) (2.96)
Mainline CASM excluding fuel expense
and related taxes and special items 7.31c 7.05c
============ ============
FORECAST
Successor Successor
June 2008 Full Year
Quarter 2008
Projection Projection
------------ ------------
Operating margin projection 2 - 4% (28) - (26)%
Items excluded:
Impairment of goodwill 29%
Restructuring and related items 1% 1%
------------ ------------
Operating margin projection
excluding special items 3 - 5% 2 - 4%
============ ============
FORECAST
----------------------------------
(Successor) (Successor)
June 2008 Quarter Full Year 2008
Projected Range Projected Range
---------------- ----------------
Mainline CASM projection 12.21c 12.28c 16.49c 16.63c
Items excluded:
Aircraft maintenance and staffing
services to third parties (0.34) (0.34) (0.41) (0.41)
------- ------- ------- -------
Mainline CASM projection
excluding items not related to
generation of a seat mile 11.87c 11.94c 16.08c 16.22c
Items excluded:
Impairment of goodwill -- -- (4.71) (4.71)
Restructuring and related items (0.26) (0.26) (0.08) (0.08)
Profit Sharing -- -- (0.04) (0.04)
------- ------- ------- -------
Total items excluded (0.26) (0.26) (4.83) (4.83)
Mainline CASM projection
excluding special items 11.61c 11.68c 11.25c 11.39c
------- ------- ------- -------
Fuel expense and related taxes (4.59) (4.59) (4.51) (4.52)
------- ------- ------- -------
Mainline CASM projection
excluding fuel expense and
related taxes and special items 7.02c 7.09c 6.74c 6.88c
======= ======= ======= =======
Change year over year in
Mainline CASM excluding fuel
expense and related taxes
and special items 1% 2% -1% 1%
This news release was distributed by PrimeNewswire, www.primenewswire.com
SOURCE: Delta Air Lines, Inc.
Delta Air Lines
Investor Relations
404-715-2170
Corporate Communications
404-715-2554
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Companies: Delta Air Lines, Inc. (DAL), Delta Air Lines, Inc. (DALw)
Northwest Airlines Reports First Quarter 2008 Results - Zibb.com
EAGAN, Minn., Apr 23, 2008 (BUSINESS WIRE) --
Northwest Airlines Corporation (NYSE:NWA) today reported a first quarter 2008 net loss of $4.1 billion, or $15.78 per share. Reported results include a non-cash goodwill impairment charge of $3.9 billion. This compares to the first quarter 2007 when Northwest reported a net loss of $292 million.
Excluding non-recurring, non-cash impairment charges and losses associated with marking-to-market out-of-period fuel hedges, Northwest reported a first quarter 2008 net loss of $191 million versus the first quarter 2007 when the airline reported net income of $73 million before the impact of reorganization items and out-of-period fuel hedge gains.
Excluding taxes and out-of-period mark-to-market adjustments on fuel hedges, Northwest paid $2.77 per gallon for jet fuel in the first quarter compared to $1.85 a gallon in the first quarter of 2007, an increase of 49.7 percent.
On April 14th, Northwest announced an agreement to merge with Delta. Commenting on the transaction, Doug Steenland, Northwest Airlines' president and chief executive officer, said, "The agreement to merge with Delta creates America's premier global airline. Because it combines end-to-end networks with little overlap, there will be no reduction in competition. The transaction will create America's leading airline -- an airline that is more financially secure, better able to invest in our employees and our customers and be sustainable in an increasingly competitive marketplace. The new carrier will offer superior route diversity across the U.S., Latin America, Europe and Asia and will be better able to overcome the industry's boom-and-bust cycles. The airline will also be better able to match the right planes with the right routes, making transportation more efficient across our entire network."
In commenting on first quarter results, Steenland added, "Northwest's first quarter performance was negatively impacted by the dramatic increases in the price of oil. Year-over-year our first quarter total fuel expense increased by $445 million, or 57.3 percent. The sustained high fuel prices represent an extraordinary challenge to Northwest and the entire airline industry. In response to fuel, we have taken a series of actions and will continue to monitor the impacts of fuel prices on our operation and are prepared to take additional actions as necessary."
$3.9 Billion Non-cash, Non-recurring Accounting Charge Taken to Reduce Goodwill
The Company is required for accounting purposes to measure the value of goodwill annually or whenever significant events that could be indicators of a change in value have occurred. In completing our first quarter evaluation, we considered the impact of current high fuel prices, Northwest's recent stock price, other industry trends and the equity value of Northwest implied by the recent merger announcement and have determined that an impairment to goodwill is required. To make this determination, the Company compared the carrying value of its equity to its fair value. For purposes of this evaluation, fair value has been determined based on the implied market value of Northwest's equity in the announced transaction. As a result of this evaluation, the Company recorded a non-cash goodwill impairment charge of $3.9 billion.
