Exhibit 99.1

 

   

 

CONTACT: Investor Relations Corporate Communications
  404-715-2170 404-715-2554, media@delta.com
     

 

Delta Air Lines Announces June Quarter Profit

 

June quarter 2019 GAAP pre-tax income of $1.9 billion, net income of $1.4 billion

and earnings per diluted share of $2.21 on record total revenue of $12.5 billion

Record June quarter 2019 adjusted pre-tax income of $2.0 billion, adjusted net income of $1.5 billion

and adjusted earnings per diluted share of $2.35

Increases full year earnings guidance to $6.75 to $7.25 per share

Board of Directors approves 15% increase to company’s quarterly dividend

 

ATLANTA, July 11, 2019 - Delta Air Lines (NYSE:DAL) today reported financial results for the June quarter 2019 and provided its outlook for the September quarter 2019. Highlights of the June quarter 2019 results, including both GAAP and adjusted metrics, are below and incorporated here.

 

June Quarter Financial Highlights

 

Adjusted earnings per share were $2.35, reflecting a 32 percent increase year over year with 8.7 percent top-line growth, 2.3 points of operating margin expansion and $1.8 billion of free cash flow.
Total adjusted revenue, which excludes refinery sales, grew nearly $1 billion to $12.5 billion, a new quarterly record, with 52 percent of adjusted revenue from premium products and non-ticket sources.
Total unit revenue, adjusted, increased 3.8 percent driven by healthy growth in leisure and corporate revenue and an approximate one point benefit from the amended American Express agreement announced earlier this year.
Non-fuel unit cost (CASM-Ex) increased 1.4 percent compared to the prior year period, driven by better operations, fleet transformation and efficiency initiatives.
Generated $5.2 billion of operating cash flow and $2.5 billion of free cash flow on a year-to-date basis, after investing $2.7 billion into the business, primarily for aircraft purchases and modifications.
Returned $497 million to shareholders, comprised of $268 million of share repurchases and $229 million in dividends.

 

“Our record June quarter financial and operating results demonstrate that we are translating our powerful brand and competitive advantages into earnings growth, margin expansion and solid returns for our owners.  Our people are the best in the business and I’m proud to recognize their hard work and dedication this quarter with an additional $518 million toward next year’s profit sharing,” said Ed Bastian, Delta’s chief executive officer.  “With our strong first half performance and building momentum from our customer-focused initiatives, we are increasing our full-year earnings guidance to $6.75 to $7.25 per share.”

 

September Quarter 2019 Outlook

 

For the September quarter, Delta expects to deliver solid top-line growth and margin expansion.

 

  3Q19 Forecast
Earnings per share $2.10 - $2.40
Pre-tax margin 14.5% - 16.5%
Fuel price, including taxes and refinery impact $1.95 - $2.15
Total revenue, adjusted (year-over-year) Up 6% - 8%
TRASM, adjusted (year-over-year) Up 1.5% - 3.5%
CASM - Ex (year-over-year)

Up 1% - 2%

System Capacity (year-over-year) Up ~4%
See Note A for information about reconciliation of projected non-GAAP financial measures

Total adjusted revenue and TRASM, adjusted above exclude refinery sales and DAL Global Services (due to the sale of DGS in December 2018)

 

 

 

 

 

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Revenue Environment

 

Delta’s adjusted operating revenue of $12.5 billion for the June quarter improved 8.7 percent, $1 billion higher than prior year quarter. This revenue result marks a record for the company, driven by improvements across Delta’s business, including a ten percent increase in premium product ticket revenue and double-digit percentage increases in loyalty and third-party maintenance revenue. Cargo revenue during the quarter declined 17 percent driven by lower volumes and yield. Other revenue declined by $24 million as growth in loyalty and third-party maintenance was offset by $176 million lower third-party refinery sales.

 

Passenger Revenue by Geographic Region:

Domestic revenues grew 8.8% in the quarter on 3.6% higher passenger unit revenue (PRASM) and 5.1% higher capacity.  Domestic premium product revenue grew 11% and corporate revenue grew 8%, similar to the March quarter.
Atlantic revenues grew 6.1% in the quarter on 4.6% higher capacity and 1.5% higher PRASM, including a two point headwind from foreign exchange rates and pressure from the cessation of operations of our partner in India. Atlantic unit revenue improved from the March quarter driven by premium cabin performance and strong U.S. point of sale demand.  
Latin revenues grew 5.2% on a 7.8% increase in unit revenue and 2.4% lower capacity. This revenue improvement was driven by double-digit unit revenue growth in Brazil and Mexico beach markets.
Pacific revenues grew 3.2% in the quarter as 9.7% higher capacity was partially offset by a 5.9% decline in unit revenues. Unit revenue performance was pressured by a 6% increase in length of haul, softer than expected demand in Japan and a roughly 1.5 point currency headwind.

 

“With record passenger loads, customer satisfaction and $1 billion in revenue growth for the June quarter, demand for Delta’s customer-focused product and service has never been stronger. Our third quarter is off to a great start with a new highest revenue day on record on July 7th,” said Glen Hauenstein, Delta’s president. “We now expect revenue growth of six to seven percent for the year, a $3 billion increase over 2018, as we benefit from our multi-year pipeline of fleet, product, and loyalty initiatives.”

