Commission
file number 1-5424
|
DELTA AIR LINES, INC.
|
(Exact
name of registrant as specified in its
charter)
|
Delaware
|
58-0218548
|
||
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
Post
Office Box 20706
Atlanta, Georgia
|
30320-6001
|
||
(Address
of principal executive offices)
|
(Zip
Code)
|
Title
of each class
|
Name
of each exchange on which
registered
|
|
None
|
Large
accelerated filer o
|
Accelerated
filer
x
|
Non-accelerated
filer o
|
Page
|
||
1
|
||
1
|
||
|
|
|
|
||
1
|
||
1
|
||
2
|
||
3
|
||
4
|
||
4
|
||
4
|
||
7
|
||
8
|
||
9
|
||
9
|
||
13
|
||
14
|
||
15
|
||
15
|
||
16
|
||
16
|
||
17
|
||
|
||
|
||
|
||
18
|
||
19
|
||
21
|
||
21
|
||
21
|
||
22
|
||
24
|
||
24
|
||
26
|
||
30
|
||
33
|
||
38
|
||
41
|
||
42
|
||
ITEM 7A. |
43
|
|
ITEM 8. |
43
|
|
ITEM 9. |
43
|
|
ITEM 9A. |
43
|
|
ITEM 9B. |
45
|
|
|
||
45
|
||
45
|
||
45
|
||
45
|
||
45
|
||
|
||
45
|
||
F-1
|
|
|
Gallons
|
|
|
|
Average
|
|
Percentage
of
|
|
|
Consumed
|
|
Cost (1)
|
|
Price
Per
|
|
Total
Operating
|
Year
|
|
(Millions)
|
|
(Millions)
|
|
Gallon (1)
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
2006
|
|
2,111
|
|
$4,319
|
|
$2.04
|
|
25%
|
2005
|
|
2,492
|
|
4,271
|
|
1.71
|
|
23%
|
2004
|
|
2,527
|
|
2,924
|
|
1.16
|
|
16%
|
(1) |
Net
of fuel hedge (losses) gains under our fuel hedging program of ($108)
million and $105 million for 2006 and 2004, respectively. We had
no fuel
hedge contracts in 2005.
|
Stage
|
Description
of
Event
Leading to
Activation
|
International
Passenger
Aircraft
Allocated
|
Number
of
Aeromedical
Aircraft
Allocated
|
Total
Aircraft by
Stage
|
||||
I
|
Minor
Crisis
|
7
|
N/A
|
7
|
||||
II
|
Major
Theater Conflict
|
13
|
13
|
26
|
||||
III
|
Total
National Mobilization
|
43
|
44
|
87
|
Employee
Group
|
Approximate
Number
of
Employees
Represented
|
Union
|
Date
on which Collective
Bargaining
Agreement
Becomes
Amendable
|
|||
Delta
Pilots
|
5,810
|
ALPA
|
December
31, 2009
|
|||
Delta
Flight Superintendents
|
170
|
PAFCA
|
January
1, 2010
|
|||
Comair
Pilots
|
1,345
|
ALPA
|
May
21, 2007(1)
|
|||
Comair
Maintenance Employees
|
535
|
IAM
|
December
31, 2010
|
|||
Comair
Flight Attendants
|
880
|
IBT
|
December
31, 2010
|
(1)
|
On
February 12, 2007, Comair and ALPA reached a tentative agreement
to reduce
Comair’s pilot labor costs. The agreement is subject to ratification by
Comair pilots and Bankruptcy Court approval. If ratified and approved,
the
agreement would become effective March 2, 2007 and become
amendable on
March 2, 2011.
|
· |
our
ability to prosecute, confirm and consummate our proposed
Plan;
|
· |
the
actions and decisions of our creditors and other third parties who
have
interests in our Chapter 11 proceedings that may be inconsistent with
our plans;
|
· |
our
ability to obtain court approval with respect to motions in the
Chapter 11 proceedings prosecuted from time to time;
|
· |
our
ability to obtain and maintain normal terms with vendors and service
providers;
|
· |
our
ability to maintain contracts that are critical to our operations;
and
|
· |
risks
associated with third parties seeking and obtaining court approval
to
terminate or shorten the exclusivity period for us to confirm our
proposed
Plan, to appoint a Chapter 11 trustee or to convert the cases to
Chapter 7
cases.
|
· |
require
us
to dedicate a substantial portion of cash flow from operations to
the
payment of principal, and interest on, indebtedness, thereby reducing
the
funds available for other purposes;
|
· |
make
us
more vulnerable to economic downturns, adverse industry conditions
or
catastrophic external events;
|
· |
limit
our ability to withstand competitive
pressures;
|
· |
reduce
our flexibility in planning for or responding to changing business
and
economic conditions; and/or
|
· |
place
us
at a competitive disadvantage to competitors that have relatively
less
debt than we have.
|
Current
Fleet
|
|||||||||
Aircraft
Type
|
Owned
|
Capital
Lease
|
Operating
Lease
|
Total
|
Average
Age
|
||||
B-737-800
|
71
|
—
|
—
|
71
|
6.2
|
||||
B-757-200
|
68
|
32
|
21
|
121
|
15.3
|
||||
B-767-300
|
4
|
1
|
19
|
24
|
16.4
|
||||
B-767-300ER
|
50
|
—
|
9
|
59
|
10.9
|
||||
B-767-400ER
|
21
|
—
|
—
|
21
|
5.8
|
||||
B-777-200ER
|
8
|
—
|
—
|
8
|
6.9
|
||||
MD-88
|
63
|
32
|
25
|
120
|
16.5
|
||||
MD-90
|
16
|
—
|
—
|
16
|
11.1
|
||||
CRJ-100
|
20
|
—
|
83
|
103
|
9.3
|
||||
CRJ-200
|
21
|
—
|
9
|
30
|
4.2
|
||||
CRJ-700
|
27
|
—
|
—
|
27
|
3.4
|
||||
Total
|
369
|
65
|
166
|
600
|
11.4
|
Delivery
in Calendar Years Ending
|
||||||
Aircraft
on Firm Order
|
2007
|
2008
|
2009
|
2010
|
Total
|
|
B-737-700
|
—
|
7
|
3
|
—
|
10
|
|
B-737-800
|
10
|
7
|
14
|
19
|
50
|
(1) |
B-777-200LR
|
—
|
2
|
3
|
—
|
5
|
|
Total(2)
|
10
|
16
|
20
|
19
|
65
|
(1) |
We
have definitive agreements, which were approved by the Bankruptcy
Court,
with third parties to sell 48 B-737-800 aircraft immediately after
those
aircraft are delivered to us by the manufacturer starting in 2007.
These
aircraft are included in the above table because we continue to have
a
contractual obligation to purchase these aircraft from the
manufacturer.
|
(2) |
See
Note 8 of the Notes to the Consolidated Financial Statements for
information about (a) an agreement we entered into in January 2007
to
purchase 30 CRJ-900 aircraft, with options to acquire an additional
30 CRJ-900 aircraft, and (b) letters of intent we have entered into
to
lease 13 B-757-200ER aircraft from third
parties.
|
Delivery
in Calendar Years Ending
|
|||||||||||||||||||
Aircraft
on Option(1)
|
2008
|
2009
|
2010
|
After
2010
|
Total
|
Rolling
Options
|
|||||||||||||
B-737-800
|
—
|
—
|
14
|
46
|
60
|
120
|
|||||||||||||
B-767-300/300ER
|
1
|
2
|
2
|
5
|
10
|
2
|
|||||||||||||
B-767-400
|
1
|
2
|
2
|
13
|
18
|
—
|
|||||||||||||
B-777-200LR
|
1
|
—
|
2
|
8
|
11
|
13
|
|||||||||||||
CRJ-200
|
13
|
15
|
5
|
—
|
33
|
—
|
|||||||||||||
CRJ-700
|
11
|
19
|
5
|
—
|
35
|
—
|
|||||||||||||
Total
|
27
|
38
|
30
|
72
|
167
|
135
|
(1) |
Aircraft
options have scheduled delivery slots, while rolling options replace
options and are assigned delivery slots as options expire or are
exercised. See Note 8 of the Notes to the Consolidated Financial
Statements for information about an agreement we entered into in
January
2007 to purchase 30 CRJ-900 aircraft, with options to acquire an
additional 30 aircraft.
|
ITEM 5. |
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY
SECURITIES
|
High
|
Low
|
||||||
Fiscal
2005
|
|||||||
First
Quarter
|
$
|
7.78
|
$
|
3.80
|
|||
Second
Quarter
|
4.39
|
2.46
|
|||||
Third
Quarter
|
4.10
|
0.68
|
|||||
Fourth
Quarter (through October 13, 2005)
|
0.87
|
0.58
|
|||||
Fourth
Quarter (from October 13, 2005)
|
0.89
|
0.50
|
|||||
Fiscal
2006
|
|||||||
First
Quarter
|
$
|
0.88
|
$
|
0.30
|
|||
Second
Quarter
|
0.81
|
0.50
|
|||||
Third
Quarter
|
1.78
|
0.63
|
|||||
Fourth
Quarter
|
1.77
|
0.96
|
(in
millions, except share data)
|
2006
(2)
|
2005
(3)
|
2004
(4)
|
2003
(5)
|
2002
(6)
|
|||||||||||
Operating
revenues
|
$
|
17,171
|
$
|
16,191
|
$
|
15,235
|
$
|
14,308
|
$
|
13,866
|
||||||
Operating
expenses
|
17,113
|
18,192
|
18,543
|
15,093
|
15,175
|
|||||||||||
Operating
income (loss)
|
58
|
(2,001
|
)
|
(3,308
|
)
|
(785
|
)
|
(1,309
|
)
|
|||||||
Interest
expense, net(7)
|
(801
|
)
|
(973
|
)
|
(787
|
)
|
(721
|
)
|
(629
|
)
|
||||||
Miscellaneous
income, net(8)
|
(19
|
)
|
(1
|
)
|
94
|
317
|
(22
|
)
|
||||||||
Gain
(loss) on extinguishment of debt, net
|
—
|
—
|
9
|
—
|
(42
|
)
|
||||||||||
Loss
before reorganization items, net
|
(762
|
)
|
(2,975
|
)
|
(3,992
|
)
|
(1,189
|
)
|
(2,002
|
)
|
||||||
Reorganization
items, net
|
(6,206
|
)
|
(884
|
)
|
—
|
—
|
—
|
|||||||||
Loss
before income taxes
|
(6,968
|
)
|
(3,859
|
)
|
(3,992
|
)
|
(1,189
|
)
|
(2,002
|
)
|
||||||
Income
tax benefit (provision)
|
765
|
41
|
(1,206
|
)
|
416
|
730
|
||||||||||
Net
loss
|
(6,203
|
)
|
(3,818
|
)
|
(5,198
|
)
|
(773
|
)
|
(1,272
|
)
|
||||||
Preferred
stock dividends
|
(2
|
)
|
(18
|
)
|
(19
|
)
|
(17
|
)
|
(15
|
)
|
||||||
Net
loss attributable to common shareowners
|
$
|
(6,205
|
)
|
$
|
(3,836
|
)
|
$
|
(5,217
|
)
|
$
|
(790
|
)
|
$
|
(1,287
|
)
|
|
Basic
and diluted loss per share
|
$
|
(31.58
|
)
|
$
|
(23.75
|
)
|
$
|
(41.07
|
)
|
$
|
(6.40
|
)
|
$
|
(10.44
|
)
|
|
Dividends
declared per common share
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
0.05
|
$
|
0.10
|
2006
(2)
|
|
2005
(3)
|
|
2004
(4)
|
|
2003
(5)
|
|
2002
(6)
|
||||||||
Total
assets (millions)
|
$ | 19,622
|
$ | 20,039 | $ | 21,801 | $ | 25,939 | $ | 24,720 | ||||||
Long-term
debt and capital leases (excluding current maturities) (millions)
|
$
|
6,509
|
$
|
6,557
|
$
|
13,005
|
$
|
11,538
|
$
|
10,174
|
||||||
Shareowners’
(deficit) equity (millions)
|
$
|
(13,593
|
)
|
$
|
(9,895
|
)
|
$
|
(5,796
|
)
|
$
|
(659
|
)
|
$
|
893
|
||
Weighted
average shares outstanding
|
196,496,349
|
161,532,291
|
127,033,234
|
123,397,129
|
123,292,670
|
|||||||||||
Revenue
passengers enplaned (thousands)
|
106,649
|
118,853
|
110,000
|
104,452
|
107,048
|
|||||||||||
Available
seat miles (millions)
|
147,995
|
156,793
|
151,679
|
139,505
|
145,232
|
|||||||||||
Revenue
passenger miles (millions)
|
116,133
|
119,954
|
113,311
|
102,301
|
104,422
|
|||||||||||
Operating
revenue per available seat mile
|
11.60
|
¢
|
10.33
|
¢
|
10.04
|
¢
|
10.26
|
¢
|
9.55
|
¢
|
||||||
Passenger
revenue per available seat mile
|
10.56
|
¢
|
9.33
|
¢
|
9.09
|
¢
|
9.17
|
¢
|
8.69
|
¢
|
||||||
Passenger
mile yield
|
13.46
|
¢
|
12.19
|
¢
|
12.17
|
¢
|
12.73
|
¢
|
12.26
|
¢
|
||||||
Operating
cost per available seat mile
|
11.56
|
¢
|
11.60
|
¢
|
12.23
|
¢
|
10.82
|
¢
|
10.45
|
¢
|
||||||
Passenger
load factor
|
78.5
|
%
|
76.5
|
%
|
74.7
|
%
|
73.3
|
%
|
71.9
|
%
|
||||||
Breakeven
passenger load factor
|
78.2
|
%
|
87.0
|
%
|
92.6
|
%
|
77.8
|
%
|
79.3
|
%
|
||||||
Fuel
gallons consumed (millions)
|
2,111
|
2,492
|
2,527
|
2,370
|
2,514
|
|||||||||||
Average
price per fuel gallon, net of
hedging
activity
|
$
|
2.04
|
$
|
1.71
|
$
|
1.16
|
$
|
0.82
|
$
|
0.67
|
||||||
Full-time
equivalent employees, end of period
|
51,300
|
55,600
|
69,150
|
70,600
|
75,100
|
(1) |
Includes
the operations under contract carrier agreements with unaffiliated
regional air carriers:
|
- |
Chautauqua
Airlines, Inc. and SkyWest Airlines, Inc. for all periods
presented,
|
- |
Shuttle
America Corporation for the year ended December 31, 2006 and
from
September 1 through December 31,
2005,
|
-
|
Atlantic
Southeast Airlines for the year ended December 31, 2006 and from
September
8 through December 31,
2005,
|
-
|
Freedom
Airlines, Inc. for the year ended December 31, 2006 and from
October 1,
2005 through December 31, 2005,
and
|
-
|
Flyi,
Inc (formerly Atlantic Coast Airlines) from January 1, 2002 through
November 1, 2004.
|
(2) |
Includes
a $6.2 billion charge or $31.58 diluted EPS for reorganization costs;
$310
million of noncash charges or $1.58 diluted EPS associated with certain
accounting adjustments; and a $765 million income tax benefit or
$3.89
diluted EPS (see Item 7).
|
(3) |
Includes
an $888 million charge or $5.49 diluted EPS for restructuring, asset
writedowns, pension settlements and related items, net and an $884
million
charge or $5.47 diluted EPS for reorganization costs (see Item
7).
|
(4) |
Includes
a $1.9 billion charge or $14.76 diluted EPS related to the impairment
of
intangible assets; a $1.2 billion charge or $9.51 diluted EPS for
deferred
income tax valuation; a $123 million gain, or $0.97 diluted EPS from
the
sale of investments; and a $41 million gain or $0.33 diluted EPS
from
restructuring, asset writedowns, pension settlements and related
items,
net (see Item 7).
|
(5) |
Includes
a $268 million charge ($169 million net of tax, or $1.37 diluted
EPS) for
restructuring, asset writedowns, pension settlements and related
items,
net; a $398 million gain ($251 million net of tax, or $2.03 diluted
EPS)
for reimbursements received under the Emergency Wartime Supplemental
Appropriations Act; compensation; and a $304 million gain ($191 million
net of tax, or $1.55 diluted EPS) for certain other income and expense
items.
|
(6) |
Includes
a $439 million charge ($277 million net of tax, or $2.25 diluted
EPS) for
restructuring, asset writedowns, and related items, net; a $34 million
gain ($22 million net of tax, or $0.17 diluted EPS) for compensation
under
the Air Transportation Safety and System Stabilization Act; and a
$94
million charge ($59 million net of tax, or $0.47 diluted EPS) for
certain
other income and expense items.
|
(7) |
Includes
interest income.
|
(8) |
Includes
(losses) gains from the sale of investments and fuel hedging
activity.
|
ITEM 7. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
· |
simplifying
our fleet, including retiring four aircraft
types;
|
· |
right-sizing
capacity to better meet customer demand, including utilizing smaller
aircraft in domestic operations, which reduced domestic mainline
capacity
by 16% in 2006 compared to 2005;
|
· |
growing
our international presence by shifting wide-body aircraft from domestic
to
international operations, which increased international capacity
by 21% in
2006 compared to 2005; and
|
· |
increasing
point-to-point flying and right-sizing and simplifying our domestic
hubs
to achieve a greater local traffic
mix.
|
· |
restructuring
our fleet by rejecting, returning or selling approximately 188 aircraft;
and
|
· |
making
cost-saving progress on many facility agreements, including a review
of
approximately 55 locations.