First Quarter Financial Overview
Northwest's operating revenues for the first quarter rose to $3.1 billion, up 8.8 percent from last year.
Consolidated passenger revenue increased by 6.2 percent versus the first quarter 2007 to $2.6 billion on 2.0 percent more available seat miles (ASMs), resulting in a 4.1 percent improvement in revenue per available seat mile (RASM). Excluding the impact of fresh-start accounting, consolidated RASM increased 5.0 percent.
Mainline passenger revenue increased by 1.7 percent versus the first quarter 2007 to $2.2 billion on 0.5 percent fewer mainline available seat miles (ASMs), resulting in a 2.2 percent improvement in revenue per available seat mile (RASM). Excluding the impact of fresh-start accounting, mainline RASM increased 3.4 percent. Mainline yield improved by 2.1 percent and load factor was up 1.0 percentage point during the quarter.
Commenting on the first quarter revenue performance, Doug Steenland said, "Northwest's five percent consolidated unit revenue performance was strong. However, it was not sufficient to overcome the rapid increase in fuel prices. Ticket prices need to keep pace with the cost we pay for fuel."
First quarter operating expenses of $3.2 billion, excluding impairment charges, were up $574 million, or 21.5 percent year-over-year as the result of a $445 million increase in year-over-year fuel expense. Excluding fuel costs and impairment charges, operating expenses increased by $129 million year-over-year. Northwest's first quarter mainline unit costs per available seat mile (CASM) excluding fuel and non-recurring items increased 4.5 percent versus the first quarter of 2007, which is consistent with previous guidance. This increase was primarily due to reduced mainline capacity, as well as the continued impact of non-cash emergence-related items and year-over-year timing of maintenance checks.
Fuel continues to be Northwest's single largest cost, representing 38 percent of the company's first quarter operating expenses, excluding impairment charges. Northwest had previously hedged approximately 45 percent of its fuel exposure for the quarter and realized $19 million in value from settled fuel hedge contracts during the quarter. For the remainder of the year, Northwest has hedged approximately 24 percent of its second quarter fuel requirements, 21 percent of its third quarter requirements and 46 percent of its fourth quarter requirements. As of April 21st, the value of Northwest's open hedge positions for the remainder of 2008 was approximately $115 million.
Northwest ended the quarter with $3.2 billion in unrestricted cash and $484 million in restricted cash. Northwest's 2007 first quarter ending unrestricted cash was $2.4 billion.
Dave Davis, Northwest Airline's executive vice-president and chief financial officer, said, "Despite our first quarter loss, Northwest ended the quarter with the strongest liquidity among network carriers." Davis added, "Today's results demonstrate the volatility of the airline industry and the challenges that airlines face related to uncontrollable increases in input costs such as oil. Northwest and Delta recently announced a merger in order to create a truly global carrier. This was a strategic decision by both companies to create a truly global airline that would be better positioned for sustained profitability."
Northwest and Delta Agree to Merge, Creating America's Premier Global Airline
On April 14th, 2008, Northwest and Delta announced an agreement to merge the two companies and create the leading U.S. airline. This will give the merged carrier the global presence to compete effectively with foreign carriers. The merger also creates a more stable company that is better positioned to manage through economic cycles and volatile fuel prices.
The transaction is expected to generate more than $1 billion in annual revenue and cost synergies from more effective aircraft utilization, a more comprehensive and diversified route system and cost synergies resulting from reduced overhead and improved operational efficiency.
Also, by diversifying capacity around the world, the two airlines build a natural hedge against seasonal demand shifts and regional economic weakness, positioning the combined carrier for greater long-term success and increasing financial stability.
The two airlines expect the regulatory review process to last from six to eight months and anticipate closing the transaction in late 2008.
Northwest's Swift Response to Extraordinary Fuel Costs
In response to the unprecedented rise in fuel costs, Northwest has taken a series of actions. In announcing these measures, Doug Steenland said, "Over the past several months, the price of oil has risen dramatically to all time highs. These increased costs call for a strong response from us in the form of revenue enhancements, capacity and fleet reductions, as well as reductions in capital and operating expenses."
Actions include:
-- Fuel Surcharge and Fare Increases
-- Northwest has participated in numerous fuel surcharge and
fare increases for travel from North America to Europe,
India, Japan and most other destinations in Asia.
-- For domestic routes, Northwest has participated in numerous
attempts by various carriers to increase fares to reflect
rising fuel costs, although most have been rolled back
because some airlines failed to match.