 

Cost Performance

 

Total adjusted operating expense for the June quarter increased $559 million versus the prior year quarter, with approximately 20% due to higher profit sharing expense. CASM-Ex was up 1.4 percent for the June quarter 2019 compared to the prior year quarter. This performance was driven by industry-leading operations, savings from the company’s fleet transformation and the One Delta efficiency initiative, which partially offset investments in our people and product. During the quarter, the company decided to accelerate retirement of its MD-90 fleet by two years to the end of 2022, which pressured CASM-Ex by approximately $60 million due to higher depreciation expense.

 

Adjusted fuel expense decreased $35 million, down two percent, relative to June quarter 2018. Delta’s adjusted fuel price per gallon for the June quarter was $2.08, which includes a $37 million benefit from the refinery.

 

Adjusted non-operating expense for the quarter was $60 million higher versus the prior year quarter, driven primarily by lower pension income and lower results from international equity partners.

 

Cash Flow and Shareholder Returns

 

Delta generated $3.3 billion of operating cash flow and $1.8 billion of free cash flow during the quarter after the investment of $1.4 billion into the business primarily for aircraft purchases and improvements. Year-to-date, the company has generated $5.2 billion of operating cash flow and $2.5 billion of free cash flow.

 

For the June quarter, Delta returned $497 million to shareholders, comprised of $268 million of share repurchases and $229 million in dividends. The company also completed repayment of the $1 billion short-term loan that was used to accelerate the repurchase of shares in the March quarter.

 

 

 

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The Board of Directors today declared a quarterly dividend of $0.4025 per share, an increase of 15% over previous levels. This marks the sixth consecutive increase in Delta’s dividend since it was established in 2013. The September quarter dividend will be payable to shareholders of record as of the close of business on July 25, 2019, to be paid on August 15, 2019.

 

“With efficiency gains from our operations, fleet transformation, and One Delta initiatives, we have solid line of sight to achieve our 1% cost growth target for the year,” said Paul Jacobson, Delta’s chief financial officer.  “Our strong financial foundation and cash generation allow us to sustainably invest in the business, while maintaining our investment grade balance sheet and consistently returning cash to shareholders.  With our cash flow exceeding original expectations, we are on track to return $3 billion to our owners this year through share repurchases and our increased dividend.”

 

Strategic Highlights

 

In the June quarter, Delta achieved a number of milestones across its five key strategic pillars.

 

Culture and People

Accrued an additional $518 million in profit sharing and paid $26 million in Shared Rewards as a testament to the outstanding performance made possible by Delta’s more than 80,000 employees around the world.
Ranked as the number one corporate blood donor by the American Red Cross for the second year in a row with 13,064 units of blood, up 18 percent from the prior year, from 254 Delta sponsored blood drives.
Recognized as an honoree of The Civic 50 by Points of Light, the world's largest volunteer service organization, for a second consecutive year, a testament to the commitment of the Delta people to everyday social responsibility by celebrating Pride, building homes with Habitat for Humanity and giving blood through the American Red Cross.
Named to Corporate Responsibility Magazine's annual 100 Best Corporate Citizens ranking, recognized for outstanding environmental, social and governance transparency and performance amongst the 1,000 largest U.S. public companies.

 

Operational Reliability

Delivered 148 days of zero mainline cancellations and 78 days of zero system cancellations for the first half of the year, a 30% improvement over 2018’s record performance.
Achieved record quarterly system and domestic load factor of 88.0% and 89.0%, up 1.3 points and 2.3 points, respectively, versus the prior year.
Reached record completion factor for the first half of the year on a system and mainline basis, with mainline completion factor of 99.86%.

 

Network and Partnerships

Celebrated the one-year anniversary of the joint venture with Korean Air, building the most comprehensive and reliable network in the trans-Pacific and providing our customers unparalleled access to over 80 destinations in Asia and more than 290 in the U.S.
Received tentative approval from the U.S. Department of Transportation for new Delta service between Tokyo-Haneda and five U.S. cities, a major milestone for Delta that, once finalized, will increase traveler options and bring more competition to Tokyo.
Received clearance for the WestJet-Delta proposed U.S./Canada transborder joint venture under Canada’s Competition Act from the Canadian Competition Bureau. The proposed joint venture is still subject to regulatory approval from the U.S. Department of Transportation.

 

Customer Experience and Loyalty

Took delivery of Delta's first A330-900neo aircraft, featuring a modern, luxurious interior with all four branded seat products - Delta One suites, Delta Premium Select, Delta Comfort+ and Main Cabin - and thoughtful touches like in-seat power ports, full-spectrum LED ambient lighting, spacious overhead bins and memory foam cushions throughout the aircraft for added comfort.
Launched Reclaim My Status, an industry-leading program allowing Delta SkyMiles Medallion Members who have experienced a life event that has temporarily affected their ability to travel to resume their status. Its launch is an important step in making our policies more intuitive and customer-friendly and has been extremely well-received by our Medallion Members.
Began the use of Apple Business Chat, allowing select Medallions and an expanded group of customers in the future to connect with a live Delta representative to receive in-the-moment assistance, or with a Delta Virtual Assistant, to get quick answers to frequently asked questions through the Fly Delta app.
Completed an initial two-week trial of free Wi-Fi to gather customer feedback from more than 700 flights, a first step toward making Wi-Fi as accessible in the sky as it is when visiting most businesses on the ground.