We
have rejected or restructured leases at various airports, including
Dallas, Orlando and Tampa.
|
· |
reached
an agreement with the Air Line Pilots Association, International
(“ALPA”)
under which we expect to receive approximately $280 million in average
annual pilot labor cost savings between June 1, 2006 and December
31, 2009
from changes in pilot pay rates, benefits and work rules. This excludes
savings we will achieve from the termination of the primary qualified
defined benefit pension plan for pilots (“Pilot Plan”) and the related
non-qualified plans;
|
· |
implemented
plans designed to achieve more than $600 million per year in non-pilot
employment cost reductions. These cost reductions included charges
to pay
and benefits for non-pilot employees and staffing
reductions;
|
· |
reached
agreements with committees representing our retired pilots and retired
non-pilot employees that provide us with approximately $50 million
in
annual savings from changes to retiree healthcare benefit
coverage;
|
· |
advocated
successfully for pension reform legislation, culminating in the Pension
Protection Act. As a result, we intend to preserve our defined benefit
pension plan for active and retired non-pilot
employees;
|
· |
reached
agreement with the Pension Benefit Guaranty Corporation (the “PBGC”)
regarding the termination of the Pilot Plan;
and
|
· |
implemented
an enhanced profit-sharing plan that will allow employees to share
in our
future success.
|
· |
Leveraging
Network Strength to Provide Expanded International Service.
We
will continue to focus on international growth. With our
geographically-balanced hubs, we believe we are well-positioned
for international growth from the U.S. to Europe and Latin America.
In
addition, we expect our hubs will help us increase service to Africa
and
Asia.
|
· |
Maintaining
Focus on Improving the Customer Experience. Our
focus on safety will
remain our top priority. We are also committed to continuous improvement
throughout our operations to earn our customers’ preference. We have
renewed our focus on improving our product and customer service through
aircraft cabin and airport
improvements.
|
· |
Maximizing
a Streamlined and Upgraded Fleet. We
are supporting the ongoing changes to our network by bolstering our
internationally-capable mainline fleet. We plan to pursue additional
strategic improvements to our fleet by adding high-performance aircraft
that will enable us to serve new destinations with appropriate capacity.
We have announced plans to add 28 internationally capable aircraft
scheduled for delivery in 2007 through
2009.
|
· |
Capturing
the Benefit of Competitive Cost Structure. Through
initiatives undertaken during the Chapter 11 proceedings and previous
productivity initiatives, we currently have one of the lowest mainline
unit cost structures of any full service carrier. These efforts have
resulted in reduced costs throughout our organization, including
reductions in employment costs, retiree pension
and healthcare costs and aircraft fleet costs. We recognize that,
to
succeed, we must maintain the competitive unit cost structure that
we
developed through our restructuring efforts.
|
· |
Generating
Cash Flow from Operations Necessary to Fund Capital Expenditures
and
Reduce Debt.
Over an extended period following emergence from Chapter 11, we intend
to
balance long-term operating growth with overall credit improvement.
At
emergence from bankruptcy, we expect
to
have significantly reduced our total debt from pre-petition levels.
Ongoing improvements to our financial condition are, however, necessary
for us to withstand industry and economic volatility and to have
favorable, consistent access to capital markets.
|
· |
A
$112 million charge in landing fees and other rents. This adjustment
is
associated primarily with our airport facility leases at John F.
Kennedy
International Airport in New York. It resulted from historical differences
associated with recording escalating rent expense based on actual
rent
payments instead of on a straight-line basis over the lease term
as
required by Statement of Financial Accounting Standards (“SFAS”) No. 13,
“Accounting for Leases” (“SFAS
13”).
|
· |
A
$108 million net charge related to the sale of mileage credits under
our
SkyMiles frequent flyer program. This includes an $83 million decrease
in
passenger revenues, a $106 million decrease in other, net operating
revenues, and an $81 million decrease in other operating expenses.
This
net charge primarily resulted from the reconsideration of our position
with respect to the timing of recognizing revenue associated with
the sale
of mileage credits that we expect will never be redeemed for
travel.
|
· |
A
$90 million charge in salaries and related costs to adjust our
accrual for
postemployment healthcare benefits. This adjustment is due to healthcare
payments applied
to
this accrual over several years, which should have been expensed
as
incurred.
|
Year
Ended
December
31,
|
Increase
(Decrease)
|
%
Increase
(Decrease)
|
|||||||||||
(in
millions)
|
2006
|
2005
|
|||||||||||
Operating
Revenue:
|
|||||||||||||
Passenger:
|
|||||||||||||
Mainline
|
$
|
11,773
|
$
|
11,399
|
$
|
374
|
3
|
%
|
|||||
Regional
affiliates
|
3,853
|
3,225
|
628
|
19
|
%
|
||||||||
Total
passenger revenue
|
15,626
|
14,624
|
1,002
|
7
|
%
|
||||||||
Cargo
|
498
|
524
|
(26
|
)
|
(5)
|
%
|
|||||||
Other,
net
|
1,047
|
1,043
|
4
|
0
|
%
|
||||||||
Total
operating revenue
|
$
|
17,171
|
$
|
16,191
|
$
|
980
|
6
|
%
|
Year
Ended
|
Increase
(Decrease)
|
||||||||||||||||||
December
31, 2006
|
Year
Ended December 31, 2006 vs. 2005
|
||||||||||||||||||
Passenger
|
Passenger
|
Passenger
|
Load
|
||||||||||||||||
(in
millions)
|
Revenue
|
Revenue
|
RPMs
|
Yield
|
RASM
|
Factor
|
|||||||||||||
Passenger
Revenue:
|
|||||||||||||||||||
North
American passenger revenue
|
$
|
11,787
|
2%
|
|
(10)
|
%
|
14%
|
|
18%
|
|
2.8
|
||||||||
International
passenger revenue
|
3,719
|
24%
|
|
20
|
%
|
3%
|
|
2%
|
|
(0.6
|
)
|
||||||||
Charter
revenue
|
120
|
2%
|
|
(21)
|
%
|
28%
|
|
12%
|
|
(5.3
|
)
|
||||||||
Total
passenger revenue
|
$
|
15,626
|
7%
|
|
(3)
|
%
|
10%
|
|
13%
|
|
2.0
|
Year
Ended
December 31, |
Increase
|
%
Increase
|
|||||||||||
(in
millions)
|
2006
|
2005
|
(Decrease)
|
(Decrease)
|
|||||||||
Operating
Expense:
|
|||||||||||||
Aircraft
fuel
|
$
|
4,319
|
$
|
4,271
|
$
|
48
|
1
|
%
|
|||||
Salaries
and related costs
|
4,128
|
5,058
|
(930
|
)
|
(18
|
)%
|
|||||||
Contract
carrier arrangements
|
2,656
|
1,318
|
1,338
|
102
|
%
|
||||||||
Depreciation
and amortization
|
1,276
|
1,273
|
3
|
0
|
%
|
||||||||
Contracted
services
|
1,083
|
1,096
|
(13
|
)
|
(1
|
)%
|
|||||||
Passenger
commissions and other selling expenses
|
888
|
948
|
(60
|
)
|
(6
|
)%
|
|||||||
Landing
fees and other rents
|
865
|
863
|
2
|
0
|
%
|
||||||||
Aircraft
maintenance materials and outside repairs
|
735
|
776
|
(41
|
)
|
(5
|
)%
|
|||||||
Passenger
service
|
328
|
345
|
(17
|
)
|
(5
|
)%
|
|||||||
Aircraft
rent
|
316
|
541
|
(225
|
)
|
(42
|
)%
|
|||||||
Restructuring,
asset writedowns, pension settlements and related items,
net
|
13
|
888
|
(875
|
)
|
(99
|
)%
|
|||||||
Other
|
506
|
815
|
(309
|
)
|
(38
|
)%
|
|||||||
Total
operating expense
|
$
|
17,113
|
$
|
18,192
|
$
|
(1,079
|
)
|
(6
|
)%
|
· |
Workforce
Reduction.
A
$29 million charge related to our decision in 2005 to reduce staffing
by
approximately 7,000 to 9,000 jobs by December
2007, which has been substantially completed. This charge was partially
offset by a $21 million reduction in accruals associated with prior
year
workforce reduction programs.
|
· |
Pension
curtailment charge.
A
$447 million curtailment
charge related to the Pilot and Non-pilot Plans. This charge relates
to
the freeze of service accruals under the Pilot Plan effective December
31,
2004, and the impact of the planned reduction of 6,000 to 7,000 jobs
announced in November 2004 on the Non-pilot Plan (see Note 10 of
the Notes
to the Consolidated Financial
Statements).
|
· |
Pension
settlements.
$388 million in settlement charges primarily
related to the Pilot Plan due to a significant increase in pilot
retirements and lump sum distributions from plan assets (see Note
10 of
the Notes to the Consolidated Financial
Statements).
|
· |
Workforce
reduction.
A
$46 million charge related to our decision in 2005 to reduce staffing
by
approximately 7,000 to 9,000 jobs by December 2007,
which has been substantially completed. This charge was offset by
a net $3
million reduction in accruals associated with prior year workforce
reduction programs.
|
· |
Asset
charges.
A
$10 million charge related to
the removal from service of six B-737-200 aircraft prior to their
lease
expiration dates.
|
· |
Pilot
pension termination.
$2.2 billion and $801 million allowed general, unsecured pre-petition
claims in connection with our settlement agreements with the PBGC
and a
group representing retired pilots, respectively. Charges for these
claims
were offset by $1.3 billion in settlement gains associated with the
derecognition of previously recorded Pilot Plan and pilot non-qualified
plan obligations upon each plan’s termination. For additional information
regarding these settlement agreements and the termination of these
plans,
see Note 10 of the Notes to the Consolidated Financial Statements.
|
· |
Pilot
collective bargaining agreement.
A
$2.1 billion allowed general, unsecured pre-petition claim in connection
with our comprehensive agreement with ALPA reducing our pilot labor
costs.
For additional information regarding this agreement, see Note 1 of
the
Notes to the Consolidated Financial
Statements.
|
· |
Aircraft
financing renegotiations and rejections.
$1.7 billion of estimated claims associated with restructuring the
financing arrangements for 188 aircraft and the rejection
of
16 aircraft leases.
|
· |
Retiree
healthcare benefit claims.
$539 million of allowed general, unsecured pre-petition claims in
connection with agreements that we reached with committees representing
both pilot and non-pilot retired employees reducing their postretirement
healthcare benefits. For additional information regarding these
agreements, see Note 10 of the Notes to the Consolidated Financial
Statements.
|
· |
Aircraft
financing renegotiations, rejections and repossessions.
A
$611 million charge for estimated claims associated with restructuring
the
financing arrangements for seven
aircraft, the rejection of 50 aircraft leases and the repossession
of 15
aircraft.
|
· |
Debt
issuance and discount costs.
A
$163 million charge associated with the write-off of certain debt
issuance
costs and discounts in conjunction with the valuation of our
unsecured and undersecured debt.
|
· |
Facility
leases.
An
$88 million charge for estimated claims in connection with the rejection
of certain unexpired facility leases and the related bond
obligations.
|
Year
Ended
December
31,
|
Increase
|
%
Increase
|
|||||||||||
(in
millions)
|
2005
|
2004
|
(Decrease)
|
(Decrease)
|
|||||||||
Operating
Revenue:
|
|||||||||||||
Passenger:
|
|||||||||||||
Mainline
|
$
|
11,399
|
$
|
10,880
|
$
|
519
|
5
|
%
|
|||||
Regional
affiliates
|
3,225
|
2,910
|
315
|
11
|
%
|
||||||||
Total
passenger revenue
|
14,624
|
13,790
|
834
|
6
|
%
|
||||||||
Cargo
|
524
|
500
|
24
|
5
|
%
|
||||||||
Other,
net
|
1,043
|
945
|
98
|
10
|
%
|
||||||||
Total
operating revenue
|
$
|
16,191
|
$
|
15,235
|
$
|
956
|
6
|
%
|
|
Year
Ended
December 31, 2005 |
Increase
(Decrease)
Year
Ended December 31, 2005 vs.
2004
|
|
||||||||||||||||
|
|
Passenger
|
|
Passenger
|
|
|
|
|
|
Passenger
|
|
Load
|
|
||||||
(in
millions)
|
|
Revenue
|
|
Revenue
|
|
RPMs
|
|
Yield
|
|
RASM
|
|
Factor
|
|||||||
Passenger
Revenue:
|
|||||||||||||||||||
North
American passenger revenue
|
$
|
11,503
|
4
|
%
|
4
|
%
|
—
|
3
|
%
|
2.2
|
|||||||||
International
passenger revenue
|
3,003
|
17
|
%
|
13
|
%
|
4
|
%
|
4
|
%
|
—
|
|||||||||
Charter
revenue
|
118
|
(2)
|
%
|
(25)
|
%
|
30
|
%
|
20
|
%
|
(3.6
|
)
|
||||||||
Total
passenger revenue
|
$
|
14,624
|
6
|
%
|
6
|
%
|
—
|
3
|
%
|
1.8
|
|
|
Year
Ended
December
31,
|
|
Increase
|
|
%
Increase
|
|
||||||
(in
millions)
|
|
2005
|
|
2004
|
|
(Decrease)
|
|
(Decrease)
|
|
||||
Operating
Expense:
|
|||||||||||||
Salaries
and related costs
|
$
|
5,058
|
$
|
6,338
|
$
|
(1,280
|
)
|
(20)
|
%
|
||||
Aircraft
fuel
|
4,271
|
2,924
|
1,347
|
46
|
%
|
||||||||
Depreciation
and amortization
|
1,273
|
1,244
|
29
|
2
|
%
|
||||||||
Contracted
services
|
1,096
|
999
|
97
|
10
|
%
|
||||||||
Contract
carrier arrangements
|
1,318
|
932
|
386
|
41
|
%
|
||||||||
Landing
fees and other rents
|
863
|
875
|
(12
|
)
|
(1)
|
%
|
|||||||
Aircraft
maintenance materials and outside repairs
|
776
|
681
|
95
|
14
|
%
|
||||||||
Aircraft
rent
|
541
|
716
|
(175
|
)
|
(24)
|
%
|
|||||||
Passenger
commissions and other selling expenses
|
948
|
939
|
9
|
1
|
%
|
||||||||
Passenger
service
|
345
|
349
|
(4
|
)
|
(1)
|
%
|
|||||||
Impairment
of intangible assets
|
—
|
1,875
|
(1,875
|
)
|
NM
|
||||||||
Restructuring,
asset writedowns, pension settlements and related items,
net
|
888
|
(41
|
)
|
929
|
NM
|
||||||||
Other
|
815
|
712
|
103
|
14
|
%
|
||||||||
Total
operating expense
|
$
|
18,192
|
$
|
18,543
|
$
|
(351
|
)
|
(2)
|
%
|
· |
Pension
Curtailment Charge.