-- Northwest attempted to increase the minimum stay
requirements to create better segmentation between business
and leisure travelers. Many have been pulled because some
airlines failed to match.
-- Fee Increases
-- In March, Northwest matched other U.S. network carriers and
for North American travel, implemented a $25 charge, each
way, for the customer's second checked bag and $100 each
for three or more checked bags.
-- Northwest increased the fee for bags greater than 50 pounds
from $25 to $50 each way.
-- In March, Northwest implemented International Coach Select,
where passengers can purchase select seats for $25 each way
inter-Asia and $50 each way Trans-Pacific or Trans-
Atlantic.
-- Capacity Reductions
-- In September, after peak summer travel concludes, Northwest
will reduce its scheduled domestic system capacity by
approximately five percent versus the 2008 business plan.
This reduction will entail the removal from service of 15
to 20 additional aircraft. For the full-year, consolidated
domestic available seat miles (ASMs) are expected to be
down slightly versus 2007.
-- Cargo Fleet and Capacity Changes
-- Northwest Cargo has implemented a new network strategy that
suspended service to Bangkok, Singapore, and will suspend
freighter service to Guangzhou, China, effective July 1,
and Taipei, Taiwan, effective August 1. The new Asia
freighter schedule maintains service between Northwest's
Anchorage cargo hub and Shanghai, Tokyo and Osaka. New non-
stop westbound service will be added from Anchorage to
Seoul's Incheon airport. This new network will improve
aircraft utilization and profitability.
-- Northwest Cargo is also accelerating the planned retirement
of the three oldest, least-fuel efficient freighter
aircraft. Ten freighters will remain in active cargo
service; including one plane largely dedicated to the Civil
Reserve Air Fleet (CRAF) program, where the U.S. government
assumes fuel price risk.
-- Liquidity Enhancements
-- Northwest will reduce non-aircraft capital expenditures for
2008 by approximately $100 million. The airline now intends
to invest $150 million in non-aircraft capital expenditures
in 2008.
-- Northwest intends to realize annualized profit improvements
of $100 million through cost reductions, productivity
improvements and revenue enhancements.
Northwest First Quarter 2008 Highlights
In addition to the announced merger with Delta Air Lines, key accomplishments in the first quarter for Northwest include:
-- DOT Recommends Approval for Six-Way Anti-Trust Immunity
-- In early April, the U.S. Department of Transportation (DOT)
recommended approval of Northwest's application for six-way
antitrust immunity with its SkyTeam alliance partners:
Delta Air Lines, Air France, KLM Royal Dutch Airlines,
Alitalia, and CSA Czech Airlines. Final approval is
expected to follow after the DOT reviews the final round of
comments to its "show cause" order.
-- The six-way ATI approval will enable the carriers to expand
their transatlantic networks by coordinating schedules and
services with a single, customer-focused objective.
-- Fleet
-- Northwest's regional jet fleet also grew in the first
quarter with the on-schedule delivery of six Bombardier
CRJ-900s and eight Embraer EMB-175s, bringing the airline's
quarter-end total to 19 CRJ-900s and 17 EMB-175s.
-- By the end of 2008, Northwest's scheduled deliveries will
bring its regional jet fleet to 36 EMB-175s and 36 CRJ-
900s.
-- As a result of the five percent domestic capacity reduction
from planned levels, Northwest will remove an additional 15
to 20 aircraft from service. Two DC9s will be removed in
June and the remainder in the fall to coincide with the
planned schedule reductions, bringing the total DC9 fleet
to 61 aircraft year-end. The overall fleet reductions
include approximately 10 DC9s, and the balance being a mix
of Boeing 757s and Airbus A320s and A319s.
-- Northwest now anticipates taking delivery of its first 787
in November 2009.
FORWARD-LOOKING STATEMENTS
Statements in this news release that are not purely historical facts, including statements regarding our beliefs, expectations, intentions or strategies for the future, may be "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the plans, intentions and expectations reflected in or suggested by the forward-looking statements. Such risks and uncertainties include, among others, the ability of the company to operate pursuant to the terms of its financing facilities (particularly the related financial covenants), the ability of the company to attract, motivate and/or retain key executives and associates, the future level of air travel demand, the company's future passenger traffic and yields, the airline industry pricing environment, increased costs for security, the cost and availability of aviation insurance coverage and war risk coverage, the general economic condition of the U.S. and other regions of the world, the price and availability of jet fuel, the war in Iraq, the possibility of additional terrorist attacks or the fear of such attacks, concerns about Severe Acute Respiratory Syndrome (SARS) and other influenza or contagious illnesses, labor strikes, work disruptions, labor negotiations both at other carriers and the company, difficulties in integrating the operations of the company and Delta following the merger, low cost carrier expansion, capacity decisions of other carriers, actions of the U.S. and foreign governments (including conditions imposed by U.S. or foreign governments to obtain regulatory approval for the merger), foreign currency exchange rate fluctuations and inflation. Other factors include the possibility that the merger may not close, including due to the failure to receive required stockholder or regulatory approvals, or the failure of other closing conditions. Northwest cautions that the foregoing list of factors is not exclusive. Additional information with respect to the factors and events that could cause differences between forward-looking statements and future actual results is contained in the company's Securities and Exchange Commission filings, including the company's Annual Report on Form 10-K for the year ended December 31, 2007 and subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. We undertake no obligation to update any forward-looking statements to reflect events or circumstances that may arise after the date of this release.