 

 

 

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Investment Grade Balance Sheet

Completed repayment of a $1 billion short-term loan that was used to accelerate the repurchase of shares in the March quarter, earlier than initially expected.
Received a reaffirmed investment-grade rating and Stable outlook from Fitch Ratings.
Achieved a 1.7x adjusted debt to EBITDAR ratio, in line with our long-term leverage ratio target of 1.5x to 2.5x adjusted debt to EBITDAR, which is expected to allow Delta to maintain investment grade ratings through a business cycle.

 

June Quarter Results

 

Adjusted results primarily exclude the impact of unrealized gains/losses on investments.

 

  GAAP        
($ in millions except per share and unit costs)  2Q19  2Q18  $
Change
   %
Change
 
Pre-tax income  1,907  1,386  521   37.6 %
Net income  1,443  1,036  407   39.3 %
Diluted earnings per share  2.21  1.49  0.72   48.3 %
Operating revenue  12,536  11,775  761   6.5 %
Total revenue per available seat mile (TRASM)  17.47  17.19  0.28   1.6 %
Operating margin  17.0%  14.3%  2.7   18.9 %
Operating cash flow  3,273  2,898  375   12.9 %
Consolidated unit cost (CASM)  14.51  14.73  (0.22)  (1.5)%
Operating expense  10,408  10,091  317   3.1 %
Fuel expense  2,291  2,341  (50)  (2.1)%
Average fuel price per gallon  2.08  2.19  (0.11)  (5.0)%
Non-operating expense  221  298  (77)  (25.8)%

 

 

 

  Adjusted      
($ in millions except per share and unit costs)  2Q19  2Q18  $
Change
   %
Change
 
Pre-tax income  1,997  1,617  379   23.5%
Net income  1,532  1,240  292   23.6%
Diluted earnings per share  2.35  1.78  0.57   32.1%
Operating revenue  12,496  11,498  998   8.7%
Total revenue per available seat mile (TRASM, adjusted)  17.42  16.78  0.63   3.8%
Operating margin  17.1%  14.8%  2.3   15.5%
Free cash flow  1,771  1,392  379   27.2%
Consolidated unit cost (CASM-Ex)  10.15  10.00  0.15   1.4%
Operating expense  10,358  9,799  559   5.7%
Fuel expense  2,282  2,317  (35)  (1.5)%
Average fuel price per gallon  2.08  2.17  (0.10)  (4.4)%
Non-operating expense  141  81  60   74.1%

 

 

 

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About Delta

 

Delta Air Lines (NYSE: DAL) is the U.S. global airline leader in products, services, innovation, reliability and customer experience. Powered by its 80,000 people around the world, Delta continues to invest billions in its people, improving the air travel experience and generating industry-leading shareholder returns.

 

Delta serves nearly 200 million people every year, taking customers across its industry-leading global network to more than 300 destinations in over 50 countries.
Headquartered in Atlanta, Delta offers more than 5,000 daily departures and as many as 15,000 affiliated departures including the premier SkyTeam alliance, of which Delta is a founding member.
Through its innovative alliances with Aeromexico, Air France-KLM, Alitalia, China Eastern, GOL, Korean Air, Virgin Atlantic, Virgin Australia and WestJet, Delta is bringing more choice and competition to customers worldwide.
Delta operates significant hubs and key markets at airports in Amsterdam, Atlanta, Boston, Detroit, London-Heathrow, Los Angeles, Mexico City, Minneapolis/St. Paul, New York-JFK and LaGuardia, Paris-Charles de Gaulle, Salt Lake City, São Paulo, Seattle, Seoul-Incheon and Tokyo-Narita.
Delta has been recognized as a Fortune’s top 50 Most Admired Companies in addition to being named the most admired airline for the eighth time in nine years. Additionally, Delta has ranked No.1 in the Business Travel News Annual Airline survey for an unprecedented eight consecutive years and named one of Fast Company’s Most Innovative Companies Worldwide for two consecutive years.
As an employer, Delta has been regularly awarded top honors from organizations like Glassdoor and recognized as a top workplace for women and members of the military. Delta CEO Ed Bastian was named among the “World’s Greatest Leaders” by Fortune magazine in 2018.
More about Delta can be found on the Delta News Hub as well as delta.com, via @DeltaNewsHub on Twitter and Facebook.com/delta.