A
$447 million curtailment charge related to our Pilot Plan and Non-pilot
Plan. This charge relates to the freeze of service accruals under
the
Pilot Plan effective December 31, 2004 and the impact of the planned
reduction of 6,000 to
7,000 jobs announced in November 2004 on the Non-pilot Plan (see
Note 10
of the Notes to the Consolidated Financial
Statements).
|
· |
Pension
Settlements.
$388 million in settlement charges
primarily related to the Pilot Plan due to a significant increase
in pilot
retirements and lump sum distributions from plan assets (see Note
10 of
the Notes to the Consolidated Financial
Statements).
|
· |
Workforce
Reduction.
A
$46 million charge related
to
our decision in 2005 to reduce staffing by approximately 7,000 to
9,000
jobs by December 2007, which has been substantially completed. This
charge
was offset by a net $3 million reduction in accruals associated with
prior
year workforce reduction programs.
|
· |
Asset
Charges.
A
$10 million charge related
to
the removal from service of six B-737-200 aircraft prior to their
lease
expiration dates.
|
· |
Elimination
of Retiree Healthcare Subsidy.
A
$527 million gain related to our decision to eliminate the company
provided healthcare coverage subsidy for employees
who retire after January 1, 2006 (see Note 10 of the Notes to the
Consolidated Financial Statements).
|
· |
Pension
Settlements.
$251 million in settlement charges related to the Pilot Plan due
to a
significant increase in pilot retirements and lump sum distribution
from
plan assets (see Note 10 of the Notes to the Consolidated Financial
Statements).
|
· |
Workforce
Reduction.
A
$194 million charge related to our decision to reduce staffing by
approximately 6,000 to 7,000 jobs by December 2005. This charge
included
charges of $152 million related to special termination benefits and
$42
million related to employee severance (see Note 10 of the Notes to
the
Consolidated Financial Statements).
|
· |
Asset
Charges.
A
$41 million aircraft impairment charge related to our agreement to
sell
eight owned MD-11 aircraft. In October 2004, we sold these aircraft
and
related inventory to a third party for $227
million.
|
Contractual
Obligations by Year
|
||||||||||||||||||||||
(in
millions)
|
2007
|
2008
|
2009
|
2010
|
2011
|
After
2011
|
Total
|
|||||||||||||||
Long-term
debt, not including liabilities subject to compromise(1)(2)
|
$
|
1,466
|
$
|
2,152
|
$
|
392
|
$
|
1,300
|
$
|
1,307
|
$
|
1,071
|
$
|
7,688
|
||||||||
Long-term
debt classified as liabilities subject to compromise(1)
|
453
|
640
|
868
|
177
|
103
|
2,704
|
4,945
|
|||||||||||||||
Operating
lease payments(3)(4)
|
1,257
|
1,182
|
977
|
915
|
792
|
4,915
|
10,038
|
|||||||||||||||
Aircraft
order commitments(5)
|
523
|
823
|
960
|
712
|
—
|
—
|
3,018
|
|||||||||||||||
Capital
lease obligations not subject to compromise(3)(6)
|
104
|
100
|
99
|
99
|
94
|
94
|
590
|
|||||||||||||||
Capital
lease obligations subject to compromise(3)(6)
|
6
|
3
|
—
|
—
|
—
|
—
|
9
|
|||||||||||||||
Contract
carrier obligations(7)
|
2,167
|
2,272
|
2,344
|
2,281
|
2,242
|
17,930
|
29,236
|
|||||||||||||||
Other
purchase obligations(8)
|
212
|
51
|
46
|
28
|
25
|
5
|
367
|
|||||||||||||||
Other
liabilities(9)
|
45
|
—
|
—
|
—
|
—
|
—
|
45
|
|||||||||||||||
Total(10)
|
$
|
6,233
|
$
|
7,223
|
$
|
5,686
|
$
|
5,512
|
$
|
4,563
|
$
|
26,719
|
$
|
55,936
|
(1) |
These
amounts are included in our Consolidated Balance Sheets. Interest
on
long-term debt is not included in the table above. For additional
information about our debt and related matters, see Note 6 of the
Notes to
the Consolidated Financial
Statements.
|
(2) |
Under
our comprehensive agreement with ALPA reducing our pilot labor costs,
we
are required to issue for the benefit of pilots, no later than 120
days
following our emergence from bankruptcy, senior unsecured notes (“Pilot
Notes”) with an aggregate principal amount of $650 million, a term of up
to 15 years and an annual interest rate calculated to ensure the
Pilot
Notes trade at par on the issuance date. The Pilot Notes are
pre-payable at any time at our option, and we may replace all or a
portion of the principal amount of the Pilot Notes with cash prior
to
their issuance.
|
(3) |
Although
we are not generally permitted to make any payments on pre-petition
obligations as a result of our Chapter 11 proceedings, we have reached
agreements with certain aircraft financing parties under Section
1110 of
the Bankruptcy Code and received approval from the Bankruptcy Court
to
continue to make payments on certain aircraft debt and lease obligations.
The amounts included remain subject to change until a plan of
reorganization is approved and we emerge from Chapter
11.
|
(4) |
This
amount includes our noncancelable operating leases and our lease
payments
related to aircraft under our contract carrier agreements with ASA,
SkyWest Airlines, Freedom and Shuttle America. Emerging Issues Task
Force
01-08, “Determining Whether an Arrangement Contains a Lease”, provides
guidance on whether an arrangement contains a lease within the scope
of
SFAS 13 and is applicable to agreements entered into or modified
after
June 30, 2003. Because we entered into our contract carrier agreement
with
Chautauqua prior to June 30, 2003, payments totaling $183 million
related
to Chautauqua aircraft are not included in the table. See Note 7
of the
Notes to the Consolidated Financial Statements for further information.
|
(5) |
Our
aircraft order commitments as of December 31, 2006 consist of firm
orders
to purchase five B-777-200LR aircraft, 10 B-737-700 aircraft and
50
B-737-800 aircraft, including 48 B-737-800 aircraft, which we have
entered
into definitive agreements to sell to third parties immediately following
delivery of these aircraft to us by the manufacturer starting in
2007. The
impact of these sales on the future commitments above would be a
total
reduction of approximately $2.0 billion during the period 2007 through
2010.
|
(6) |
Interest
payments related to capital lease obligations are included in the
table.
The present value of these obligations, excluding interest, is included
on
our Consolidated Balance Sheets. For additional information about
our
capital lease obligations, see Note 7 of the Notes to the Consolidated
Financial Statements.
|
(7) |
This
amount represents our minimum fixed obligation under our contract
carrier
agreements with Chautauqua, Shuttle America, ASA, SkyWest Airlines,
and
Freedom (excluding contract carrier lease payments accounted for
as
operating leases, (see footnote (4) above)). For additional information
regarding our contract carrier agreements, see Note 8 of the Notes
to the
Consolidated Financial Statements.
|
(8) |
Includes
purchase obligations pursuant to which we are required to make minimum
payments for goods and services, including but not limited to insurance,
outsourced human resource services, marketing, maintenance, obligations
related to Comair, technology, and other third party services and
products. For additional information about other commitments and
contingencies, see Note 8 of the Notes to the Consolidated Financial
Statements.
|
(9) |
Represents
other liabilities on our Consolidated Balance Sheets for which we
are
obligated to make future payments related to medical benefit costs
incurred but not yet paid. These liabilities are not included in
any other
line item on this table.
|
(10) |
In
addition to the contractual obligations included in the table, we
have
significant cash obligations that are not included in the table.
For
example, we will pay wages required under collective bargaining
agreements; fund pension plans (as discussed below); purchase capacity
under contract carrier arrangements (as discussed below); and pay
credit
card processing fees and fees for other goods and services, including
those related to fuel, maintenance and commissions. While we are
parties
to legally binding contracts regarding these goods and services,
the
actual commitment is contingent on certain factors such as volume
and/or
variable rates that are uncertain or unknown at this time. Therefore,
these items are not included in the table. In addition, purchase
orders
made in the ordinary course of business are excluded from the table
and
any amounts which we are liable for under the purchase orders are
included
in current liabilities on our Consolidated Balance
Sheets.
|
Change
in Assumption
|
Effect
on 2007
Pension
Expense
|
Effect
on Accrued
Pension
Liability at
December
31, 2006
|
0.50%
decrease in discount rate
|
+$15
million
|
+$475
million
|
0.50%
increase in discount rate
|
-$15
million
|
-$475
million
|
0.50%
decrease in expected return on assets
|
+$20
million
|
—
|
0.50%
increase in expected return on assets
|
-$20
million
|
—
|
ITEM 7A. |
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
ITEM 8. |
FINANCIAL
STATEMENTS AND SUPPLEMENTARY
DATA
|
ITEM 9. |
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
ITEM 9A. |
CONTROLS
AND PROCEDURES
|
ITEM 9B. |
OTHER
INFORMATION.
|
ITEM 10. |
DIRECTORS
AND EXECUTIVE OFFICERS OF THE
REGISTRANT
|
ITEM 11. |
ITEM 12. |
ITEM 15. |
EXHIBITS
AND FINANCIAL STATEMENT
SCHEDULES.
|
DELTA AIR LINES, INC | ||
|
|
|
By: | /s/ Gerald Grinstein | |
Gerald
Grinstein
|
||
Chief
Executive Officer
|
Signature
|
Title
|
/s/
Gerald
Grinstein
Gerald
Grinstein
|
Chief
Executive Officer and Director (Principal Executive
Officer)
|
/s/
Edward H. Bastian
Edward
H. Bastian
|
Executive
Vice President and Chief Financial Officer
(Principal
Financial Officer and Principal Accounting Officer)
|
/s/
Edward H. Budd
Edward
H. Budd
|
Director
|
/s/
Dominico De Sole
Dominico
De Sole
|
Director
|
/s/
David R. Goode
David
R. Goode
|
Director
|
Patricia
L. Higgins
|
Director
|
Signature
|
Title
|
/s/
Arthur E. Johnson
Arthur
E. Johnson
|
Director
|
/s/
Karl J. Krapek
Karl
J. Krapek
|
Director
|
Paula
Rosput Reynolds
|
Director
|
John
F. Smith, Jr.
|
Chairman
of the Board
|
/s/
Kenneth B. Woodrow
Kenneth
B. Woodrow
|
Director
|
3.1
|
Delta’s
Certificate of Incorporation (Filed
as Exhibit 3.1 to Delta’s Current Report on Form 8-K as filed on
May 23, 2005).*
|
3.2
|
Delta’s
By-Laws (Filed as Exhibit 3.2 to Delta’s Current Report on
Form 8-K as filed on May 23, 2005).*
|
4.1
|
Indenture
dated as of March 1, 1983, between Delta and The Citizens and
Southern National Bank, as trustee, as supplemented by the First
and
Second Supplemental Indentures thereto dated as of January 27, 1986
and May 26, 1989, respectively (Filed as Exhibit 4 to Delta’s
Registration Statement on Form S-3 (Registration No. 2-82412),
Exhibit 4(b) to Delta’s Registration Statement on Form S-3
(Registration No. 33-2972), and Exhibit 4.5 to Delta’s Annual
Report on Form 10-K for the year ended June 30, 1989).*
|
4.2
|
Third
Supplemental Indenture dated as of August 10, 1998, between Delta and
The Bank of New York, as successor trustee, to the Indenture dated
as of
March 1, 1983, as supplemented, between Delta and The Citizens and
Southern National Bank of Florida, as predecessor trustee (Filed
as
Exhibit 4.5 to Delta’s Annual Report on Form 10-K for the year
ended June 30, 1998).*
|
4.3
|
Indenture
dated as of April 30, 1990, between Delta and The Citizens and
Southern National Bank of Florida, as trustee (Filed as Exhibit 4(a)
to Amendment No. 1 to Delta’s Registration Statement on Form S-3
(Registration No. 33-34523)).*
|
4.4
|
First
Supplemental Indenture dated as of August 10, 1998, between Delta and
The Bank of New York, as successor trustee, to the Indenture dated
as of
April 30, 1990, between Delta and The Citizens and Southern National
Bank of Florida, as predecessor trustee (Filed as Exhibit 4.7 to
Delta’s Annual Report on Form 10-K for the year ended June 30,
1998).*
|
4.5
|
Indenture
dated as of May 1, 1991, between Delta and The Citizens and Southern
National Bank of Florida, as Trustee (Filed as Exhibit 4 to Delta’s
Registration Statement on Form S-3 (Registration
No. 33-40190)).*
|
10.1
|
Purchase
Agreement No. 2022 between Boeing and Delta relating to Boeing Model
737-632/-732/-832 Aircraft (Filed as Exhibit 10.3 to Delta’s
Quarterly Report on Form 10-Q for the quarter ended March 31,
1998).*/**
|
10.2
|
Purchase
Agreement No. 2025 between Boeing and Delta relating to Boeing Model
767-432ER Aircraft (Filed as Exhibit 10.4 to Delta’s Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998).*/**
|
10.3
|
Letter
Agreements related to Purchase Agreements No. 2022 and/or
No. 2025 between Boeing and Delta (Filed as Exhibit 10.5 to
Delta’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998).*/**
|
10.4
|
Aircraft
General Terms Agreement between Boeing and Delta (Filed as
Exhibit 10.6 to Delta’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998).*/**
|
10.5(a)
|
Amended
and Restated Secured Super-Priority Debtor in Possession Credit Agreement
dated as of March 27, 2006 among Delta Air Lines, Inc., a Debtor
and Debtor in Possession, as Borrower, the other Credit Parties signatory
thereto, each a Debtor and Debtor in Possession, as Credit Parties,
the
Lenders signatory thereto from time to time, as Lenders, and General
Electric Capital Corporation, as Administrative Agent and Lender
(“Amended
and Restated Secured Super-Priority Debtor-in-Possession Credit
Agreement”).
|
10.5(b)
|
Amendment
No. 1 to Amended and Restated Secured Super-Priority
Debtor-in-Possession Credit Agreement dated as of August 31,
2006.
|
10.6
|
Delta
2000 Performance Compensation Plan (Filed as Appendix A to Delta’s
Proxy Statement dated September 15, 2000).*
|
10.7
|
First
Amendment to Delta 2000 Performance Compensation Plan, effective
April 25, 2003 (Filed as Exhibit 10.3 to Delta’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2003).*
|
10.8
|
2002
Delta Excess Benefit Plan (Filed as Exhibit 10.1 to Delta’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2002).*
|
10.9
|
2002
Delta Supplemental Excess Benefit Plan (Filed as Exhibit 10.2 to
Delta’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2002).*
|
10.10
|
Form
of Excess Benefit Agreement between Delta and its officers (Filed
as
Exhibit 10.3 to Delta’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002).*
|
10.11
|
Form
of Non-Qualified Benefit Agreement (Filed as Exhibit 10.19 to Delta’s
Annual Report on Form 10-K for the year ended December 31,
2003).*
|
10.12
|
Directors’
Deferred Compensation Plan, as amended (Filed as Exhibit 10.1 to
Delta’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2003).*
|
10.13(a)
|
Delta
Air Lines, Inc. Director and Officer Severance Plan (Filed as Exhibit
10.1
to Delta’s Current Report on Form 8-K filed on February 23,
2006).*
|
10.13(b)
|
Form
of Agreement Related to Relinquishment of Certain Prior Severance
Benefits
(Non-pilot). (Filed as Exhibit 10.15(b) to Delta’s Annual Report on
Form 10-K for the year ended December 31,
2005).*
|
10.13(c)
|
Form
of Agreement Related to Relinquishment of Certain Prior Severance
Benefits
(Pilot). (Filed as Exhibit 10.15(c) to Delta’s Annual Report on
Form 10-K for the year ended December 31,
2005).*
|
10.13(d)
|
Form
of Acknowledgement of Ineligibility for Severance Benefits Under
Any Delta
Plan or Program, as executed by Messrs. Grinstein and Whitehurst.