Additional Information About the Merger and Where to Find It
In connection with the proposed merger, Delta will file with the Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 that will include a joint proxy statement of Delta and Northwest that also constitutes a prospectus of Delta. Delta and Northwest will mail the joint proxy statement/prospectus to their stockholders. Delta and Northwest urge investors and security holders to read the joint proxy statement/prospectus regarding the proposed merger when it becomes available because it will contain important information. You may obtain copies of all documents filed with the SEC regarding this transaction, free of charge, at the SEC's website (www.sec.gov). You may also obtain these documents, free of charge, from Delta's website (www.delta.com) under the tab "About Delta" and then under the heading "Investor Relations" and then under the item "SEC Filings." You may also obtain these documents, free of charge, from Northwest's website (www.nwa.com) under the tab "About Northwest" and then under the heading "Investor Relations" and then under the item "SEC Filings and Section 16 Filings."
Delta, Northwest and their respective directors, executive officers and certain other members of management and employees may be soliciting proxies from Delta and Northwest stockholders in favor of the merger. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of Delta and Northwest stockholders in connection with the proposed merger will be set forth in the proxy statement/prospectus when it is filed with the SEC. You can find information about Delta's executive officers and directors in its Annual Reports on Form 10-K (including any amendments thereto), Current Reports on Form 8-K and other documents that have previously been filed with the SEC since April 30, 2007 as well as in its definitive proxy statement to be filed with the SEC related to Delta's 2008 Annual Meeting of Stockholders. You can find information about Northwest's executive officers and directors in its Annual Reports on Form 10-K (including any amendments thereto), Current Reports on Form 8-K and other documents that have previously been filed with the SEC since May 31, 2007 as well as in its definitive proxy statement to be filed with the SEC related to Northwest's 2008 Annual Meeting of Stockholders. You can obtain free copies of these documents from Delta and Northwest using the contact information above.
Northwest Airlines is one of the world's largest airlines with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 1,000 cities in excess of 160 countries on six continents.
Further details regarding the Northwest/Delta merger can be found at www.newglobalairline.com.
NORTHWEST AIRLINES CORPORATION
----------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
----------------------------------------------------------------------
(Unaudited, in millions except per share amounts)
Successor Predecessor
(a)
--------- -----------
Three Three
Months Months
Ended Ended %
March 31, March 31, Incr
2008 2007 (Decr)
--------- ----------- ------
OPERATING REVENUES
Passenger $ 2,239 $2,202 1.7
Regional carrier revenues 410 292 40.4
Cargo 198 189 4.8
Other 280 190 47.4
--------- -----------
Total operating revenues 3,127 2,873 8.8
OPERATING EXPENSES
Aircraft fuel and taxes (b) 1,114 704 58.2
Salaries, wages and benefits 670 615 8.9
Aircraft maintenance materials and
repairs 221 184 20.1
Selling and marketing 193 191 1.0
Other rentals and landing fees 138 141 (2.1)
Depreciation and amortization 131 121 8.3
Aircraft rentals 93 96 (3.1)
Regional carrier expenses 205 211 (2.8)
Other unusual items (c) 3,934 - n/m
Other 481 409 17.6
--------- -----------
Total operating expenses 7,180 2,672 n/m
OPERATING INCOME (LOSS) (4,053) 201
Operating margin (129.6%) 7.0%
OTHER INCOME (EXPENSE)
Interest expense, net (114) (132)
Investment income 37 31
Foreign currency gain (loss) (8) -
Other (1) -
--------- -----------
Total other income (expense) (86) (101)
--------- -----------
INCOME (LOSS) BEFORE REORGANIZATION
ITEMS AND INCOME TAXES (4,139) 100
Reorganization items, net (d) - (393)
--------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (4,139) (293)
Income tax expense (benefit) (e) - (1)
--------- -----------
NET INCOME (LOSS) $(4,139) $ (292)
========= ===========
Earnings (Loss) per common share: (f)
Basic and Diluted $(15.78) $(3.34)
Average shares used in computation:
Basic and Diluted 262 87
See accompanying consolidated notes.