 

 

 

Forward Looking Statements

 

Statements in this press release that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections and strategies reflected in or suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the cost of aircraft fuel; the availability of aircraft fuel; the impact of fuel hedging activity including rebalancing our hedge portfolio, recording mark-to-market adjustments or posting collateral in connection with our fuel hedge contracts; the performance of our significant investments in airlines in other parts of the world; the possible effects of accidents involving our aircraft; breaches or security lapses in our information technology systems; disruptions in our information technology infrastructure; our dependence on technology in our operations; the restrictions that financial covenants in our financing agreements could have on our financial and business operations; labor issues; the effects of weather, natural disasters and seasonality on our business; the effects of an extended disruption in services provided by third parties; failure or inability of insurance to cover a significant liability at Monroe’s Trainer refinery; the impact of environmental regulation on the Trainer refinery, including costs related to renewable fuel standard regulations; our ability to retain senior management and key employees; damage to our reputation and brand if we are exposed to significant adverse publicity through social media; the effects of terrorist attacks or geopolitical conflict; competitive conditions in the airline industry; interruptions or disruptions in service at major airports at which we operate; the effects of extensive government regulation on our business; the sensitivity of the airline industry to prolonged periods of stagnant or weak economic conditions; uncertainty in economic conditions and regulatory environment in the United Kingdom related to the exit of the United Kingdom from the European Union; and the effects of the rapid spread of contagious illnesses.

 

Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in our Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Caution should be taken not to place undue reliance on our forward-looking statements, which represent our views only as of July 11, 2019, and which we have no current intention to update.

 

 

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DELTA AIR LINES, INC.

Consolidated Statements of Operations

(Unaudited)

 

    Three Months Ended            Six Months Ended         
    June 30,            June 30,         
(in millions, except per share data)   2019    2018    $ Change   % Change   2019    2018    $ Change   % Change
Operating Revenue:                                    
Passenger  $11,368   $10,546   $822   8 %  $20,622   $19,311   $1,311   7 %
Cargo   186    223    (37)  (17)%   378    425    (47)  (11)%
Other   982    1,006    (24)  (2)%   2,008    2,007    1   — %
Total operating revenue   12,536    11,775    761   6 %   23,008    21,743    1,265   6 %
                                     
Operating Expense:                                    
Salaries and related costs   2,752    2,668    84   3 %   5,391    5,252    139   3 %
Aircraft fuel and related taxes   2,291    2,341    (50)  (2)%   4,269    4,195    74   2 %
Regional carriers expense, excluding fuel   905    863    42   5 %   1,798    1,701    97   6 %
Depreciation and amortization   713    583    130   22 %   1,328    1,186    142   12 %
Contracted services   657    540    117   22 %   1,288    1,084    204   19 %
Passenger commissions and other selling expenses   538    511    27   5 %   965    938    27   3 %
Aircraft maintenance materials and outside repairs   434    427    7   2 %   910    862    48   6 %
Landing fees and other rents   442    425    17   4 %   861    814    47   6 %
Profit sharing   518    404    114   28 %   739    592    147   25 %
Ancillary businesses and refinery   316    494    (178)  (36)%   667    987    (320)  (32)%
Passenger service   322    300    22   7 %   593    563    30   5 %
Aircraft rent   107    97    10   10 %   209    191    18   9 %
Other   413    438    (25)  (6)%   842    850    (8)  (1)%
Total operating expense   10,408    10,091    317   3 %   19,860    19,215    645   3 %
                                     
Operating Income   2,128    1,684    444   26 %   3,148    2,528    620   25 %
                                     
Non-Operating Expense:                                    
Interest expense, net   (75)   (79)   4   (5)%   (158)   (170)   12   (7)%
Unrealized gain/(loss) on investments, net   (82)   (238)   156   (66)%   18    (220)   238   NM
Miscellaneous, net   (64)   19    (83)  NM   (155)   (19)   (136)  NM
Total non-operating expense, net   (221)   (298)   77   (26)%   (295)   (409)   114   (28)%
                                     
Income Before Income Taxes   1,907    1,386    521   38 %   2,853    2,119    734   35 %
                                     
Income Tax Provision   (464)   (350)   (114)  33 %   (680)   (525)   (155)  30 %
                                     
Net Income  $1,443   $1,036   $407   39 %  $2,173   $1,594   $579   36 %
                                     
Basic Earnings Per Share  $2.22   $1.49           $3.30    $2.28          
Diluted Earnings Per Share  $2.21   $1.49           $3.29    $2.27          
                                     
Basic Weighted Average Shares Outstanding   650    695            658     699          
Diluted Weighted Average Shares Outstanding   652    697            660     701         

 

 

Note: The prior periods presented here have been recast to reflect adoption of certain new accounting standards.

 

 

 

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DELTA AIR LINES, INC.

Passenger Revenue

(Unaudited)

 

    Three Months Ended              Six Months Ended           
    June 30,              June 30,           
(in millions)   2019    2018    $ Change    % Change    2019    2018    $ Change    % Change 
Ticket- Main cabin  $5,938   $5,644   $294    5 %   $10,659   $10,267   $392    4 % 
Ticket- Business cabin and premium products   4,031    3,664    367    10 %    7,298    6,694    604    9 % 
Loyalty travel awards   751    680    71    10 %    1,442    1,298    144    11 % 
Travel-related services   648    558    90    16 %    1,223    1,052    171    16 % 
Total passenger revenue  $11,368   $10,546   $822    8 %   $20,622   $19,311   $1,311    7 % 

 

 

DELTA AIR LINES, INC.