(Filed
as Exhibit 10.15(d) to Delta’s Annual Report on Form 10-K for
the year ended December 31, 2005).*
|
10.13(e)
|
Form
of Separation Agreement and General Release Applicable to Executive
Officers. (Filed as Exhibit 10.15(e) to Delta’s Annual Report on
Form 10-K/A for the year ended December 31,
2005).*
|
10.14
|
Description
of Certain Benefits of Executive Officers (Filed as Exhibit 10.16 to
Delta’s Annual Report on Form 10-K/A for the year ended
December 31, 2005).*
|
21.1
|
Subsidiaries
of the Registrant.
|
23.1
|
Consent
of Ernst & Young LLP.
|
23.2
|
Consent
of Deloitte & Touche LLP.
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Executive
Officer.
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Financial
Officer.
|
32
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act 2002.
|
Report
of Independent Registered Public Accounting Firm (Ernst & Young
LLP)
|
F-2
|
Report
of Independent Registered Accounting Firm (Deloitte & Touche
LLP)
|
F-3
|
Consolidated
Balance Sheets — December 31, 2006 and 2005
|
F-4
|
Consolidated
Statements of Operations for the years ended December 31, 2006, 2005
and 2004
|
F-6
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2006, 2005
and 2004
|
F-7
|
Consolidated
Statements of Shareowners’ Deficit for the years ended
December 31, 2006, 2005 and 2004
|
F-8
|
Notes
to the Consolidated Financial Statements
|
F-9
|
Delta
Air Lines, Inc.
|
||||
Debtor
and Debtor-In-Possession
|
||||
Consolidated
Balance Sheets
|
||||
December
31, 2006 and 2005
|
ASSETS
|
|||||||
(in
millions)
|
2006
|
2005
|
|||||
CURRENT
ASSETS:
|
|||||||
Cash
and cash equivalents
|
$
|
2,034
|
$
|
2,008
|
|||
Short-term
investments
|
614
|
-
|
|||||
Restricted
cash
|
750
|
870
|
|||||
Accounts
receivable, net of an allowance for uncollectible accounts
of $21 and $41 at December 31, 2006 and 2005, respectively |
915
|
819
|
|||||
Expendable
parts and supplies inventories, net of an allowance for
obsolescence of $161 and $201 at December 31, 2006 and 2005, respectively |
181
|
172
|
|||||
Deferred
income taxes, net
|
402
|
99
|
|||||
Prepaid
expenses and other
|
489
|
512
|
|||||
Total
current assets
|
5,385
|
4,480
|
|||||
|
|||||||
|
|||||||
PROPERTY
AND EQUIPMENT:
|
|||||||
Flight
equipment
|
17,641
|
18,591
|
|||||
Accumulated
depreciation
|
(6,800
|
)
|
(6,621
|
)
|
|||
Flight
equipment, net
|
10,841
|
11,970
|
|||||
|
|||||||
Ground
property and equipment
|
4,575
|
4,791
|
|||||
Accumulated
depreciation
|
(2,838
|
)
|
(2,847
|
)
|
|||
Ground
property and equipment, net
|
1,737
|
1,944
|
|||||
|
|||||||
Flight
and ground equipment under capital leases
|
474
|
535
|
|||||
Accumulated
amortization
|
(136
|
)
|
(213
|
)
|
|||
Flight
and ground equipment under capital leases, net
|
338
|
322
|
|||||
|
|||||||
Advance
payments for equipment
|
57
|
44
|
|||||
|
|||||||
Total
property and equipment, net
|
12,973
|
14,280
|
|||||
|
|||||||
|
|||||||
OTHER
ASSETS:
|
|||||||
Goodwill
|
227
|
227
|
|||||
Operating
rights and other intangibles, net of accumulated amortization
of
$190 and $189 at December 31, 2006 and 2005, respectively |
89
|
74
|
|||||
Other
noncurrent assets
|
948
|
978
|
|||||
Total
other assets
|
1,264
|
1,279
|
|||||
|
|||||||
Total
assets
|
$
|
19,622
|
$
|
20,039
|
|||
The
accompanying notes are an integral part of these Consolidated Financial
Statements.
|
Delta
Air Lines, Inc.
|
||||
Debtor
and Debtor-In-Possession
|
||||
Consolidated
Balance Sheets
|
||||
December
31, 2006 and 2005
|
LIABILITIES
AND SHAREOWNERS' DEFICIT
|
|||||||
(in
millions, except share data)
|
2006
|
2005
|
|||||
CURRENT
LIABILITIES:
|
|||||||
Current
maturities of long-term debt and capital leases
|
$
|
1,503
|
$
|
1,186
|
|||
Air
traffic liability
|
1,797
|
1,712
|
|||||
Accounts
payable
|
936
|
934
|
|||||
Taxes
payable
|
500
|
525
|
|||||
Deferred
revenue
|
363
|
182
|
|||||
Accrued
salaries and related benefits
|
405
|
435
|
|||||
Other
accrued liabilities
|
265
|
291
|
|||||
Total
current liabilities
|
5,769
|
5,265
|
|||||
|
|||||||
NONCURRENT
LIABILITIES:
|
|||||||
Long-term
debt and capital leases
|
6,509
|
6,557
|
|||||
Deferred
income taxes, net
|
406
|
132
|
|||||
Deferred
revenue and credits
|
346
|
186
|
|||||
Other
|
368
|
167
|
|||||
Total
noncurrent liabilities
|
7,629
|
7,042
|
|||||
|
|||||||
LIABILITIES
SUBJECT TO COMPROMISE
|
19,817
|
17,380
|
|||||
|
|||||||
COMMITMENTS
AND CONTINGENCIES
|
|||||||
|
|||||||
EMPLOYEE
STOCK OWNERSHIP PLAN
|
|||||||
PREFERRED
STOCK:
|
|||||||
Series
B ESOP Convertible Preferred Stock, $1.00 par value,
|
|||||||
$72.00
stated and liquidation value; zero and 4,667,568 shares issued
|
|||||||
and
outstanding at December 31, 2006 and 2005, respectively
|
-
|
336
|
|||||
Unearned
compensation under employee stock ownership plan
|
-
|
(89
|
)
|
||||
Total
Employee Stock Ownership Plan Preferred Stock
|
-
|
247
|
|||||
|
|||||||
SHAREOWNERS'
DEFICIT:
|
|||||||
Common
stock:
|
|||||||
$0.01
par value, 900,000,000 shares authorized, 202,081,648
|
|||||||
shares
issued at December 31, 2006 and 2005
|
2
|
2
|
|||||
Additional
paid-in capital
|
1,561
|
1,635
|
|||||
Accumulated
deficit
|
(14,414
|
)
|
(8,209
|
)
|
|||
Accumulated
other comprehensive loss
|
(518
|
)
|
(2,722
|
)
|
|||
Treasury
stock at cost, 4,745,710 shares at December 31, 2006,
|
|||||||
and
12,738,630 shares at December 31, 2005
|
(224
|
)
|
(601
|
)
|
|||
Total
shareowners' deficit
|
(13,593
|
)
|
(9,895
|
)
|
|||
|
|||||||
Total
liabilities and shareowners' deficit
|
$
|
19,622
|
$
|
20,039
|
|||
The
accompanying notes are an integral part of these Consolidated Financial
Statements.
|
Delta
Air Lines, Inc.
|
||||||
Debtor
and Debtor-In-Possession
|
||||||
Consolidated
Statements of Operations
|
||||||
For
the years ended December 31, 2006, 2005 and
2004
|
(in
millions, except per share data)
|
2006
|
2005
|
2004
|
|||||||
OPERATING
REVENUE:
|
||||||||||
Passenger:
|
||||||||||
Mainline
|
$
|
11,773
|
$
|
11,399
|
$
|
10,880
|
||||
Regional
affiliates
|
3,853
|
3,225
|
2,910
|
|||||||
Cargo
|
498
|
524
|
500
|
|||||||
Other,
net
|
1,047
|
1,043
|
945
|
|||||||
Total
operating revenue
|
17,171
|
16,191
|
15,235
|
|||||||
|
||||||||||
OPERATING
EXPENSE:
|
||||||||||
Aircraft
fuel
|
4,319
|
4,271
|
2,924
|
|||||||
Salaries
and related costs
|
4,128
|
5,058
|
6,338
|
|||||||
Contract
carrier arrangements
|
2,656
|
1,318
|
932
|
|||||||
Depreciation
and amortization
|
1,276
|
1,273
|
1,244
|
|||||||
Contracted
services
|
1,083
|
1,096
|
999
|
|||||||
Passenger
commissions and other selling expenses
|
888
|
948
|
939
|
|||||||
Landing
fees and other rents
|
865
|
863
|
875
|
|||||||
Aircraft
maintenance materials and outside repairs
|
735
|
776
|
681
|
|||||||
Passenger
service
|
328
|
345
|
349
|
|||||||
Aircraft
rent
|
316
|
541
|
716
|
|||||||
Restructuring,
asset writedowns, pension settlements and related items,
net
|
13
|
888
|
(41
|
)
|
||||||
Impairment
of intangible assets
|
-
|
-
|
1,875
|
|||||||
Other
|
506
|
815
|
712
|
|||||||
Total
operating expense
|
17,113
|
18,192
|
18,543
|
|||||||
|
||||||||||
OPERATING
INCOME (LOSS)
|
58
|
(2,001
|
)
|
(3,308
|
)
|
|||||
|
||||||||||
OTHER
(EXPENSE) INCOME:
|
||||||||||
Interest
expense (contractual interest expense equals $1,200 and $1,169
|
||||||||||
for
the years ended December 31, 2006 and 2005, respectively)
|
(870
|
)
|
(1,032
|
)
|
(824
|
)
|
||||
Interest
income
|
69
|
59
|
37
|
|||||||
(Loss)
gain from sale of investments, net
|
-
|
(1
|
)
|
123
|
||||||
Miscellaneous,
net
|
(19
|
)
|
-
|
(20
|
)
|
|||||
Total
other expense, net
|
(820
|
)
|
(974
|
)
|
(684
|
)
|
||||
|
||||||||||
LOSS
BEFORE REORGANIZATION ITEMS
|
(762
|
)
|
(2,975
|
)
|
(3,992
|
)
|
||||
|
||||||||||
REORGANIZATION
ITEMS, NET
|
(6,206
|
)
|
(884
|
)
|
-
|
|||||
|
||||||||||
LOSS
BEFORE INCOME TAXES
|
(6,968
|
)
|
(3,859
|
)
|
(3,992
|
)
|
||||
INCOME
TAX BENEFIT (PROVISION)
|
765
|
41
|
(1,206
|
)
|
||||||
NET
LOSS
|
(6,203
|
)
|
(3,818
|
)
|
(5,198
|
)
|
||||
PREFERRED
STOCK DIVIDENDS
|
(2
|
)
|
(18
|
)
|
(19
|
)
|
||||
NET
LOSS ATTRIBUTABLE TO COMMON
|
||||||||||
SHAREOWNERS
|
$
|
(6,205
|
)
|
$
|
(3,836
|
)
|
$
|
(5,217
|
)
|
|
BASIC
AND DILUTED LOSS PER SHARE
|
$
|
(31.58
|
)
|
$
|
(23.75
|
)
|
$
|
(41.07
|
)
|
|
The
accompanying notes are an integral part of these Consolidated Financial
Statements.
|
Delta
Air Lines, Inc.
|
||||||
Debtor
and Debtor-In-Possession
|
||||||
Consolidated
Statements of Cash Flows
|
||||||
For
the years ended December 31, 2006, 2005 and
2004
|
(in
millions)
|
2006
|
2005
|
2004
|
|||||||
Cash
Flows From Operating Activities:
|
||||||||||
Net
loss
|
$
|
(6,203
|
)
|
$
|
(3,818
|
)
|
$
|
(5,198
|
)
|
|
Adjustments
to reconcile net loss to net cash provided by (used in)
operating activities: |
||||||||||
Asset
and other writedowns
|
18
|
14
|
1,915
|
|||||||
Depreciation
and amortization
|
1,276
|
1,273
|
1,244
|
|||||||
Deferred
income taxes
|
(765
|
)
|
(41
|
)
|
1,206
|
|||||
Pension,
postretirement and postemployment expense in excess of
(less than) payments |
489
|
896
|
(121
|
)
|
||||||
Reorganization
items, net
|
6,206
|
884
|
-
|
|||||||
Gain
on extinguishment of debt, net
|
-
|
(9
|
)
|
(9
|
)
|
|||||
Loss
(gain) from sale of investments, net
|
-
|
1
|
(123
|
)
|
||||||
Changes
in certain current assets and liabilities:
|
||||||||||
(Increase)
decrease in short-term investments, net
|
(614
|
)
|
336
|
204
|
||||||
Increase
in receivables
|
(152
|
)
|
(122
|
)
|
(27
|
)
|
||||
Decrease
(increase) in restricted cash
|
116 | (482 | ) | (15 |
)
|
|||||
Decrease
(increase) in prepaid expenses and other current assets
|
41
|
(67
|
)
|
(151
|
)
|
|||||
Increase
in air traffic liability
|
86
|
145
|
259
|
|||||||
Increase
(decrease) in accounts payable and other accrued
liabilities
|
154
|
667
|
(233
|
)
|
||||||
Other,
net
|
341
|
16
|
26
|
|||||||
Net
cash provided by (used in) operating activities
|
993
|
(307
|
) |
(1,023
|
)
|
|||||
|
||||||||||
Cash
Flows From Investing Activities:
|
||||||||||
Property
and equipment additions:
|
||||||||||
Flight
equipment, including advance payments
|
(265
|
)
|
(570
|
)
|
(373
|
)
|
||||
Ground
property and equipment, including technology
|
(148
|
)
|
(244
|
)
|
(387
|
)
|
||||
(Increase)
decrease in restricted investments related to the Boston
airport
terminal project |
(2
|
)
|
81
|
159
|
||||||
Proceeds
from sales of flight equipment
|
40
|
425
|
234
|
|||||||
Proceeds
from sale of wholly owned subsidiary, net of cash
remaining
with subsidiary |
-
|
417
|
-
|
|||||||
Other,
net
|
14
|
(87
|
) |
47
|
||||||
Net
cash (used in) provided by investing activities
|
(361
|
)
|
22
|
|
(320
|
)
|
||||
|
||||||||||
Cash
Flows From Financing Activities:
|
||||||||||
Payments
on long-term debt and capital lease obligations
|
(600
|
)
|
(1,615
|
)
|
(1,452
|
)
|
||||
Proceeds
from long-term obligations
|
-
|
295
|
2,123
|
|||||||
Proceeds
from DIP financing
|
-
|
2,250
|
-
|
|||||||
Payments
on DIP financing
|
-
|
(50
|
)
|
-
|
||||||
Other,
net
|
(6
|
)
|
(50
|
)
|
(35
|
)
|
||||
Net
cash (used in) provided by financing activities
|
(606
|
)
|
830
|
636
|
||||||
|
||||||||||
Net
Increase (Decrease) In Cash and Cash Equivalents
|
26
|
545
|
(707
|
)
|
||||||
Cash
and cash equivalents at beginning of year
|
2,008
|
1,463
|
2,170
|
|||||||
Cash
and cash equivalents at end of year
|
$
|
2,034
|
$
|
2,008
|
$
|
1,463
|
||||
|
||||||||||
Supplemental
disclosure of cash paid (refunded) for:
|
||||||||||
Interest,
net of amounts capitalized
|
$
|
728
|
$
|
783
|
$
|
768
|
||||
Professional
fee disbursements due to bankruptcy
|
101
|
6
|
-
|
|||||||
Interest
received due to bankruptcy
|
(109
|
)
|
(15
|
)
|
-
|
|||||
Cash
received from aircraft renegotiation
|
(10
|
)
|
-
|
-
|
||||||
Income
taxes, net
|
(1
|
)
|
2
|
-
|
||||||
|
||||||||||
Non-cash
transactions:
|
||||||||||
Aircraft
delivered under seller-financing
|
$
|
-
|
$
|
251
|
$
|
314
|
||||
Debt
extinguishment from aircraft renegotiation
|
171
|
-
|
-
|
|||||||
Flight
equipment under capital leases
|
159
|
-
|
-
|
|||||||
Dividends
on Series B ESOP Convertible Preferred Stock
|
2
|
15
|
22
|
|||||||
Current
maturities of long-term debt exchanged for shares of common
stock
|
-
|
45
|
-
|
|||||||
|
||||||||||
The
accompanying notes are an integral part of these Consolidated Financial
Statements.