NORTHWEST AIRLINES CORPORATION
CONSOLIDATED NOTES
----------------------------------------------------------------------
(Unaudited)
(a) Northwest Airlines Corporation ("NWA Corp." or the "Company") is a
holding company whose operating subsidiary is Northwest Airlines,
Inc. ("Northwest"). In September 2005, NWA Corp. and Northwest,
along with certain direct and indirect subsidiaries filed Chapter
11 petitions for relief in the U.S. Bankruptcy Court for the
Southern District of New York. On May 31, 2007, the Company
emerged from Chapter 11.
In connection with its emergence from Chapter 11, the Company
adopted fresh-start reporting in accordance with American
Institute of Certified Public Accountants' Statement of Position
90-7, Financial Reporting by Entities in Reorganization under the
Bankruptcy Code ("SOP 90-7"). References to "Successor" refer to
NWA Corp. on or after June 1, 2007, after giving effect to the
application of fresh-start reporting. References to "Predecessor"
refer to NWA Corp. prior to June 1, 2007. Thus, the consolidated
financial statements prior to June 1, 2007 reflect results based
upon the historical cost basis of the Company while the post-
emergence consolidated financial statements reflect the new basis
of accounting incorporating the fair value adjustments made in
recording the effects of fresh-start reporting. Therefore, the
post-emergence periods are not comparable to the pre-emergence
periods. However, for discussions on the results of operations,
the Company has compared the Successor Company's results for the
three months ended March 31, 2008 to the Predecessor Company's
results for the three months ended March 31, 2007.
In addition to the fair value adjustments required for fresh-start
reporting, the Company changed its policies pertaining to the
accounting for frequent flyer obligations and breakage of
passenger tickets. Additionally, on April 24, 2007, Mesaba
Aviation, Inc. was acquired by the Company and became a wholly-
owned consolidated subsidiary. See the table of year-over-year
variance reconciliations for further details.
(b) During the three months ended March 31, 2008, the Company recorded
$13.4 million in mark-to-market losses related to fuel derivative
contracts that will settle during the remainder of 2008. During
the three months ended March 31, 2007, the Company recorded $28
million in mark-to-market gains related to fuel derivative
contracts that settled in subsequent periods during 2007.
(c) During the first quarter of 2008, the Company recorded a non-cash
goodwill impairment charge of $3.9 billion to reduce the book
value of Northwest's equity to its implied fair value as of the
merger announcement date. This goodwill impairment charge is a
preliminary estimate and subject to further analysis during the
second quarter. As required under Generally Accepted Accounting
Principles ("GAAP"), the implied fair value considered the 1.25
exchange ratio and the five-day average trading value of Delta's
common stock around the merger announcement date. This expense
was recorded in other operating expense. Additionally, the
Company recorded $17.2 million in impairment charges primarily
related to Boeing 747-200 freighter aircraft during the first
quarter of 2008. This impairment was recorded in depreciation
expense.
(d) In connection with its bankruptcy proceedings and adoption of
fresh-start reporting, the Company recorded largely non-cash
reorganization income (expense) and, in accordance with GAAP,
these items are separately classified in the Condensed
Consolidated Statements of Operations.
(e) The Company did not record a tax benefit related to our reported
first quarter 2008 pre-tax loss due to the volatility of the
price of fuel and its impact on our full year outlook; to record
a tax benefit, the Company would be required to have a high
degree of confidence that it would record a full year profit.
(f) Successor EPS. In accordance with Statement of Financial
Accounting Standards No. 128, Earnings per Share ("SFAS No.
128"), basic and diluted earnings per share were computed by
dividing net income (loss) by the weighted-average number of
shares of common stock outstanding for the applicable reporting
period presented. SFAS No. 128 requires that the entire 234.4
million shares to be issued to holders of unsecured and guaranty
claims pursuant to the Plan of Reorganization be considered
outstanding for purposes of calculating earnings per share as
these shares will ultimately be issued to unsecured creditors
once the allocation of disputed unsecured claims is completed.
Diluted earnings (loss) per share includes the dilutive effects of
stock options and restricted stock. To the extent stock options
and restricted stock are anti-dilutive, they are excluded from
the calculation of diluted earnings (loss) per share.
Predecessor EPS. Predecessor basic earnings per share was computed
based on the Predecessor's weighted average shares outstanding.
Dilutive earnings per share excluded securities related to the
Company's Series C Preferred Stock and convertible debt because
the Company recorded a net loss for the period.