Other Revenue

(Unaudited)

 

   Three Months Ended           Six Months Ended         
   June 30,           June 30,         
(in millions)  2019   2018   $ Change   % Change   2019   2018   $ Change   % Change 
Loyalty program  $484   $358   $126    35 %   $958   $705   $253    36 % 
Ancillary businesses and refinery   330    522    (192)   (37)%    699    1,042    (343)   (33)% 
Miscellaneous   168    126    42    33 %    351    260    91    35 % 
Total other revenue  $982   $1,006   $(24)   (2)%   $2,008   $2,007   $1    — % 

 

 

DELTA AIR LINES, INC.

Total Revenue

(Unaudited)

 

      Increase (Decrease)
      2Q19 versus 2Q18
Revenue  2Q19 ($M)    

Change

YoY

   Unit Revenue   Yield   Capacity
Domestic $8,071    8.8 %   3.6 %   0.9 %   5.1 %
Atlantic  1,880    6.1 %   1.5 %   1.9 %   4.6 %
Latin America  760    5.2 %   7.8 %   5.6 %   (2.4)%
Pacific  657    3.2 %   (5.9)%   (3.9)%   9.7 %
Total Passenger $11,368    7.8 %   2.9 %   1.4 %   4.7 %
Cargo Revenue  186    (16.7)%            
Other Revenue  982    (2.4)%            
Total Revenue $12,536    6.5 %   1.6%        
Third Party Refinery Sales  (40)                
Total Revenue, adjusted $12,496    8.7 %   3.8 %        

 

 

 

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DELTA AIR LINES, INC.

Statistical Summary

(Unaudited)

 

   Three Months Ended     Six Months Ended    
   June 30,     June 30,    
   2019  2018  Change  2019  2018  Change 
Revenue passenger miles (millions)   63,173   59,406   6.3  %   114,790   108,682   5.6  % 
Available seat miles (millions)   71,754   68,514   4.7  %   134,169   127,967   4.8  % 
Passenger mile yield (cents)   18.00   17.75   1.4  %   17.96   17.77   1.1  % 
Passenger revenue per available seat mile (cents)   15.84   15.39   2.9  %   15.37   15.09   1.8  % 
Total revenue per available seat mile (cents)   17.47   17.19   1.6  %   17.15   16.99   0.9  % 
TRASM, adjusted - see Note A (cents)   17.42   16.78   3.8  %   17.08   16.57   3.1  % 
Operating cost per available seat mile (cents)   14.51   14.73   (1.5) %   14.80   15.02   (1.5) % 
CASM-Ex - see Note A (cents)   10.15   10.00   1.4  %   10.57   10.50   0.6  % 
Passenger load factor   88.0%   86.7%   1.3 pts   85.6%   84.9%   0.6 pts 
Fuel gallons consumed (millions)   1,099   1,067   3.0  %   2,061   2,003   2.9  % 
Average price per fuel gallon  $2.08  $2.19   (5.0) %  $2.07  $2.10   (1.4) % 
Average price per fuel gallon, adjusted - see Note A  $2.08  $2.17   (4.4) %  $2.06  $2.10   (1.6) % 
Number of aircraft in fleet, end of period   1,060   1,031   29  %             

 

Note: The prior periods presented here have been recast to reflect adoption of certain new accounting standards. Except for number of aircraft in fleet, consolidated data presented includes operations under Delta’s contract carrier arrangements.

 

 

 

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DELTA AIR LINES, INC.

Consolidated Statements of Cash Flows

(Unaudited)

 

   Three Months Ended 
   June 30, 
(in millions)  2019   2018 
Cash Flows From Operating Activities:          
Net income  $1,443   $1,036 
Depreciation and amortization   713    583 
Deferred income taxes   470    338 
Pension, postretirement and postemployment payments greater than expense   (481)   (62)
Changes in air traffic liability   17    127 
Changes in profit sharing   518    400 
Other, net   593    476 
Net cash provided by operating activities   3,273    2,898 
           
Cash Flows From Investing Activities:          
Property and equipment additions:          
Flight equipment, including advance payments   (1,166)   (1,272)
Ground property and equipment, including technology   (393)   (308)
Purchase of equity investments   (89)    
Other, net   81    35 
Net cash used in investing activities   (1,567)   (1,545)
           
Cash Flows From Financing Activities:          
Payments on long-term debt and capital lease obligations   (1,165)   (1,848)
Repurchases of common stock   (268)   (600)
Cash dividends   (229)   (213)
Proceeds from long-term obligations       3,124 
Other, net       (38)
Net cash (used in) provided by financing activities   (1,662)   425 
           
Net Increase in Cash, Cash Equivalents and Restricted Cash Equivalents   44    1,778 
Cash, cash equivalents and restricted cash equivalents at beginning of period   2,985    1,482 
Cash, cash equivalents and restricted cash equivalents at end of period  $3,029   $3,260 

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the total of the same such amounts shown above:

 

Current assets:          
Cash and cash equivalents  $2,009   $1,886 
Restricted cash included in prepaid expenses and other   127    48 
Other assets:          
Cash restricted for airport construction   893    1,326 
Total cash, cash equivalents and restricted cash equivalents  $3,029   $3,260 

 

Note: The prior periods presented here have been recast to reflect adoption of certain new accounting standards.