|
Delta
Air Lines, Inc.
|
||||||||||||
Debtor
and Debtor-In-Possession
|
||||||||||||
Consolidated
Statements of Shareowners' Deficit
|
||||||||||||
For
the years ended December 31, 2006, 2005 and
2004
|
Accumulated
|
|||||||||||||||||||
Additional
|
Retained
|
Other
|
|||||||||||||||||
Common
|
Paid-In
|
Earnings/
|
Comprehensive
|
Treasury
|
|||||||||||||||
(in
millions, except share data)
|
Stock
|
Capital
|
(Deficit)
|
Loss
|
Stock
|
Total
|
|||||||||||||
Balance
at January 1, 2004
|
$
|
271
|
$
|
3,272
|
$
|
844
|
$
|
(2,338
|
)
|
$
|
(2,708
|
)
|
$
|
(659
|
)
|
||||
Comprehensive
loss:
|
|||||||||||||||||||
Net
loss
|
-
|
-
|
(5,198
|
)
|
-
|
-
|
(5,198
|
)
|
|||||||||||
Other
comprehensive loss
|
-
|
-
|
-
|
(20
|
)
|
-
|
(20
|
)
|
|||||||||||
Total
comprehensive loss (See Note 13)
|
(5,218
|
)
|
|||||||||||||||||
Dividends
on Series B ESOP Convertible
|
|||||||||||||||||||
Preferred
Stock allocated shares
|
-
|
-
|
(19
|
)
|
-
|
-
|
(19
|
)
|
|||||||||||
Transfer
of 113,672 shares of common from Treasury
under stock incentive plan and other equity plans ($47.20 per share(1)) |
-
|
(5
|
)
|
-
|
-
|
5
|
-
|
||||||||||||
Transfer
of 6,330551 shares of common from Treasury
under ESOP ($47.20 per share(1)) |
-
|
(266
|
)
|
-
|
-
|
299
|
33
|
||||||||||||
Issuance
of 9,842,778 shares of common stock related
to Delta's transformation plan ($6.98 per share) |
15
|
53
|
-
|
-
|
-
|
68
|
|||||||||||||
Other
|
-
|
(2
|
)
|
-
|
-
|
1
|
(1
|
)
|
|||||||||||
Balance
at December 31, 2004
|
286
|
3,052
|
(4,373
|
)
|
(2,358
|
)
|
(2,403
|
)
|
(5,796
|
)
|
|||||||||
Comprehensive
loss:
|
|||||||||||||||||||
Net
loss
|
-
|
-
|
(3,818
|
)
|
-
|
-
|
(3,818
|
)
|
|||||||||||
Other
comprehensive loss
|
-
|
-
|
-
|
(364
|
)
|
-
|
(364
|
)
|
|||||||||||
Total
comprehensive loss (See Note 13)
|
(4,182
|
)
|
|||||||||||||||||
Dividends
on Series B ESOP Convertible
|
|||||||||||||||||||
Preferred
Stock allocated shares
|
-
|
-
|
(18
|
)
|
-
|
-
|
(18
|
)
|
|||||||||||
Transfer
of 34,378 shares of common from Treasury under
stock incentive and other equity plans ($47.20 per share(1))
|
-
|
(2
|
)
|
-
|
-
|
2
|
-
|
||||||||||||
Transfer
of 38,140,673 shares of common from Treasury under
ESOP ($47.20 per share(1))
|
-
|
(1,738
|
)
|
-
|
-
|
1,800
|
62
|
||||||||||||
Issuance
of 11,336,203 shares of common stock related to
Delta's transformation plan ($3.40 per share)
|
5
|
34
|
-
|
-
|
-
|
39
|
|||||||||||||
Amendment
to Certificate of Incorporation to increase number of authorized
shares of common stock from 450 million to 900 million and
to decrease par value from $1.50 per share to $.01 per
share
|
(289
|
)
|
289
|
-
|
-
|
-
|
-
|
||||||||||||
Balance
at December 31, 2005
|
2
|
1,635
|
(8,209
|
)
|
(2,722
|
)
|
(601
|
)
|
(9,895
|
)
|
|||||||||
Comprehensive
loss:
|
|||||||||||||||||||
Net
loss
|
-
|
-
|
(6,203
|
)
|
-
|
-
|
(6,203
|
)
|
|||||||||||
Other
comprehensive income
|
-
|
-
|
-
|
1,780
|
-
|
1,780
|
|||||||||||||
Total
comprehensive loss (See Note 13)
|
(4,423
|
)
|
|||||||||||||||||
Adoption
of SFAS 158, net of tax
|
-
|
-
|
-
|
424
|
-
|
424
|
|||||||||||||
Dividends
on Series B ESOP Convertible
|
|||||||||||||||||||
Preferred
Stock allocated shares
|
-
|
-
|
(2
|
)
|
-
|
-
|
(2
|
)
|
|||||||||||
Compensation
expense associated with vesting stock options
|
-
|
8
|
-
|
-
|
-
|
8
|
|||||||||||||
Compensation
expense associated with the rejection of
stock options
|
-
|
55
|
-
|
-
|
-
|
55
|
|||||||||||||
Transfer
of 7,996,125 shares of common from Treasury under
ESOP ($47.20 per share(1))
|
-
|
(137
|
)
|
-
|
-
|
377
|
240
|
||||||||||||
Balance
at December 31, 2006
|
$
|
2
|
$
|
1,561
|
$
|
(14,414
|
)
|
$
|
(518
|
)
|
$
|
(224
|
)
|
$
|
(13,593
|
)
|
|||
(1)
Average price per share
|
|||||||||||||||||||
The
accompanying notes are an integral part of these Consolidated Financial
Statements.
|
·
|
Leveraging
Network Strength to Provide Expanded International Service.
We
will continue to focus on international growth. With our
geographically-balanced hubs, we believe we are well-positioned for
international growth from the U.S. to Europe and Latin America. In
addition, we expect our hubs will help us increase service to Africa
and
Asia.
|
·
|
Maintaining
Focus on Improving the Customer Experience. Our
focus on safety will remain our top priority. We are also committed
to
continuous improvement throughout our operations to earn our customers’
preference. We have renewed our focus on improving our product and
customer service through aircraft cabin and airport
improvements.
|
·
|
Maximizing
a Streamlined and Upgraded Fleet. We
are supporting the ongoing changes to our network by bolstering our
internationally-capable mainline fleet. We plan to pursue additional
strategic improvements to our fleet by adding high-performance aircraft
that will enable us to serve new destinations with appropriate capacity.
We have announced plans to add 28 internationally capable aircraft
scheduled for delivery in 2007 through
2009.
|
·
|
Capturing
the Benefit of Competitive Cost Structure. Through
initiatives undertaken during the Chapter 11 proceedings and previous
productivity initiatives, we currently have one of the lowest mainline
unit cost structures of any full service carrier. These efforts have
resulted in reduced costs throughout our organization, including
reductions in employment costs, retiree pension and healthcare costs
and
aircraft fleet costs. We recognize that, to succeed, we must maintain
the
competitive unit cost structure that we developed through our
restructuring efforts.
|
·
|
Generating
Cash Flow from Operations Necessary to Fund Capital Expenditures
and
Reduce Debt.
Over an extended period following emergence from Chapter 11, we intend
to
balance long-term operating growth with overall credit improvement.
At
emergence from bankruptcy, we expect to have significantly reduced
our
total debt levels from pre-petition levels. Ongoing improvements
to our
financial condition are, however, necessary for us to withstand industry
and economic volatility and to have favorable, consistent access
to
capital markets.
|
·
|
the
14% hourly pilot wage rate reduction, and other pilot pay and cost
reductions equivalent to an approximately additional 1% hourly wage
rate
reduction, which became effective on December 15, 2005 under an interim
agreement between Delta and ALPA, remain in effect, with annual pay
rate
increases beginning in January
2007.
|
·
|
ALPA
has a $2.1 billion allowed general, unsecured pre-petition claim
in our
bankruptcy proceedings.
|
·
|
we
will issue for the benefit of pilots, on a date that is no later
than 120
days following our emergence from bankruptcy, senior unsecured notes
(“Pilot Notes”) with an aggregate principal amount equal to $650 million,
a term of up to 15 years and an annual interest rate calculated to
ensure
that the Pilot Notes trade at par on the issuance date. The Pilot
Notes
are pre-payable at any time at our option, and we may replace all
or a
portion of the principal amount of Pilot Notes with cash prior to
their
issuance.
|
·
|
eligible
pilots will participate in a company-wide profit-sharing plan that
will
provide an aggregate payout of 15% of our annual pre-tax income (as
defined) up to $1.5 billion and 20% of annual pre-tax income over
$1.5
billion.
|
·
|
we
will not seek relief under Section 1113 during these Chapter 11
proceedings with respect to the pilot collective bargaining agreement
unless we are in imminent risk of our post-petition financing (as
described in Note 6) being accelerated on account of an imminent
breach of
the financial covenants in such financing, we have used our best
efforts
to seek a waiver of such breach but have not been able to secure
such a
waiver, and we would be unable to remedy such a breach without labor
cost
reductions.
|
(in
millions)
|
2006
|
2005
|
|||||
Pension,
postretirement and other benefits
|
$
|
10,329
|
$
|
8,652
|
|||
Debt
and accrued interest
|
5,079
|
5,843
|
|||||
Aircraft
lease related obligations
|
3,115
|
1,740
|
|||||
Accounts
payable and other accrued liabilities
|
1,294
|
1,145
|
|||||
Total
liabilities subject to compromise
|
$
|
19,817
|
$
|
17,380
|
(in
millions)
|
2006
|
2005
|
|||||
Pilot
collective bargaining agreement(1)
|
$
|
2,100
|
$
|
—
|
|||
Pilot
pension termination(2)
|
1,743
|
—
|
|||||
Aircraft
financing renegotiations, rejections and repossessions(3)
|
1,671
|
611
|
|||||
Retiree
healthcare claims(4)
|
539
|
—
|
|||||
Professional
fees
|
110
|
39
|
|||||
Rejection
of other executory contracts(5)
|
89
|
—
|
|||||
Compensation
expense(6)
|
55
|
—
|
|||||
Debt
issuance and discount costs
|
13
|
163
|
|||||
Facility
leases
|
8
|
88
|
|||||
Interest
income(7)
|
(109
|
)
|
(17
|
)
|
|||
Vendor
waived pre-petition debt
|
(36
|
)
|
—
|
||||
Other
|
23
|
—
|
|||||
Total
reorganization items, net
|
$
|
6,206
|
$
|
884
|
(1) |
Allowed
general, unsecured pre-petition claim in connection with our comprehensive
agreement with ALPA reducing our pilot labor costs. For additional
information regarding this agreement, see “Collective Bargaining
Agreements” in this Note.
|
(2) |
$2.2
billion and $801 million allowed general, unsecured pre-petition
claims in
connection with our settlement agreements with the PBGC and a group
representing retired pilots, respectively. Charges for these claims
were
offset by $1.3 billion in settlement gains associated with the
derecognition of previously recorded Pilot Plan and pilot non-qualified
plan obligations upon each plan’s termination. For additional information
regarding our settlement agreements and the termination of these
plans,
see Note 10.
|
(3) |
Estimated
claims for the year ended December 31, 2006 relate to the restructuring
of
the financing arrangements of 188 aircraft and the rejection of 16
aircraft leases. Estimated claims for the year ended December 31,
2005
relate to the restructuring of the arrangements of seven aircraft,
the
rejection of 50 aircraft leases and the repossession of 15
aircraft.
|
(4) |
Allowed
general, unsecured pre-petition claims in connection with agreements
reached with committees representing both pilot and non-pilot retired
employees reducing their postretirement healthcare benefits. For
additional information regarding these agreements, see Note
10.
|
(5) |
Allowed
general, unsecured pre-petition claims primarily related to the rejection
of an executory contract with our main flight service food supply
vendor.
|
(6)
|
Reflects
a charge for rejecting substantially all of our stock options in
our
Chapter 11 proceedings. For additional information regarding the
rejection
of our stock options, see Note 2.
|
(7)
|
Reflects
interest earned due to the preservation of cash from our Chapter
11
proceedings.
|
·
|
A
$112 million charge in landing fees and other rents. This adjustment
is
associated primarily with our airport facility leases at John F.
Kennedy
International Airport in New York. It resulted from historical differences
associated with recording escalating rent expense based on actual
rent
payments instead of on a straight-line basis over the lease term
as
required by Statement of Financial Accounting Standards (“SFAS”) No. 13,
“Accounting for Leases” (“SFAS
13”).
|
·
|
A
$108 million net charge related to the sale of mileage credits under
our
SkyMiles frequent flyer program. This includes an $83 million decrease
in
passenger revenues, a $106 million decrease in other, net operating
revenues, and an $81 million decrease in other operating expenses.