NORTHWEST AIRLINES CORPORATION
----------------------------------------------------------------------
RECONCILIATION OF YEAR-OVER-YEAR VARIANCES
----------------------------------------------------------------------
(Unaudited, in millions)
As a result of the adoption of fresh-start reporting, the Company's
financial statements on or after June 1, 2007 are not comparable
with its pre-emergence financial statements because they are, in
effect, those of a new entity. In addition to the fair value
adjustments required for fresh-start reporting, the Company changed
its policies pertaining to the accounting for frequent flyer
obligations and breakage of passenger tickets. The effects of fresh-
start reporting, the policy changes and the impact of exit-related
stock compensation expense on the Company's Condensed Consolidated
Statement of Operations are itemized below in column (A).
During the first quarter of 2008, the Company recorded a non-cash
goodwill impairment charge of $3.9 billion to reduce the book value
of Northwest's equity to its implied fair value as of the merger
announcement date. As required under GAAP, the implied fair value
considered the 1.25 exchange ratio and the five-day average trading
value of Delta's common stock around the merger announcement date.
This expense was recorded in other operating expense. Additionally,
the Company recorded $17.2 million in impairment charges primarily
related to Boeing 747-200 freighter aircraft during the first
quarter of 2008. This impairment was recorded in depreciation
expense. The impact on the Company's year-over-year variance as a
result of these charges is itemized in column (B).
On April 24, 2007, Mesaba Aviation, Inc. was acquired by the Company
and became a wholly-owned consolidated subsidiary. The impact on the
Company's year-over-year variance as a result of this consolidation
is itemized in column (C).
Excluding the items listed above, the comparable year-over-year
operating performance variances are itemized in column (D). System
passenger revenue increased 7.1 percent due primarily to a 5.0
percent improvement on unit revenue. Other revenue increased
primarily due to favorable partner and charter revenues.
Successor Predecessor
------------ ------------
Three Months Three Months
Ended Ended Total
March 31, March 31, Incr
2008 2007 (Decr)
------------ ------------ --------
OPERATING REVENUES
Passenger $ 2,239 $ 2,202 $ 37
Regional carrier revenues 410 292 118
Cargo 198 189 9
Other 280 190 90
------------ ------------ --------
Total operating revenues 3,127 2,873 254
OPERATING EXPENSES
Aircraft fuel and taxes 1,114 704 410
Salaries, wages and benefits 670 615 55
Aircraft maintenance
materials and repairs 221 184 37
Selling and marketing 193 191 2
Other rentals and landing
fees 138 141 (3)
Depreciation and
amortization 131 121 10
Aircraft rentals 93 96 (3)
Regional carrier expenses 205 211 (6)
Other unusual items 3,934 - 3,934
Other 481 409 72
------------ ------------ --------
Total operating expenses 7,180 2,672 4,508
OPERATING INCOME (LOSS) (4,053) 201 (4,254)
Operating margin (129.6%) 7.0% (136.6)pts.
Operating margin excluding
impairment charges (3.8%) 7.0% (10.8)pts.
---------------------------------------------------------------------
REPORTED NET INCOME / (LOSS) EXCLUDING NON-RECURRING ITEMS
----------------------------------------------------------------------
(Unaudited, in millions)
Net income / (loss) (as
reported) $(4,139.1) $(291.7)
Excluding:
Reorganization items, net - (393.2)
Impairment Charges (3,934.6) -
Mark-to-market on fuel
derivatives to be settled
in future periods (13.4) 28.5
------------ ------------
Adjusted net income $ (191.1) $ 73.0
============ ============
(A) (B) (C) (D)
--------------------------------------------
Increase (Decrease) Due To:
--------------------------------------------
Fresh-Start/ Mesaba Total
Exit-Related Impairment Net of Incr
Stk Comp. Exp. Charges Elim Operations (Decr)
-------------------------------------------- --------
OPERATING
REVENUES
Passenger $(26) $ - $ - $ 63 $ 37
Regional carrier
revenues 4 - - 114 118
Cargo - - - 9 9
Other 24 - 1 65 90
-------------------------------------------- --------
Total operating
revenues 2 - 1 251 254
OPERATING
EXPENSES
Aircraft fuel
and taxes - - 1 409 410
Salaries, wages
and benefits 8 - 35 12 55
Aircraft
maintenance
materials and
repairs - - 10 27 37
Selling and
marketing - - - 2 2
Other rentals
and landing
fees - - 5 (8) (3)
Depreciation and
amortization (2) - 2 10 10
Aircraft rentals - - - (3) (3)
Regional carrier
expenses - - (54) 48 (6)
Other unusual
items - 3,934 - - 3,934
Other - - 11 61 72
-------------------------------------------- --------
Total operating
expenses 6 3,934 10 558 4,508
OPERATING INCOME
(LOSS) (4) (3,934) (9) (307) (4,254)
Operating margin
Operating margin
excluding
impairment
charges
----------------------------------------------------------------------
REPORTED NET INCOME / (LOSS) EXCLUDING NON-RECURRING ITEMS
----------------------------------------------------------------------
(Unaudited, in millions)
Net income /
(loss) (as
reported)
Excluding:
Reorganization
items, net
Impairment
Charges
Mark-to-market
on fuel
derivatives to
be settled in
future periods
Adjusted net
income
NORTHWEST AIRLINES CORPORATION
----------------------------------------------------------------------
PASSENGER AND REGIONAL CARRIER REVENUES AND STATISTICAL RESULTS
----------------------------------------------------------------------
(Unaudited)
Three Months Ended Percent
March 31, Change
---------------------- -------
2008 2007
-------- --------
Scheduled Service -
Consolidated: (1)
Available seat miles
(ASM) (millions) 23,359 22,893 2.0
Revenue passenger miles
(RPM) (millions) 19,214 18,618 3.2
Passenger load factor 82.3 % 81.3 % 1.0 pts.