 

 

 

 9 

 

 

DELTA AIR LINES, INC.

Consolidated Balance Sheets

(Unaudited)

 

(in millions)  June 30,
2019
   December 31,
2018
 
ASSETS 
Current Assets:        
Cash and cash equivalents  $2,009   $1,565 
Accounts receivable, net   2,844    2,314 
Fuel inventory   590    592 
Expendable parts and supplies inventories, net   493    463 
Prepaid expenses and other   1,198    1,406 
Total current assets   7,134    6,340 
           
Property and Equipment, Net:          
Property and equipment, net   30,165    28,335 
           
Other Assets:          
Operating lease right-of-use assets   5,906    5,994 
Goodwill   9,781    9,781 
Identifiable intangibles, net   4,824    4,830 
Cash restricted for airport construction   893    1,136 
Other noncurrent assets   3,815    3,850 
Total other assets   25,219    25,591 
Total assets  $62,518   $60,266 
           
LIABILITIES AND STOCKHOLDERS' EQUITY 
Current Liabilities:          
Current maturities of long-term debt and finance leases  $2,281   $1,518 
Current maturities of operating leases   841    955 
Air traffic liability   6,616    4,661 
Accounts payable   3,359    2,976 
Accrued salaries and related benefits   2,617    3,287 
Loyalty program deferred revenue   3,048    2,989 
Fuel card obligation   1,067    1,075 
Other accrued liabilities   1,335    1,117 
Total current liabilities   21,164    18,578 
           
Noncurrent Liabilities:          
Long-term debt and finance leases   7,710    8,253 
Pension, postretirement and related benefits   8,516    9,163 
Loyalty program deferred revenue   3,606    3,652 
Noncurrent operating leases   5,539    5,801 
Other noncurrent liabilities   2,025    1,132 
Total noncurrent liabilities   27,396    28,001 
           
Commitments and Contingencies          
           
Stockholders' Equity:   13,958    13,687 
Total liabilities and stockholders' equity  $62,518   $60,266 

 

 

 

 10 
 

 

Note A: The following tables show reconciliations of non-GAAP financial measures. The reasons Delta uses these measures are described below. Reconciliations may not calculate due to rounding.

 

Delta sometimes uses information ("non-GAAP financial measures") that is derived from the Consolidated Financial Statements, but that is not presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”). Under the U.S. Securities and Exchange Commission rules, non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. The tables below show reconciliations of non-GAAP financial measures used in this release to the most directly comparable GAAP financial measures.

Forward Looking Projections. The Company is not able to reconcile forward looking non-GAAP financial measures because the adjusting items such as those used in the reconciliations below will not be known until the end of the period and could be significant.



Pre-tax Income and Net Income, adjusted. We adjust pre-tax income and net income for the following items to determine pre-tax income and net income, adjusted for the reasons described below. We include the income tax effect of adjustments when presenting net income, adjusted.

 

MTM adjustments and settlements. Mark-to-market ("MTM") adjustments are defined as fair value changes recorded in periods other than the settlement period. Such fair value changes are not necessarily indicative of the actual settlement value of the underlying hedge in the contract settlement period. Settlements represent cash received or paid on hedge contracts settled during the period (defined below).

 

Equity investment MTM adjustments. We record our proportionate share of earnings/loss from our equity investments in Virgin Atlantic and Aeroméxico in non-operating expense. We adjust for our equity method investees' hedge portfolio MTM adjustments to allow investors to better understand and analyze our core operational performance in the periods shown.

 

Unrealized gain/loss on investments. We record the unrealized gains/losses on our equity investments in GOL, China Eastern, Air France-KLM and Korean, which are accounted for at fair value in non-operating expense. Adjusting for these gains/losses allows investors to better understand and analyze our core operational performance in the periods shown.

 

DGS sale adjustment. Because we sold DAL Global Services, LLC ("DGS") in December 2018, we have excluded the impact of DGS from 2018 results for comparability.

 

  Three Months Ended   Three Months Ended 
  June 30, 2019   June 30, 2019 
  Pre-Tax   Income   Net   Net Income 
(in millions, except per share data)  Income   Tax   Income   Per Diluted Share 
GAAP  $1,907   $(464)  $1,443   $2.21 
Adjusted for:                    
MTM adjustments and settlements   10    (2)    8      
Equity investment MTM adjustments   (2)       (2)     
Unrealized gain/loss on investments   82    1    83      
Total adjustments   90    (1   89    0.14 
Non-GAAP  $1,997   $(465)  $1,532   $2.35 
Year-over-year change                  32%  

 

 

  Three Months Ended   Three Months Ended 
  June 30, 2018   June 30, 2018 
  Pre-Tax   Income   Net   Net Income 
(in millions, except per share data)  Income   Tax   Income   Per Diluted Share 
GAAP  $1,386   $(350)  $1,036   $1.49 
Adjusted for:                    
MTM adjustments and settlements   24    (6   18      
Equity investment MTM adjustments   (22   5    (17     
Unrealized gain/loss on investments   238    (29   209      
DGS sale adjustment   (9)   2    (7)     
Total adjustments   231    (28)   203    0.29 
Non-GAAP  $1,617   $(378)  $1,240   $1.78 

 

 

 11 
 

 

Operating Revenue, adjusted and Total Revenue Per Available Seat Mile ("TRASM"), adjusted. We adjust operating revenue and TRASM for refinery sales to third parties to determine operating revenue, adjusted and TRASM, adjusted because refinery sales to third parties are not related to our airline segment. Operating revenue, adjusted and TRASM, adjusted therefore provide a more meaningful comparison of revenue from our airline operations to the rest of the airline industry. We adjust for the DGS sale for the same reason described above under the heading pre-tax income and net income, adjusted.