This
net charge primarily resulted from the reconsideration of our position
with respect to the timing of recognizing revenue associated with
the sale
of mileage credits that we expect will never be redeemed for
travel.
|
·
|
A
$90 million charge in salaries and related costs to adjust our accrual
for
postemployment healthcare benefits. This adjustment is due to healthcare
payments applied to this accrual over several years, which should
have
been expensed as incurred.
|
Asset
Classification
|
Estimated
Useful Life
|
Flight
equipment
|
25
years
|
Capitalized
software
|
5-7
years
|
Ground
property and equipment
|
3-40
years
|
Leasehold
improvements
|
Generally
shorter of lease term or estimated useful life
|
Flight
and ground equipment under capital lease
|
Shorter
of lease term or estimated useful
life
|
|
Stock
Options Granted
|
|||||||||
Assumption
|
2006
|
2005
|
2004
|
|||||||
Risk-free
interest rate
|
—
|
3.8
|
%
|
3.1
|
%
|
|||||
Average
expected life of stock options (in years)
|
—
|
3.0
|
3.2
|
|||||||
Expected
volatility of common stock
|
—
|
73.6
|
%
|
68.8
|
%
|
|||||
Weighted
average fair value of a stock option granted
|
$
|
—
|
$
|
2
|
$
|
3
|
Year
Ended December 31,
|
|||||||
(in
millions, except per share data)
|
2005
|
2004
|
|||||
Net
loss:
|
|||||||
As
reported
|
$
|
(3,818
|
)
|
$
|
(5,198
|
)
|
|
Stock
option compensation expense determined under the fair value
method
|
(108
|
)
|
(38
|
)
|
|||
As
adjusted for the fair value method under SFAS 123R
|
$
|
(3,926
|
)
|
$
|
(5,236
|
)
|
|
Basic
and diluted loss per share:
|
|||||||
As
reported
|
$
|
(23.75
|
)
|
$
|
(41.07
|
)
|
|
As
adjusted for the fair value method under SFAS 123R
|
$
|
(24.42
|
)
|
$
|
(41.36
|
)
|
|
For
the Years Ended December 31,
|
||||||||||||||||||
2006
|
2005
|
2004
|
|||||||||||||||||
(in
millions)
|
Aircraft
fuel
expense
|
Other
expense
(income)
|
Aircraft
fuel
expense
|
Other
expense
(income)
|
Aircraft
fuel
expense
|
Other
expense
(income)
|
|||||||||||||
Open
fuel hedge contracts
|
$
|
—
|
$
|
5
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||||
Settled
fuel hedge contracts
|
108
|
32
|
—
|
—
|
(105
|
)
|
28
|
||||||||||||
Total
|
$
|
108
|
$
|
37
|
$
|
—
|
$
|
—
|
$
|
(105
|
)
|
$
|
28
|
|
Reporting
Unit
|
||||||||||||
(in
millions)
|
Mainline
|
ASA
|
Comair
|
Total
|
|||||||||
Balance
at January 1, 2004
|
$
|
227
|
$
|
498
|
$
|
1,367
|
$
|
2,092
|
|||||
Impairment
charge
|
—
|
(498
|
)
|
(1,367
|
)
|
(1,865
|
)
|
||||||
Balance
at December 31, 2006, 2005 and 2004
|
$
|
227
|
$
|
—
|
$
|
—
|
$
|
227
|
|
2006
|
|
2005
|
|
|||||||||
(in
millions)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|||||
Definite-lived
intangible assets:
|
|||||||||||||
Operating
rights
|
$
|
121
|
$
|
(104
|
)
|
$
|
125
|
$
|
(103
|
)
|
|||
Other
|
3
|
(3
|
)
|
3
|
(3
|
)
|
|||||||
Total
|
$
|
124
|
$
|
(107
|
)
|
$
|
128
|
$
|
(106
|
)
|
(in
millions)
|
Net
Carrying
Amount
|
Net
Carrying
Amount
|
||||
Indefinite-lived
intangible assets:
|
||||||
International
routes and slots
|
$
|
71
|
$
|
51
|
||
Other
|
1
|
1
|
||||
Total
|
$
|
72
|
$
|
52
|
(dollars
in millions)
|
2006
|
2005
|
|||||
Senior
Secured(1)
|
|||||||
Secured
Super-Priority Debtor-in-Possession Credit Agreement
|
|||||||
8.12%
GE DIP Credit Facility Term Loan A due March 16, 2008(2)
|
$
|
600
|
$
|
600
|
|||
10.12%
GE DIP Credit Facility Term Loan B due March 16, 2008(2)
|
700
|
700
|
|||||
12.87%
GE DIP Credit Facility Term Loan C due March 16, 2008(2)
|
600
|
600
|
|||||
|
1,900
|
1,900
|
|||||
Other
senior secured debt
|
|||||||
14.11%
Amex Facility Note due in installments during 2007(2)(3)
|
176
|
300
|
|||||
|
176
|
300
|
|||||
Secured(1)
|
|||||||
Series
2000-1 Enhanced Equipment Trust Certificates
|
|||||||
7.38%
Class A-1 due in installments from 2007 to May 18, 2010
|
136
|
174
|
|||||
7.57%
Class A-2 due November 18, 2010
|
738
|
738
|
|||||
7.92%
Class B due November 18, 2010
|
182
|
182
|
|||||
|
1,056
|
1,094
|
|||||
Series
2001-1 Enhanced Equipment Trust Certificates
|
|||||||
6.62%
Class A-1 due in installments from 2007 to March 18, 2011
|
130
|
150
|
|||||
7.11%
Class A-2 due September 18, 2011
|
571
|
571
|
|||||
7.71%
Class B due September 18, 2011
|
207
|
207
|
|||||
7.30%
Class C due September 18, 2006
|
—
|
60
|
|||||
|
908
|
988
|
|||||
Series
2001-2 Enhanced Equipment Trust Certificates
|
|||||||
7.06%
Class A due in installments from 2007 to December 18, 2011(2)
|
313
|
341
|
|||||
8.26%
Class B due in installments from 2007 to December 18, 2011(2)
|
145
|
172
|
|||||
9.61%
Class C due in installments from 2007 to December 18, 2011(2)
|
64
|
77
|
|||||
|
522
|
590
|
|||||
Series
2002-1 Enhanced Equipment Trust Certificates
|
|||||||
6.72%
Class G-1 due in installments from 2007 to January 2, 2023
|
454
|
488
|
|||||
6.42%
Class G-2 due July 2, 2012
|
370
|
370
|
|||||
7.78%
Class C due in installments from 2007 to January 2, 2012
|
111
|
126
|
|||||
|
935
|
984
|
|||||
Series
2003-1 Enhanced Equipment Trust Certificates
|
|||||||
6.13%
Class G due in installments from 2007 to January 25, 2008(2)
|
291
|
318
|
|||||
9.11%
Class C due in installments from 2007 to January 25, 2008(2)
|
135
|
135
|
|||||
|
426
|
453
|
(dollars
in millions)
|
2006
|
2005
|
|||||
General
Electric Capital Corporation(4)
|
|||||||
9.87%
Notes due in installments from 2007 to July 7, 2011(2)(5)
|
168
|
198
|
|||||
9.87%
Notes due in installments from 2007 to July 7, 2011(2)(6)
|
119
|
134
|
|||||
9.87%
Notes due in installments from 2007 to July 7, 2011(2)(7)
|
271
|
293
|
|||||
|
558
|
625
|
|||||
Other
secured debt
|
|||||||
8.86%
Senior Secured Notes due in installments from 2007 to September
29,
2012(8)
|
|
189
|
|
235
|
|||
4.62%
to 8.85% Other secured financings due in installments from 2007
to May 9,
2021(2)(9)(10)
|
1,354
|
1,715
|
|||||
Total
senior secured and secured debt
|
$
|
8,024
|
$
|
8,884
|
|||
Unsecured(9)
|
|||||||
Massachusetts
Port Authority Special Facilities Revenue Bonds
|
|||||||
5.0-5.5%
Series 2001A due in installments from 2012 to January 1,
2027
|
$
|
338
|
$
|
338
|
|||
4.25%
Series 2001B due in installments from 2027 to January 1, 2031(2)
|
80
|
80
|
|||||
4.3%
Series 2001C due in installments from 2027 to January 1, 2031(2)
|
80
|
80
|
|||||
7.7%
Notes due December 15, 2005
|
122
|
122
|
|||||
7.9%
Notes due December 15, 2009
|
499
|
499
|
|||||
9.75%
Debentures due May 15, 2021
|
106
|
106
|
|||||
Development
Authority of Clayton County, loan agreement
|
|||||||
3.98%
Series 2000A due June 1, 2029(2)
|
65
|
65
|
|||||
4.05%
Series 2000B due May 1, 2035(2)
|
110
|
110
|
|||||
4.05%
Series 2000C due May 1, 2035(2)
|
120
|
120
|
|||||
8.3%
Notes due December 15, 2029
|
925
|
925
|
|||||
8.125%
Notes due July 1, 2039
|
538
|
538
|
|||||
10.0%
Senior Notes due August 15, 2008
|
248
|
248
|
|||||
8.0%
Convertible Senior Notes due June 3, 2023
|
350
|
350
|
|||||
2
7/8%
Convertible Senior Notes due February 18, 2024
|
325
|
325
|
|||||
3.01%
to 10.375% Other unsecured debt due in installments from 2006 to
May 1,
2033
|
703
|
703
|
|||||
Total
unsecured debt
|
4,609
|
4,609
|
|||||
Total
secured and unsecured debt, including liabilities subject to
compromise
|
12,633
|
13,493
|
|||||
Less:
pre-petition debt classified as liabilities subject to
compromise(9)(10)
|
(4,945
|
)
|
(5,766
|
)
|
|||
Total
debt
|
7,688
|
7,727
|
|||||
Less:
current maturities
|
(1,466
|
)
|
(1,183
|
)
|
|||
Total
long-term debt
|
$
|
6,222
|
$
|
6,544
|
(1) |
Our
senior secured debt and secured debt is collateralized by first liens,
and
in many cases second and junior liens, on substantially all of our
assets,
including but not limited to accounts receivable, owned aircraft,
certain
spare engines, certain spare parts, certain flight simulators, ground
equipment, landing slots, international routes, equity interests
in
certain of our domestic subsidiaries, intellectual property and real
property. For more information on the Secured Super-Priority
Debtor-in-Possession Credit Agreement and other senior secured debt,
see
“DIP Credit Facility” and “Financing Agreement with Amex”, respectively,
in this Note.
|
(2) |
Our
variable interest rate long-term debt is shown using interest rates
which
represent LIBOR or Commercial Paper plus a specified margin, as provided
for in the related agreements. The rates shown were in effect at
December
31, 2006, if applicable.
|
(3) |
For
additional information about the repayment terms related to these
debt
maturities, see “Financing Agreement with Amex” in this
Note.
|
(4) |
For
information about the letters of credit issued by, and our related
reimbursement obligation to, General Electric Capital Corporation
(“GECC”), see “Letter of Credit Enhanced Special Facility Bonds” and
“Reimbursement Agreement and Other GECC Agreements” in this
Note.
|
(5) |
For
additional information about this debt, as amended (“Spare Engines Loan”),
see “Reimbursement Agreement and Other GECC Agreements” in this
Note.
|
(6) |
For
additional information about this debt, as amended (“Aircraft Loan”), see
“Reimbursement Agreement and Other GECC Agreements” in this
Note.
|
(7) |
For
additional information about this debt, as amended (“Spare Parts Loan”),
see “Reimbursement Agreement and Other GECC Agreements” in this
Note.
|
(8) |
In
October 2006, we refinanced our 9.5% Senior Secured Notes due 2008
(“Senior Notes”). In connection with the refinancing, we repaid $39
million in principal of the Senior Notes. We refinanced the remaining
$196
million principal of the Senior Notes by issuing $196 million principal
amount of new notes (“New Notes”). The New Notes are due in installments
through September 2012 and bear interest at a floating rate based
on LIBOR
plus a margin. The New Notes are secured by the same 32 aircraft
as the
Senior Notes.
|
(9) |
In
accordance with SOP 90-7, substantially all of our unsecured debt
has been
classified as liabilities subject to compromise. Additionally, certain
of
our undersecured debt has been classified as liabilities subject
to
compromise. For more information on liabilities subject to compromise,
see
Note 1.
|
(10)
|
Certain
of our secured and under-secured debt, which was classified as liabilities
subject to compromise at December 31, 2005, has been reclassified
from
liabilities subject to compromise or converted to operating leases
during
the year ended December 31, 2006 in connection with in-court restructuring
initiatives undertaken as part of our Chapter 11
reorganization.
|
Years
Ending December 31,
(in
millions)
|
Principal
Not
Subject
to
Compromise
|
|
Principal
Subject
to
Compromise
|
|
Total
Principal
Amount
|
|||||
2007
|
$
|
1,466
|
$
|
453
|
$
|
1,919
|
||||
2008
|
2,152
|
640
|
2,792
|
|||||||
2009
|
392
|
868
|
1,260
|
|||||||
2010
|
1,300
|
177
|
1,477
|
|||||||
2011
|
1,307
|
103
|
1,410
|
|||||||
After
2011
|
1,071
|
2,704
|
3,775
|
|||||||
Total
|
$
|
7,688
|
$
|
4,945
|
$
|
12,633
|
● |
maintain
unrestricted funds in an amount not less than $750 million through
May 31,
2006; $1.0 billion at all times from June 1, 2006, through November
30,
2006; $750 million at all times from December 1, 2006, through February
28, 2007; and $1.0 billion at all times thereafter (“Liquidity
Covenant”);
|
● |
not
exceed specified levels of capital expenditures during any fiscal
quarter;
and
|
● |
achieve
specified levels of earnings before interest, taxes, depreciation,
amortization and aircraft rent, as defined (“EBITDAR”), for successive
trailing 12-month periods through March 2008. During 2005, we were
required to achieve increasing levels of EBITDAR, including EBITDAR
of
$644 million for the 12-month period ending December 31, 2005. Thereafter,
the minimum EBITDAR level for each successive trailing 12-month period
continues to increase, including $1.4 billion for the 12-month period
ended December 31, 2006; $2.0 billion for the 12-month period ending
December 31, 2007; and $2.0 billion for each 12-month period ending
thereafter. If our cash on hand exceeds the minimum cash on hand
that we
are required to maintain pursuant to the Liquidity Covenant, then
the
EBITDAR level that we are required to achieve is effectively reduced
by
the amount of such excess cash, up to a maximum reduction of $250
million
from the required EBITDAR level.
|
● |
$295
million principal amount of bonds issued by the Development Authority
of
Clayton County (“Clayton Authority”) to refinance the construction cost of
certain facilities leased to us at Hartsfield-Jackson Atlanta
International Airport. We pay debt service on these bonds pursuant
to loan
agreements between us and the Clayton
Authority.
|
● |
$86
million principal amount of bonds issued by other municipalities
to
refinance the construction cost of certain facilities leased to us
at
Cincinnati/Northern Kentucky International Airport and Salt Lake
City
International Airport. We pay debt service on these bonds pursuant
to
long-term lease agreements.
|
Years
Ending December 31,
(in
millions)
|
Not
Subject to
Compromise
|
Subject
to
Compromise
|
Total
|
|||||||
2007
|
$
|
104
|
$
|
6
|
$
|
110
|
||||
2008
|
100
|
3
|
103
|
|||||||
2009
|
99
|
—
|
99
|
|||||||
2010
|
99
|
—
|
99
|
|||||||
2011
|
94
|
—
|
94
|
|||||||
After
2011
|
94
|
—
|
94
|
|||||||
Total
minimum lease payments
|
590
|
9
|
599
|
|||||||
Less:
amount of lease payments representing interest
|
266
|
1
|
267
|
|||||||
Present
value of future minimum capital lease payments
|
324
|
8
|
332
|
|||||||
Less:
current obligations under capital leases
|
37
|
5
|
42
|
|||||||
Long-term
capital lease obligations
|
$
|
287
|
$
|
3
|
$
|
290
|
Years
Ending December 31,
(in
millions)
|
Delta
Lease
Payments
|
Contract
Carrier
Agreements
Lease
Payments(1)
|
Total
|
|||||||
2007
|
$
|
871
|
$
|
386
|
$
|
1,257
|
||||
2008
|
798
|
384
|
1,182
|
|||||||
2009
|
652
|
325
|
977
|
|||||||
2010
|
590
|
325
|
915
|
|||||||
2011
|
467
|
325
|
792
|
|||||||
After
2011
|
2,607
|
2,308
|
4,915
|
|||||||
Total
minimum lease payments
|
$
|
5,985
|
$
|
4,053
|
$
|
10,038
|
(1) |
Emerging
Issues Task Force 01-08, “Determining Whether an Arrangement Contains a
Lease”, provides guidance on whether an arrangement contains a lease
within the scope of SFAS 13 and is applicable to agreements entered
into
or modified after June 30, 2003. Because we entered into our contract
carrier agreement with Chautauqua prior to June 30, 2003, payments
totaling $183 million related to Chautauqua aircraft are not included
in
the table.
|
Years
Ending December 31,
(in
millions)
|
|
|||
2007
|
$
|
523
|
||
2008
|
823
|
|||
2009
|
960
|
|||
2010
|
712
|
|||
Total
|
$
|
3,018
|
Carrier(1)
|
Maximum
Number
of
Aircraft
to be
Operated
Under
Agreement
(1) (2)
|
Expiration
Date
of
Agreement
|
|||||
ASA(2)
|
161
|
2020
|
|||||
SkyWest
Airlines(2)
|
98
|
2020
|
|||||
Chautauqua
|
39
|
2016
|
|||||
Freedom
|
42
|
2017
|
|||||
Shuttle
America
|
16
|
2019
|
(1) |
The
table does not include information regarding Eagle because our agreement
with Eagle is structured as a revenue proration arrangement which
establishes a fixed dollar or percentage division of revenues for
tickets
sold to passengers traveling on connecting flight
itineraries.