Revenue passengers
(millions) 15.9 15.6 1.9
Passenger revenue per RPM
(yield) 13.78 cents 13.39 cents 2.9
Passenger revenue per RPM
(yield) excluding fresh-
start 13.90 cents 13.39 cents 3.8
Passenger revenue per ASM
(RASM) 11.34 cents 10.89 cents 4.1
Passenger revenue per ASM
(RASM) excluding fresh-
start 11.43 cents 10.89 cents 5.0
Fuel gallons consumed -
Consolidated (millions)
(1) 420 419 0.2
Scheduled Service -
Mainline: (2)
Available seat miles
(ASM) (millions) 21,144 21,252 (0.5)
Revenue passenger miles
(RPM) (millions) 17,621 17,492 0.7
Passenger load factor 83.3 % 82.3 % 1.0 pts.
Revenue passengers
(millions) 12.3 12.9 (4.7)
Passenger revenue per RPM
(yield) 12.71 cents 12.59 cents 1.0
Passenger revenue per RPM
(yield) excluding fresh-
start 12.85 cents 12.59 cents 2.1
Passenger revenue per ASM
(RASM) 10.59 cents 10.36 cents 2.2
Passenger revenue per ASM
(RASM) excluding fresh-
start 10.71 cents 10.36 cents 3.4
Fuel gallons consumed -
Mainline (millions) (2) 367 378 (2.9)
----------------------------------------------------------------------
PASSENGER AND REGIONAL CARRIER REVENUES
----------------------------------------------------------------------
(Unaudited)
Domestic Pacific Atlantic Mainline
----------- ------- -------- --------
As reported:
-----------------------
First Quarter 2008
Passenger revenues
(in millions) $1,392 $ 539 $ 308 $2,239
Increase (Decrease)
from 2007:
Passenger revenues (1.6)% 4.7 % 13.2 % 1.7 %
Scheduled service
ASMs (capacity) (3.6)% (2.4)% 16.4 % (0.5)%
Scheduled service
RPMs (traffic) (0.6)% (1.7)% 11.3 % 0.7 %
Passenger load factor 2.5 pts. 0.7 pts. (3.6)pts. 1.0 pts.
Yield (1.1)% 6.6 % 1.7 % 0.9 %
Passenger RASM 2.0 % 7.5 % (2.8)% 2.2 %
Excluding fresh-start:
-----------------------
First Quarter 2008
Passenger revenues
(in millions) $1,396 $ 557 $ 312 $2,265
Increase (Decrease)
from 2007:
Passenger revenues (1.3)% 8.2 % 14.7 % 2.9 %
Yield (0.8)% 10.1 % 3.1 % 2.1 %
Passenger RASM 2.3 % 11.0 % (1.5)% 3.4 %
Consolidated
------------
As reported:
----------------------------------------------------------
First Quarter 2008
Passenger revenues (in millions) $2,649
Increase (Decrease) from 2007:
Passenger revenues 6.2 %
Scheduled service ASMs (capacity) 2.0 %
Scheduled service RPMs (traffic) 3.2 %
Passenger load factor 1.0 pts.
Yield 2.9 %
Passenger RASM 4.1 %
Excluding fresh-start:
----------------------------------------------------------
First Quarter 2008
Passenger revenues (in millions) $2,671
Increase (Decrease) from 2007:
Passenger revenues 7.1 %
Yield 3.8 %
Passenger RASM 5.0 %
(1) Consolidated statistics include Northwest Airlink regional
carriers.