 

   Three Months Ended     
(in millions)  June 30, 2019   June 30, 2018   Change 
Operating revenue  $12,536   $11,775      
Adjusted for:               
Third-party refinery sales   (40)   (216)      
DGS sale adjustment       (61)      
Operating revenue, adjusted  $12,496   $11,498    8.7% 
Year-over-year change  $998           

 

   Six Months Ended     
(in millions)  June 30, 2019   June 30, 2018   Change 
Operating revenue  $23,008   $21,743      
Adjusted for:               
Third-party refinery sales   (89)   (429)      
DGS sale adjustment       (121)      
Operating revenue, adjusted  $22,920   $21,194    8.1% 

 

 

    Three Months Ended      
    June 30, 2019    June 30, 2018    Change 
TRASM (cents)   17.47    17.19      
Adjusted for:               
Third-party refinery sales   (0.06)   (0.32)     
DGS sale adjustment       (0.09)      
TRASM, adjusted   17.42    16.78    3.8% 

 

 

    Six Months Ended      
    June 30, 2019    June 30, 2018    Change 
TRASM (cents)   17.15    16.99      
Adjusted for:               
Third-party refinery sales   (0.07)   (0.33)     
DGS sale adjustment       (0.09)      
TRASM, adjusted   17.08    16.57    3.1% 

 

Operating Margin, adjusted. We adjust operating margin for MTM adjustments and settlements and third-party refinery sales for the same reasons described above under the headings Pre-tax income and net income, adjusted and Operating Revenue and TRASM, adjusted.

 

 

    Three Months Ended      
    June 30, 2019    June 30, 2018    Change 
Operating margin   17.0%    14.3%      
Adjusted for:                
MTM adjustments and settlements   0.1%    0.2%      
Third-party refinery sales   —%    0.3%       
Operating margin, adjusted   17.1%    14.8%    2.3pts 

 

 

 

 

 12 
 

 

Free Cash Flow. We present free cash flow because management believes this metric is helpful to investors to evaluate the company's ability to generate cash that is available for use for debt service or general corporate initiatives. Adjustments include:

 

Net redemptions of short-term investments. Net redemptions of short-term investments represent the net purchase and sale activity of investments and marketable securities in the period, including gains and losses. We adjust free cash flow for this activity to provide investors a better understanding of the company's free cash flow generated by our operations.

 

Net cash flows related to certain airport construction projects and other. Cash flows related to certain airport construction projects are included in our GAAP operating activities and capital expenditures. We have adjusted for these items, which were primarily funded by cash restricted for airport construction, to provide investors a better understanding of the company's free cash flow and capital expenditures that are core to our operational performance in the periods shown.

 

   Three Months Ended
(in millions)  June 30, 2019
Net cash provided by operating activities  $3,273 
Net cash used in investing activities   (1,567)
Adjustments:     
Net cash flows related to certain airport construction projects and other   65 
Total free cash flow  $1,771 

 

 

   Six Months Ended
(in millions)  June 30, 2019
Net cash provided by operating activities  $5,223 
Net cash used in investing activities   (2,671)
Adjustments:     
Net redemptions of short-term investments   (206)
Net cash flows related to certain airport construction projects and other   185 
Total free cash flow  $2,531 

 

 

   Three Months Ended
(in millions)  June 30, 2018
Net cash provided by operating activities  $2,898 
Net cash used in investing activities   (1,545)
Adjustments:     
Net redemptions of short-term investments   (4)
Net cash flows related to certain airport construction projects and other   43 
Total free cash flow  $1,392 

 

 

 

 

 

 13 
 

 

Non-Fuel Unit Cost or Cost per Available Seat Mile, ("CASM-Ex"). We adjust CASM for the following items to determine CASM-Ex for the reasons described below:

 

Aircraft fuel and related taxes. The volatility in fuel prices impacts the comparability of year-over-year financial performance. The adjustment for aircraft fuel and related taxes allows investors to understand and analyze our non-fuel costs and year-over-year financial performance.

 

Ancillary businesses and refinery. These expenses include aircraft maintenance we provide to third parties, our vacation wholesale operations, Delta Private Jets and refinery cost of sales to third parties. 2018 results also include staffing services performed by DAL Global Services. Because these businesses are not related to the generation of a seat mile, we adjust for the costs related to these areas to provide a more meaningful comparison of the costs of our airline operations to the rest of the airline industry.

 

Profit sharing. We adjust for profit sharing because this adjustment allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.