|
(2) |
In
our Chapter 11 proceedings, we assumed our obligations under
the contract
carrier agreements with ASA and SkyWest Airlines. Accordingly,
these
agreements are not subject to rejection pursuant to Section 365
of the
Bankruptcy Code.
|
·
|
SkyWest
Airlines, Inc. (“SkyWest Airlines”) and Chautauqua for all periods
presented;
|
·
|
Shuttle
America for the year ended December 31, 2006 and from September 1
through
December 31, 2005;
|
·
|
ASA
for the year ended December 31, 2006 and from September 8 through
December
31, 2005. On September 7, 2005, we sold ASA to SkyWest, Inc. (“SkyWest”);
and
|
·
|
Freedom
Airlines, Inc. (“Freedom”) for the year ended December 31, 2006 and from
October 1 to December 31, 2005.
|
(in
millions, except for number of aircraft operated),
unaudited
|
2006
|
2005
|
|||||
ASMs
|
15,390
|
8,275
|
|||||
RPMs
|
11,931
|
5,961
|
|||||
Number
of aircraft operated, end of period
|
324
|
265
|
(in
millions)
|
2006
|
2005
|
|||||
Deferred
tax assets:
|
|||||||
Net
operating loss carryforwards
|
$
|
2,921
|
$
|
3,246
|
|||
Additional
minimum pension liability (see Note 10)
|
615
|
1,565
|
|||||
Postretirement
benefits
|
681
|
716
|
|||||
Other
employee benefits
|
2,898
|
992
|
|||||
AMT
credit carryforward
|
346
|
346
|
|||||
Rent
expense
|
1,215
|
398
|
|||||
Other
|
598
|
757
|
|||||
Valuation
allowance
|
(5,169
|
)
|
(3,954
|
)
|
|||
Total
deferred tax assets
|
$
|
4,105
|
$
|
4,066
|
|||
Deferred
tax liabilities:
|
|||||||
Depreciation
and amortization
|
$
|
3,850
|
$
|
3,763
|
|||
Other
|
259
|
336
|
|||||
Total
deferred tax liabilities
|
$
|
4,109
|
$
|
4,099
|
(in
millions)
|
2006
|
2005
|
|||||
Current
deferred tax assets, net
|
$
|
402
|
$
|
99
|
|||
Noncurrent
deferred tax liabilities, net
|
(406
|
)
|
(132
|
)
|
|||
Total
deferred tax liabilities, net
|
$
|
(4
|
)
|
$
|
(33
|
)
|
(in
millions)
|
2006
|
2005
|
2004
|
|||||||
Current
tax benefit (provision)
|
$
|
17
|
$
|
(9
|
)
|
$
|
—
|
|||
Deferred
tax benefit (exclusive of the other components listed
below)
|
2,364
|
1,464
|
1,139
|
|||||||
Increase
in valuation allowance
|
(1,616
|
)
|
(1,414
|
)
|
(2,345
|
)
|
||||
Income
tax benefit (provision)
|
$
|
765
|
$
|
41
|
$
|
(1,206
|
)
|
|
2006
|
2005
|
2004
|
|||||||
U.S.
federal statutory income tax rate
|
(35.0
|
)%
|
(35.0
|
)%
|
(35.0
|
)%
|
||||
State
taxes, net of federal income tax effect
|
(2.5
|
)
|
(3.3
|
)
|
(1.5
|
)
|
||||
Goodwill
impairment
|
—
|
—
|
7.5
|
|||||||
Increase
in valuation allowance
|
23.2
|
36.6
|
58.8
|
|||||||
Other,
net
|
3.3
|
0.6
|
0.4
|
|||||||
Effective
income tax rate
|
(11.0
|
)%
|
(1.1
|
)%
|
30.2
|
%
|
·
|
amended
our postretirement healthcare plan for pilots (1) to increase healthcare
premiums for pilots who retire after June 1, 2006 and their survivors
prior to age 65 and (2) to provide that pilots who retire after June
1,
2006 are not eligible for our subsidized post-age 65 healthcare coverage.
This amendment was accounted for as a negative plan amendment under
SFAS
No. 106, “Employer’s Accounting for Postretirement Benefits Other than
Pensions” (“SFAS 106”). It reduced the accumulated plan benefit obligation
(“APBO”) for this plan by $63
million.
|
·
|
amended
our disability and survivorship plan for pilots (“Pilot D&S Plan”) to
replace survivor benefits and basic life insurance coverage with
term life
insurance for pilots who retire on or after January 1, 2008. This
amendment reduced the APBO for the Pilot D&S Plan by $65
million.
|
·
|
provided
that ALPA would not oppose the termination of the Pilot Plan and
that the
non-qualified defined benefit pension plans for pilots would be terminated
if the Pilot Plan was terminated. The Pilot Plan and these non-qualified
plans were terminated effective September 2,
2006.
|
·
|
changed
our contribution to the Delta Pilots Defined Contribution Plan to
9% of
covered pay for all pilots, effective upon termination of the Pilot
Plan.
Prior to this change, pilots received a contribution between zero
and 23%
of covered pay, based on the pilot’s age and years of service on January
1, 2005.
|
·
|
as
of the date we emerge from Chapter 11, the PBGC has agreed to irrevocably
waive its rights to restore the Pilot Plan in full or in part;
|
·
|
we
have agreed not to establish any new qualified defined benefit plans
for
pilots for a period of five years after we emerge from Chapter 11;
|
·
|
the
parties agree to take steps to protect our net operating loss carryforward
tax benefits;
|
·
|
absent
extraordinary unanticipated circumstances we will (a) elect the
alternative funding schedule under section 402(a)(1) of the pension
reform
legislation (“Pension Protection Act”) with respect to the qualified
defined benefit pension plan for non-pilot employees (“Non-pilot Plan”);
(b) not seek a distress termination of the Non-pilot Plan; and (c)
provide
in our reorganization plan that we shall continue the Non-pilot Plan;
and
|
·
|
we
confirmed our previously stated intention reached independently of
the
PBGC Settlement Agreement that we would make a contribution to the
Non-Pilot Plan of not less than $50 million minus any amounts contributed
to such plan subsequent to our election of Airline Relief under the
Pension Protection Act and prior to our emergence from Chapter 11.
|
(in
millions)
|
Pre-SFAS
158
|
Effect
of adopting
SFAS
158
|
As
reported at
December
31, 2006
|
|||||||
Other
noncurrent assets
|
$
|
1,196
|
$
|
(248
|
)
|
$
|
948
|
|||
Liabilities
subject to compromise
|
20,502
|
(685
|
)
|
19,817
|
||||||
Accumulated
other comprehensive loss
|
(955
|
)
|
437
|
(518
|
)
|
Pension
Benefit
|
Other
Postretirement
Benefit
|
Other
Postemployment
Benefit
|
|||||||||||||||||
(in
millions)
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|||||||
Benefit
obligation at beginning of year
|
$
|
12,893
|
$
|
12,140
|
$
|
1,793
|
$
|
1,835
|
$
|
2,271
|
$
|
2,297
|
|||||||
Service
cost
|
34
|
155
|
17
|
17
|
45
|
64
|
|||||||||||||
Interest
cost
|
712
|
715
|
97
|
114
|
125
|
136
|
|||||||||||||
Actuarial
(gain) loss
|
(71
|
)
|
1,262
|
289
|
33
|
(10
|
)
|
(106
|
)
|
||||||||||
Benefits
paid, including lump sums and annuities
|
(844
|
)
|
(1,699
|
)
|
(214
|
)
|
(187
|
)
|
(128
|
)
|
(120
|
)
|
|||||||
Participant
contributions
|
—
|
—
|
38
|
32
|
—
|
—
|
|||||||||||||
Settlement
gain on termination of the Pilot Plan
|
(5,169
|
)
|
—
|
—
|
—
|
—
|
—
|
||||||||||||
Curtailment
losses
|
—
|
320
|
—
|
—
|
—
|
—
|
|||||||||||||
Plan
amendments
|
—
|
—
|
(859
|
)
|
(51
|
)
|
(65
|
)
|
—
|
||||||||||
Benefit
obligation at end of year
|
$
|
7,555
|
$
|
12,893
|
$
|
1,161
|
$
|
1,793
|
$
|
2,238
|
$
|
2,271
|
|||||||
|
|||||||||||||||||||
Fair
value of plan assets at beginning of year
|
$
|
6,521
|
$
|
6,842
|
$
|
1,863
|
$
|
1,829
|
|||||||||||
Actual
gain on plan assets
|
642
|
988
|
133
|
210
|
|||||||||||||||
Employer
contributions
|
5
|
390
|
—
|
—
|
|||||||||||||||
Benefits
paid, including lump sums and annuities
|
(844
|
)
|
(1,699
|
)
|
(215
|
)
|
(176
|
)
|
|||||||||||
Transfer
of Pilot Plan assets to PBGC
|
(1,734
|
)
|
—
|
—
|
—
|
||||||||||||||
Fair
value of plan assets at end of year
|
$
|
4,590
|
$
|
6,521
|
$
|
1,781
|
$
|
1,863
|
|
Pension
Benefit
|
Other
Postretirement
Benefit
|
Other
Postemployment
Benefit
|
||||||||||||||||
(in
millions)
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
||||||||
Funded
status
|
$
|
(2,965
|
)
|
$
|
(6,372
|
)
|
$
|
(1,161
|
)
|
$
|
(1,793
|
)
|
$
|
(457
|
)
|
$
|
(408
|
)
|
|
Unrecognized
net actuarial loss
|
—
|
4,286
|
—
|
368
|
—
|
275
|
|||||||||||||
Unrecognized
prior service cost (credit)
|
—
|
7
|
—
|
(496
|
)
|
—
|
—
|
||||||||||||
Contributions,
net made between the measurement date and year-end
|
—
|
—
|
45
|
46
|
(36
|
)
|
(12
|
)
|
|||||||||||
Settlement/curtailment
charge recognized between the measurement date and
year-end
|
—
|
(129
|
)
|
—
|
—
|
—
|
—
|
||||||||||||
Net
amount recognized on our Consolidated Balance Sheets
|
$
|
(2,965
|
)
|
$
|
(2,208
|
)
|
$
|
(1,116
|
)
|
$
|
(1,875
|
)
|
$
|
(493
|
)
|
$
|
(145
|
)
|
|
Pension
Benefit
|
Other
Postretirement
Benefit
|
Other
Postemployment
Benefit
|
||||||||||||||||
(in
millions)
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|||||||
Prepaid
benefit cost
|
$
|
—
|
$
|
8
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
302
|
|||||||
Accrued
benefit cost
|
—
|
(2,216
|
)
|
—
|
(1,875
|
)
|
—
|
(447
|
)
|
||||||||||
Net
prepaid/(accrued) benefit cost
|
—
|
(2,208
|
)
|
—
|
(1,875
|
)
|
—
|
(145
|
)
|
||||||||||
Intangible
assets
|
—
|
7
|
—
|
—
|
—
|
—
|
|||||||||||||
Current
liability
|
(3
|
)
|
—
|
(106
|
)
|
—
|
—
|
—
|
|||||||||||
Noncurrent
liability
|
(2,962
|
)
|
—
|
(1,010
|
)
|
—
|
(493
|
)
|
—
|
||||||||||
Additional
minimum liability
|
—
|
(4,115
|
)
|
—
|
—
|
—
|
—
|
||||||||||||
Accumulated
other comprehensive loss, pretax
|
—
|
4,108
|
—
|
—
|
—
|
—
|
|||||||||||||
Net
amount recognized on our Consolidated Balance
Sheets
|
$
|
(2,965
|
)
|
$
|
(2,208
|
)
|
$
|
(1,116
|
)
|
$
|
(1,875
|
)
|
$
|
(493
|
)
|
$
|
(145
|
)
|
|
Pension
Benefit
|
|
Other
Postretirement
Benefit
|
|
Other
Postemployment
Benefit
|
|
|||||||||||||
(in
millions)
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|||||||
Net
actuarial loss
|
$
|
1,583
|
$
|
—
|
$
|
645
|
$
|
—
|
$
|
287
|
$
|
—
|
|||||||
Prior
service cost (credit)
|
6
|
—
|
(1,311
|
)
|
—
|
(63
|
)
|
—
|
|||||||||||
Additional
minimum liability
|
—
|
4,108
|
—
|
—
|
—
|
—
|
|||||||||||||
Recognized
in accumulated other comprehensive loss, pretax
|
$
|
1,589
|
$
|
4,108
|
$
|
(666
|
)
|
$
|
—
|
$
|
224
|
|
$
|
—
|
(in
millions)
|
Pension
Benefit
|
Other
Postretirement
Benefit
|
Other
Postemployment
Benefit
|
|||||||
Net
actuarial loss
|
$
|
54
|
$
|
30
|
$
|
15
|
||||
Prior
service cost (credit)
|
1
|
(98
|
)
|
(6
|
)
|
|||||
Amount
to be amortized into net periodic cost (benefit)
|
$
|
55
|
$
|
(68
|
)
|
$
|
9
|
(in
millions)
|
2006
|
2005
|
|||||
Projected
benefit obligation
|
$
|
7,555
|
$
|
12,893
|
|||
Accumulated
benefit obligation
|
7,555
|
12,844
|
|||||
Fair
value of plan assets
|
4,590
|
6,521
|
Pension
Benefit
|
Other
Postretirement
Benefit
|
Other
Postemployment
Benefit
|
||||||||||||||||||||||||||
(in
millions)
|
2006
|
2005
|
2004
|
2006
|
|
2005
|
|
2004
|
|
2006
|
|
2005
|
|
2004
|
||||||||||||||
Service
cost
|
$
|
34
|
$
|
155
|
$
|
233
|
$
|
17
|
$
|
17
|
$
|
28
|
$
|
45
|
$
|
64
|
$
|
86
|
||||||||||
Interest
cost
|
712
|
715
|
757
|
97
|
114
|
121
|
125
|
136
|
128
|
|||||||||||||||||||
Expected
return on plan assets
|
(520
|
)
|
(598
|
)
|
(657
|
)
|
—
|
—
|
—
|
(163
|
)
|
(165
|
)
|
(154
|
)
|
|||||||||||||
Amortization
of prior service cost (benefit)
|
1
|
3
|
15
|
(44
|
)
|
(41
|
)
|
(79
|
)
|
(2
|
)
|
—
|
—
|
|||||||||||||||
Recognized
net actuarial loss
|
226
|
179
|
194
|
8
|
13
|
6
|
9
|
20
|
29
|
|||||||||||||||||||
Amortization
of net transition obligation
|
—
|
6
|
7
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||
Settlement
(gain) charge, net
|
(1,282
|
)
|
388
|
257
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Curtailment
loss (gain)
|
—
|
434
|
—
|
—
|
—
|
(527
|
)
|
—
|
—
|
—
|
||||||||||||||||||
Special
termination benefits
|
—
|
—
|
10
|
—
|
—
|
142
|
—
|
—
|
—
|
|||||||||||||||||||
Net
periodic (benefit) cost
|
$
|
(829
|
)
|
$
|
1,282
|
$
|
816
|
$
|
78
|
$
|
103
|
$
|
(309
|
)
|
$
|
14
|
$
|
55
|
$
|
89
|
Benefit
Obligations (1)
|
2006
|
2005
|
||||||||
Weighted
average discount rate
|
5.88
|
%
|
5.69
|
%
|
||||||
Rate
of increase in future compensation levels
|
0.36
|
%
|
0.72
|
%
|
||||||
Assumed
healthcare cost trend rate(2)
|
8.50
|
%
|
9.50
|
%
|
||||||
Net
Periodic Benefit Cost (3)
|
2006
|
2005
|
2004
|
|||||||
Weighted
average discount rate — pension benefit
|
5.67
|
%
|
5.81
|
%
|
6.09
|
%
|
||||
Weighted
average discount rate — other postretirement benefit
|
5.65
|
%
|
6.10
|
%
|
6.05
|
%
|
||||
Weighted
average discount rate — other postemployment benefit
|
5.72
|
%
|
6.10
|
%
|
6.13
|
%
|
||||
Rate
of increase (decrease) in future compensation levels
|
0.72
|
%
|
(1.28
|
)%
|
1.89
|
%
|
||||
Expected
long-term rate of return on plan assets
|
9.00
|
%
|
9.00
|
%
|
9.00
|
%
|
||||
Assumed
healthcare cost trend rate(2)
|
9.50
|
%
|
9.50
|
%
|
9.00
|
%
|
(1) |
Our
2006 and 2005 benefit obligations are measured using the RP 2000
combined
healthy mortality table projected to
2006.