(2) Mainline statistics exclude Northwest Airlink regional carriers,
which is consistent with how the Company reports statistics to
the Department of Transportation ("DOT").
NORTHWEST AIRLINES CORPORATION
----------------------------------------------------------------------
MAINLINE OPERATING STATISTICAL RESULTS (1)
----------------------------------------------------------------------
(Unaudited)
Three Months Ended Percent
March 31, Change
-------------------- -------
2008 2007
------- -------
Total operating ASM (millions) 21,269 21,268 -
Passenger service operating
expense per total ASM (2) (3) 12.24 cents 10.32 cents 18.6
Mainline fuel expense per total
ASM 4.54 cents 2.95 cents 53.9
Mainline fuel expense per total
ASM, excluding mark-to-market
adjustments related to fuel
derivative contracts that settle
in future periods 4.50 cents 3.08 cents 46.1
Cargo ton miles (CTM) (millions) 458 457 0.2
Cargo revenue per ton mile 43.10 cents 41.40 cents 4.1
Fuel gallons consumed (millions) 367 378 (2.9)
Average fuel cost per gallon,
excluding fuel taxes 279.74 cents 177.13 cents 57.9
Average fuel cost per gallon,
excluding fuel taxes and mark-
to-market adjustments related to
fuel derivative contracts that
settle in future periods 276.54 cents 184.70 cents 49.7
Number of operating aircraft at
end of period 348 375 (7.2)
Full-time equivalent employees at
end of period 30,053 30,008 0.1
(1) Mainline statistics exclude Northwest Airlink regional carriers,
which is consistent with how the Company reports statistics to
the DOT.
(2) This financial measure excludes non-passenger service expenses.
The Company believes that providing financial measures directly
related to passenger service operations allows investors to
evaluate and compare the Company's core operating results to
those of the industry.
(3) Passenger service operating expense excludes the following items
unrelated to passenger service operations, net of eliminations
where applicable:
Three Months Ended
March 31,
--------------------
(In millions) 2008 2007
------- -------
Goodwill impairment $ 3,917 $ -
Regional carrier expenses 413 274
Freighter operations 182 134
MLT Inc. 44 55
Other 19 16
NORTHWEST AIRLINES CORPORATION
----------------------------------------------------------------------
SELECTED BALANCE SHEET DATA
----------------------------------------------------------------------
(Unaudited, in millions)
Successor Successor
--------------- ----------------
March 31, December 31,
2008 2007
--------------- ----------------
Cash and cash equivalents $ 3,187 $ 2,939
Unrestricted short-term
investments 40 95
Restricted cash, cash equivalents
and short-term investments 484 725
Total assets 21,032 24,517
Total debt and capital leases,
including current maturities 7,248 7,088
Total liabilities 17,746 17,140
Total common stockholders' equity
(deficit) 3,286 7,377
----------------------------------------------------------------------
SECOND QUARTER 2008 AND 2008 FULL YEAR GUIDANCE
----------------------------------------------------------------------
2Q 2008
Forecast 2008 Forecast
(year-over-year (year-over-year
change) change)
--------------- ----------------
Scheduled service ASMs (capacity)
Domestic (1) (7%) - (8%) (7.5%) - (8.5%)
International 9% - 10% 8% - 9%
Mainline (1) 0% - (1%) (1%) - (2%)
Regional 45% - 50% 50% - 55%
Consolidated (2) 3% - 4% 2% - 3%
Passenger service operating
expense per total ASM excluding
fuel (1) 5% - 6% 2% - 3%
2Q 2008 2008 Forecast
Forecast
--------------- ----------------
Average fuel cost per gallon,
excluding fuel taxes (1)(3) $ 3.43 $ 3.22
Fuel gallons consumed (millions) 379 1,497
(1) Mainline statistics exclude Northwest Airlink regional carriers,
which is consistent with how the Company reports statistics to
the DOT.
(2) Consolidated statistics include Northwest Airlink regional
carriers.
(3) Average fuel cost per gallon based on the forward fuel curve as of
April 21, 2008.
----------------------------------------------------------------------
ESTIMATED FRESH-START AND EXIT-RELATED STOCK COMPENSATION EXPENSE
----------------------------------------------------------------------
(In millions)
Inc (Decr)
--------------
2Q 2008
Estimate
--------------
OPERATING REVENUES
Passenger and regional carrier
revenues $ (15)
Other 16
--------------
Total operating revenues 1
OPERATING EXPENSES
Salaries, wages and benefits 3
Selling and marketing -
Depreciation and amortization (1)
--------------
Total operating expenses 2
OPERATING INCOME (LOSS) $ (1)
SOURCE: Northwest Airlines
Northwest Airlines
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Companies: Northwest Airlines Corp. (NWA)
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