The FINANCIAL — Delta Air Lines (NYSE: DAL) on July 19 reported financial results for the June 2010 quarter.
Key points include:
Delta's net income for the June 2010 quarter was $549 million, or $0.65 per diluted share, excluding special items(1). This is a $748 million improvement year over year.
Delta's net income was $467 million, or $0.55 per diluted share, for the June 2010 quarter.
Results include $90 million in profit sharing expense, in recognition of Delta employees' achievements toward meeting the company's financial targets.
Delta generated more than $1 billion in operating cash flow and ended the June 2010 quarter with $6.0 billion in unrestricted liquidity.
"Delta's profit this quarter is our best result in a decade and proof that our plan has positioned us well as the economy begins its recovery," said Richard Anderson, Delta's chief executive officer. "These results would not have been possible without the dedication and determination of Delta people. We're happy to recognize our employees' contributions with $90 million in profit sharing."
Delta's operating revenue grew $1.2 billion, or 17% in the June 2010 quarter compared to the 2009 quarter.
"Passenger revenue increased 19%, or $1.1 billion, compared to the prior year period on 1% lower capacity. Passenger unit revenue (PRASM) increased 19.4%, driven by a 17% improvement in yield and a 1.9 point improvement in load factor," Delta Air Lines informs.
Cargo revenue increased 22%, or $38 million, on higher cargo volume and yield.
Other, net revenue increased 3%, or $24 million, primarily due to increased baggage fees.
"We are seeing strong improvements in these early stages of the economic recovery and believe there's room for more revenue growth as the economy continues to stabilize," said Ed Bastian, Delta's president. "We anticipate double-digit year over year unit revenue gains for the September quarter."
In the June 2010 quarter, Delta's operating expense increased $317 million year over year due to higher fuel price and profit sharing expense, which were partially offset by incremental merger cost synergies.
Consolidated unit cost (CASM(2)), excluding fuel expense, profit sharing and special items, was flat in the June 2010 quarter on a year-over-year basis, despite 1% lower capacity. Consolidated CASM increased 5% due to higher fuel price and profit sharing expense.
Fuel Price and Related Hedges
Delta hedged 51% of its fuel consumption for the June 2010 quarter, for an average fuel price(3) of $2.32 per gallon.
As of June 30, 2010, Delta had $6.0 billion in unrestricted liquidity, including $4.4 billion in cash and $1.6 billion in undrawn revolving credit facilities. During the quarter, the company prepaid its $914 million revolving credit facility, which is now fully undrawn and available for future cash needs.
Operating cash flow during the June 2010 quarter was $1 billion, driven by the company's profitability and advance ticket sales, and free cash flow was $778 million. In the June quarter, Delta contributed nearly $500 million to its pension plans and completed its required 2010 pension funding. Year to date, Delta has generated $2.0 billion in operating cash flow and $1.4 billion in free cash flow.
Capital expenditures during the quarter were $283 million, which included $154 million for investments in aircraft, parts and modifications.
Subsequent to the end of the quarter, Delta completed its $450 million 2010-1A enhanced equipment trust certificate (EETC) offering. The certificates will be secured by 22 aircraft that are currently included in Delta's 2000-1 EETC, which matures in November 2010, and two 777LR aircraft which were delivered in March 2010.
Total debt payments in the June 2010 quarter were $345 million, of which $70 million was paid before scheduled maturity. At June 30, Delta's adjusted net debt was $15.6 billion, an $800 million reduction from March 31, 2010.
"Delta exhibited strong cost performance this quarter as merger synergies and productivity offset cost pressures in the business. Synergies have exceeded our expectations and will be a key factor as we strive to keep our non-fuel unit costs flat for the full year," said Hank Halter, Delta's chief financial officer. "In addition, we continue to make excellent progress in delevering our balance sheet – generating nearly $800 million in free cash flow this quarter and reducing adjusted net debt to $15.6 billion."
Delta has a strong commitment to employees, customers and the communities it serves. Key accomplishments in 2010 to date include:
Accruing $90 million in employee profit sharing, in recognition of the achievements of all Delta employees toward meeting the company's financial targets;
Bolstering Delta's trans-Atlantic joint venture with Air France-KLM with the addition of Alitalia, Italy's flag carrier;
Increasing Delta's global reach through alliance and codeshare partnerships, including plans to codeshare with GOL airlines, a Brazilian carrier, and the ten-year anniversary celebration of the SkyTeam global airline alliance with the addition of Vietnam Airlines and TAROM, Romania's flag carrier;
Selling Mesaba and Compass Airlines, two wholly owned regional airline subsidiaries, to Pinnacle Airlines Corp. and Trans States Holdings, Inc., respectively;
Obtaining approval from the U.S. Department of Transportation to offer customers nonstop service between Tokyo's Haneda Airport and Detroit and Los Angeles as well as between Sao Paulo, Brazil and Detroit;
Furthering Delta's efforts to become the leading airline of New York with the launch of Delta Shuttle service between New York-LaGuardia and Chicago-O'Hare International airports;
Committing to expand First Class availability to all domestic markets longer than 750 miles, or about two and one-half hours of flight time, beginning this fall;
Allowing customers to book scheduled commercial flights and on-demand private jet service in a single transaction through Delta AirElite;
Partnering with American Express to offer select Delta SkyMiles Credit Card members the opportunity to check a first bag free for up to nine people in the same reservation; and
Raising $1 million for the Martin Luther King Jr. National Memorial in Washington, D.C. with the support of our employees and customers.
Delta recorded special items totaling $82 million in the June 2010 quarter, including:
$46 million in merger-related expenses; and
$36 million in asset impairment charges related to aircraft retirements.
Delta recorded $58 million in merger-related expense items in the June 2009 quarter.
Included with this press release are Delta's unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2010 and 2009; a statistical summary for those periods; selected balance sheet data as of June 30, 2010 and Dec. 31, 2009; and a reconciliation of certain non-GAAP financial measures.