 

   Three Months Ended     
   June 30, 2019   June 30, 2018   Change 
CASM (cents)   14.51    14.73      
Adjusted for:               
Aircraft fuel and related taxes   (3.19)   (3.42)     
Ancillary businesses and refinery   (0.44)   (0.72)     
Profit sharing   (0.72)   (0.59)     
CASM-Ex   10.15    10.00    1.4% 

 

   Six Months Ended     
   June 30, 2019   June 30, 2018   Change 
CASM (cents)   14.80    15.02      
Adjusted for:               
Aircraft fuel and related taxes   (3.18)   (3.28)     
Ancillary businesses and refinery   (0.50)   (0.77)     
Profit sharing   (0.55)   (0.46)     
CASM-Ex   10.57    10.50    0.6% 

 

 

Capital Expenditures, net. We present net capital expenditures because management believes investors should be informed that a portion of these capital expenditures are reimbursed by a third party.

 

   Three Months Ended
(in millions)  June 30, 2019
Flight equipment, including advance payments  $1,166 
Ground property and equipment, including technology   393 
Net cash flows related to certain airport construction projects   (127)
Capital expenditures, net  $1,433 

 

   Six Months Ended
(in millions)  June 30, 2019
Flight equipment, including advance payments  $2,226 
Ground property and equipment, including technology   694 
Net cash flows related to certain airport construction projects   (228)
Capital expenditures, net  $2,692 

 

 

 

 14 
 

 

Operating Expense, adjusted. We adjust operating expense for MTM adjustments and settlements, third-party refinery sales and DGS sale adjustment for the same reasons described above under the headings pre-tax income and net income, adjusted and operating revenue and TRASM, adjusted to determine operating expense, adjusted.

 

   Three Months Ended 
   June 30, 
(in millions)  2019   2018 
Operating expense  $10,408   $10,091 
Adjusted for:          
MTM adjustments and settlements   (10)   (24)
Third-party refinery sales   (40)   (216)
DGS sale adjustment       (51)
Operating expense, adjusted  $10,358   $9,799 
Year-over-year change  $559      

 

Fuel expense, adjusted and Average fuel price per gallon, adjusted. The tables below show the components of fuel expense, including the impact of the refinery segment and airline segment hedging on fuel expense and average price per gallon. We then adjust for MTM adjustments and settlements for the same reason described under the heading pre-tax income and net income, adjusted.

 

           Average Price Per Gallon 
   Three Months Ended   Three Months Ended 
   June 30,   June 30, 
(in millions, except per gallon data)  2019   2018   2019   2018 
Fuel purchase cost  $2,318   $2,361   $2.11   $2.21 
Fuel hedge impact   10    25        0.02 
Refinery segment impact   (37)   (45)   (0.03)   (0.04)
Total fuel expense  $2,291   $2,341   $2.08   $2.19 
MTM adjustments and settlements   (10)   (24)       (0.02)
Total fuel expense, adjusted  $2,282   $2,317   $2.08   $2.17 
Change year-over-year  $(35)               
Percent change year-over-year   (2)%               

 

           Average Price Per Gallon 
   Six Months Ended   Six Months Ended 
   June 30,   June 30, 
(in millions, except per gallon data)  2019   2018   2019   2018 
Fuel purchase cost  $4,255   $4,289   $2.06   $2.14 
Fuel hedge impact   17    (5)   0.01     
Refinery segment impact   (3)   (89)       (0.04)
Total fuel expense  $4,269   $4,195   $2.07   $2.10 
MTM adjustments and settlements   (17)   4    (0.01)    
Total fuel expense, adjusted  $4,252   $4,199   $2.06   $2.10 
Change year-over-year  $52                

 

 

 

 15 
 

 

Non-operating Expense, adjusted. We adjust for equity investment MTM adjustments and unrealized gain/loss on investments to determine non-operating expense, adjusted for the same reasons described above in the heading pre-tax income and net income, adjusted.

 

   Three Months Ended 
(in millions)  June 30, 2019   June 30, 2018 
Non-operating expense  $221   $298 
Adjusted for:          
Equity investment MTM adjustments   2    22 
Unrealized gain/loss on investments   (82)   (238)
Non-operating expense, adjusted  $141   $81 
Change year-over-year  $60      

  

Adjusted Debt to Earnings Before Interest, Taxes, Depreciation, Amortization and Rent ("EBITDAR"). We present adjusted debt to EBITDAR because management believes this metric is helpful to investors in assessing the company's overall debt profile. Adjusted debt includes LGA bonds and operating lease liabilities. We calculate EBITDAR by adding depreciation and amortization to GAAP operating income and adjusting for the fixed portion of operating lease expense.

 

(in billions)  June 30, 2019 
Debt and finance lease obligations  $10 
Plus: Operating lease liability   6 
Adjusted Debt  $16 

 

   Last Twelve Months Ended 
(in billions)  June 30, 2019 
GAAP operating income  $6 
Adjusted for:     
Depreciation and amortization   2 
Fixed portion of operating lease expense   1 
EBITDAR  $9 

 

Adjusted Debt to EBITDAR 1.7x

 

 

 

 

 16 


The following information was filed by Delta Air Lines Inc (DAL) on Thursday, July 11, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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