|
(2) |
The
assumed healthcare cost trend rate is assumed to decline gradually
to
5.00% by 2010 for health plan costs and remain level
thereafter.
|
(3) |
Our
2006, 2005, and 2004 assumptions reflect various remeasurements of
certain
portions of our obligations and represent the weighted average of
the
assumptions used for each measurement date.
|
(in
millions)
|
1%
Increase
|
1%
Decrease
|
|||||
Increase
(decrease) in total service and interest cost
|
$
|
9
|
$
|
(7
|
)
|
||
Increase
(decrease) in the APBO
|
28
|
(48
|
)
|
2006
|
2005
|
||||||
U.S.
equity securities
|
34%
|
|
36%
|
|
|||
Non-U.S.
equity securities
|
14%
|
|
13%
|
|
|||
High
quality bonds
|
18%
|
|
19%
|
|
|||
Convertible
and high yield bonds
|
8%
|
|
8%
|
|
|||
Private
equity
|
17%
|
|
15%
|
|
|||
Real
estate
|
9%
|
|
9%
|
|
|||
Total
|
100%
|
|
100%
|
|
U.S.
equity securities
|
27-41%
|
Non-U.S.
equity securities
|
12-18%
|
High
quality bonds
|
15-21%
|
Convertible
and high yield bonds
|
5-11%
|
Private
equity
|
15%
|
Real
estate
|
10%
|
(in
millions)
|
Pension
Benefits
|
Other
Postretirement
Benefits
|
Other
Postemployment
Benefits
|
|||||||
2007
|
$
|
472
|
$
|
106
|
$
|
140
|
||||
2008
|
462
|
109
|
146
|
|||||||
2009
|
451
|
111
|
153
|
|||||||
2010
|
444
|
107
|
160
|
|||||||
2011
|
439
|
102
|
166
|
|||||||
2012
— 2016
|
2,240
|
408
|
925
|
|||||||
Total
|
$
|
4,508
|
$
|
943
|
$
|
1,690
|
(in
millions)
|
September
7,
2005
|
|||
Assets:
|
||||
Current
assets
|
$
|
153
|
||
Flight
equipment, net
|
1,555
|
|||
Other
property and equipment, net
|
61
|
|||
Other
assets
|
33
|
|||
Total
assets
|
$
|
1,802
|
||
Liabilities:
|
||||
Current
maturities of long-term debt
|
$
|
222
|
||
Other
current liabilities
|
116
|
|||
Long-term
debt
|
1,002
|
|||
Other
noncurrent liabilities
|
8
|
|||
Total
liabilities
|
$
|
1,348
|
|
2006
|
2005
|
2004
|
||||||||||||||||
|
Shares
(000)
|
Weighted
Average
Exercise
Price
|
Shares
(000)
|
Weighted
Average
Exercise
Price
|
Shares
(000)
|
Weighted
Average
Exercise
Price
|
|||||||||||||
Outstanding
at the beginning of the year
|
92,401
|
$
|
16
|
105,933
|
$
|
15
|
37,893
|
$
|
31
|
||||||||||
Granted
|
—
|
—
|
1,939
|
5
|
70,763
|
6
|
|||||||||||||
Exercised
|
—
|
—
|
—
|
—
|
(3
|
)
|
11
|
||||||||||||
Forfeited
|
—
|
—
|
(15,471
|
)
|
8
|
(2,720
|
)
|
38
|
|||||||||||
Rejected
|
(92,086
|
)
|
|
16
|
—
|
—
|
—
|
—
|
|||||||||||
Outstanding
at the end of the year
|
315
|
$
|
16
|
92,401
|
$
|
16
|
105,933
|
$
|
15
|
||||||||||
Exercisable
at the end of the year
|
315
|
$
|
16
|
53,944
|
$
|
22
|
33,337
|
$
|
33
|
(in
millions)
|
|
Additional
Minimum
Pension
Liability
|
|
Unrecognized
Pension Liability
|
|
Fuel
Derivative
Instruments
|
|
Marketable
Equity
Securities
|
|
Valuation
Allowance
|
|
Total
|
|
||||||
Balance
at January 1, 2004
|
$
|
(2,372
|
)
|
$
|
—
|
$
|
34
|
$
|
—
|
$
|
—
|
$
|
(2,338
|
)
|
|||||
Additional
minimum pension
liability adjustments |
71
|
—
|
—
|
—
|
|
71
|
|||||||||||||
Unrealized
gain
|
—
|
—
|
50
|
—
|
|
50
|
|||||||||||||
Realized
gain
|
—
|
—
|
(105
|
)
|
—
|
|
(105
|
)
|
|||||||||||
Tax
effect
|
(28
|
)
|
—
|
21
|
—
|
(29
|
)
|
(36
|
)
|
||||||||||
Net
of tax
|
43
|
—
|
(34
|
)
|
—
|
(29
|
)
|
(20
|
)
|
||||||||||
Balance
at December 31, 2004
|
(2,329
|
)
|
—
|
—
|
—
|
(29
|
)
|
(2,358
|
)
|
||||||||||
Additional
minimum pension
liability adjustments |
(365
|
)
|
—
|
—
|
—
|
|
(365
|
)
|
|||||||||||
Unrealized
gain
|
—
|
—
|
—
|
1
|
|
1
|
|||||||||||||
Tax
effect
|
141
|
—
|
—
|
—
|
(141
|
)
|
—
|
||||||||||||
Net
of tax
|
(224
|
)
|
—
|
—
|
1
|
(141
|
)
|
(364
|
)
|
||||||||||
Balance
at December 31, 2005
|
(2,553
|
)
|
—
|
—
|
1
|
(170
|
)
|
(2,722
|
)
|
||||||||||
Termination
of Pilot Plan
|
2,264
|
—
|
—
|
—
|
|
2.264
|
|||||||||||||
Additional
minimum pension
liability adjustments |
257
|
—
|
—
|
—
|
|
257
|
|||||||||||||
Unrealized
(loss) gain
|
—
|
—
|
(93
|
)
|
1
|
|
(92
|
)
|
|||||||||||
Realized
loss
|
—
|
—
|
70
|
—
|
|
70
|
|||||||||||||
Tax
effect
|
(958
|
)
|
—
|
—
|
—
|
239
|
(719
|
) | |||||||||||
Net
of tax
|
1,563
|
—
|
(23
|
)
|
1
|
239
|
1,780
|
||||||||||||
Adoption
of SFAS 158
|
990
|
(727
|
)
|
—
|
—
|
161
|
424
|
||||||||||||
Balance
at December 31, 2006
|
$
|
—
|
(727
|
)
|
$
|
(23
|
)
|
$
|
2
|
$
|
230
|
$
|
(518
|
)
|
(in
millions)
|
2006
|
2005
|
2004
|
|||||||
North
America
|
$
|
12,931
|
$
|
13,030
|
$
|
12,389
|
||||
Atlantic
|
2,997
|
2,255
|
2,088
|
|||||||
Pacific
|
164
|
150
|
143
|
|||||||
Latin
America
|
1,079
|
756
|
615
|
|||||||
Total
|
$
|
17,171
|
$
|
16,191
|
$
|
15,235
|
Restructuring
and Other Charges
|
|
|||||||||||||||
|
|
Facilities
|
|
Severance
and Related Costs
|
|
|||||||||||
|
|
and
|
|
Workforce
Reduction Programs
|
|
|||||||||||
(in
millions)
|
|
Other
|
|
2005
|
|
2004
|
|
2002
|
|
2001
|
|
|||||
Balance
at January 1, 2004
|
$
|
47
|
$
|
—
|
$
|
—
|
$
|
5
|
$
|
1
|
||||||
Additional
costs and expenses
|
—
|
—
|
42
|
—
|
—
|
|||||||||||
Payments
|
(8
|
)
|
—
|
—
|
(2
|
)
|
(1
|
)
|
||||||||
Adjustments
|
(1
|
)
|
—
|
—
|
(3
|
)
|
—
|
|||||||||
Balance
at December 31, 2004
|
38
|
—
|
42
|
—
|
—
|
|||||||||||
Additional
costs and expenses
|
6
|
46
|
5
|
—
|
—
|
|||||||||||
Payments
|
(8
|
)
|
—
|
(36
|
)
|
—
|
—
|
|||||||||
Adjustments
|
—
|
—
|
(9
|
)
|
—
|
—
|
||||||||||
Balance
at December 31, 2005
|
36
|
46
|
2
|
—
|
—
|
|||||||||||
Additional
costs and expenses
|
3
|
29
|
—
|
—
|
—
|
|||||||||||
Payments
|
(8
|
)
|
(53
|
)
|
(2
|
)
|
—
|
—
|
||||||||
Adjustments
|
(27
|
)
|
(21
|
)
|
—
|
—
|
—
|
|||||||||
Balance
at December 31, 2006
|
$
|
4
|
$
|
1
|
$
|
—
|
$
|
—
|
$
|
—
|
● |
Workforce
Reduction.
A
$29 million charge related to our decision to reduce staffing by
approximately 7,000 to 9,000 jobs by December 2007, which has been
substantially completed. This charge was partially offset by a $21
million
reduction in accruals associated with prior year workforce reduction
programs.
|
● |
Pension
Curtailment Charge.
A
$447 million curtailment charge related to our Pilot Plan and Non-pilot
Plan. This charge related to the impact on the Non-pilot Plan of
the
planned reduction of 6,000 to 7,000 jobs announced in November 2004
and
the freeze of service accruals under the Pilot Plan effective December
31,
2004 (see Note 10).
|
● |
Pension
Settlements.
$388 million in settlement charges related to the Pilot Plan due
to a
significant increase in pilot retirements and lump sum distributions
from
plan assets (see Note 10).
|
● |
Workforce
Reduction.
A
$46 million charge related to our decision to reduce staffing by
approximately 7,000 to 9,000 jobs by December 2007, which has been
substantially completed. This charge was partially offset by a net
$3
million reduction in accruals associated with prior year workforce
reduction programs.
|
● |
Asset
Charges.
A
$10 million charge related to the removal from service of six B-737-200
aircraft prior to their lease expiration
dates.
|
● |
Elimination
of Retiree Healthcare Subsidy.
A
$527 million gain related to our decision to eliminate the company
provided healthcare coverage subsidy for employees who retire after
January 1, 2006 (see Note 10).
|
● |
Pension
Settlements.
$251 million in settlement charges related to the Pilot Plan due
to a
significant increase in pilot retirements and lump sum distribution
from
plan assets (see Note 10).
|
● |
Workforce
Reduction.
A
$194 million charge related to our decision to reduce staffing by
approximately 6,000 to 7,000 jobs by December 2005. This charge included
charges of $152 million related to special termination benefits (see
Note
10) and $42 million related to employee
severance.
|
● |
Asset
Charges.
A
$41 million aircraft impairment charge related to our agreement to
sell
eight owned MD-11 aircraft. In October 2004, we sold these aircraft
and
related inventory to a third party for $227
million.
|
Years
Ended December 31,
|
||||||||||
(in
millions, except per share data)
|
2006
|
2005
|
2004
|
|||||||
Basic
and diluted:
|
||||||||||
Net
loss
|
$
|
(6,203
|
)
|
$
|
(3,818
|
)
|
$
|
(5,198
|
)
|
|
Dividends
on allocated Series B ESOP Convertible Preferred Stock
|
(2
|
)
|
(18
|
)
|
(19
|
)
|
||||
Net
loss attributable to common shareowners
|
(6,205
|
)
|
(3,836
|
)
|
(5,217
|
)
|
||||
Weighted
average shares outstanding
|
196.5
|
161.5
|
127.0
|
|||||||
Basic
and diluted loss per share
|
$
|
(31.58
|
)
|
$
|
(23.75
|
)
|
$
|
(41.07
|
)
|
|
|
|
Allowance
for:
|
|
|||||||||
(in
millions)
|
|
Restructuring
and
Other
Charges (1)
|
|
Uncollectible
Accounts
Receivable
(2)
|
|
Obsolescence
of
Expendable
Parts
&
Supplies
Inventory
|
|
Deferred
Tax
Assets
|
|
||||
Balance
at January 1, 2004
|
$
|
53
|
$
|
38
|
$
|
183
|
$
|
25
|
|||||
Additional
costs and expenses
|
42
|
32
|
15
|
2,508
|
|||||||||
Payments
and deductions
|
(15
|
)
|
(32
|
)
|
(14
|
)
|
(133
|
)
|
|||||
Balance
at December 31, 2004
|
80
|
38
|
184
|
2,400
|
(3)
|
||||||||
Additional
costs and expenses
|
57
|
18
|
26
|
1,746
|
|||||||||
Payments
and deductions
|
(53
|
)
|
(15
|
)
|
(9
|
)
|
(192
|
)
|
|||||
Balance
at December 31, 2005
|
84
|
41
|
201
|
3,954
|
(4)
|
||||||||
Additional
costs and expenses
|
32
|
16
|
12
|
2,749
|
|||||||||
Payments
and deductions
|
(111
|
)
|
(36
|
)
|
(52
|
)
|
(1,534
|
)
|
|||||
Balance
at December 31, 2006
|
$
|
5
|
$
|
21
|
$
|
161
|
$
|
5,169
|
(5)
|
(1) |
See
Note 7 for additional information related to leased aircraft and
restructuring and other charges.
|
(2) |
The
payments and deductions related to the allowance for uncollectible
accounts receivable represent the write-off of accounts considered
to be
uncollectible, less recoveries.
|
(3) |
$29
million of this amount was recorded in accumulated other comprehensive
loss on our 2004 Consolidated Balance Sheet (see
Note 13).
|
(4) |
$141
million of this amount was recorded in accumulated other comprehensive
loss on our 2005 Consolidated Balance Sheet (see Note
13).
|
(5)
|
$400
million of this amount was recorded in accumulated other comprehensive
loss on our 2006 Consolidated Balance Sheet (see Note
13).
|
2006
|
Three
Months Ended
|
|
|||||||||||
(in
millions, except per share data)
|
|
March
31
|
|
June
30
|
|
September
30
|
|
December
31
|
|||||
Operating
revenue
|
$
|
3,719
|
$
|
4,655
|
$
|
4,659
|
$
|
4,138
|
|||||
Operating
(loss) income
|
(485
|
)
|
369
|
168
|
6
|
||||||||
Net
(loss) income
|
(2,069
|
)
|
(2,205
|
)
|
52
|
(1,981
|
)
|
||||||
Basic
(loss) earnings per share
|
(10.68
|
)
|
(11.18
|
)
|
0.26
|
(10.04
|
)
|
||||||
Diluted
(loss) earnings per share
|
(10.68
|
)
|
(11.18
|
)
|
0.22
|
(10.04
|
)
|
2005
|
Three
Months Ended
|
||||||||||||
(in
millions, except per share data)
|
March
31
|
June
30
|
September
30
|
December
31
|
|||||||||
Operating
revenue
|
$
|
3,706
|
$
|
4,249
|
$
|
4,308
|
$
|
3,928
|
|||||
Operating
loss
|
(957
|
)
|
(129
|
)
|
(240
|
)
|
(675
|
)
|
|||||
Net
loss
|
(1,071
|
)
|
(382
|
)
|
(1,130
|
)
|
(1,235
|
)
|
|||||
Basic
and diluted loss per share
|
(7.64
|
)
|
(2.64
|
)
|
(6.73
|
)
|
(6.54
|
)
|