R
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
£
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
PART
I. FINANCIAL INFORMATION
|
|||||||
Item
1. Financial Statements
|
|||||||
DELTA
AIR LINES, INC.
|
|||||||
Consolidated
Balance Sheets
|
|||||||
Successor
|
Predecessor
|
||||||
ASSETS
|
June
30,
|
December
31,
|
|||||
(in
millions)
|
2007
|
2006
|
|||||
(Unaudited)
|
|||||||
CURRENT
ASSETS:
|
|||||||
Cash
and cash equivalents
|
$
|
1,830
|
$
|
2,034
|
|||
Short-term
investments
|
1,549
|
614
|
|||||
Restricted
cash
|
333
|
750
|
|||||
Accounts
receivable, net of an allowance for uncollectible accounts
|
|||||||
of
$21 at June 30, 2007 and $21 at December 31, 2006
|
1,140
|
915
|
|||||
Expendable
parts and supplies inventories, net of an allowance for
|
|||||||
obsolescence
of $3 at June 30, 2007 and $161 at December 31, 2006
|
246
|
181
|
|||||
Deferred
income taxes, net
|
731
|
402
|
|||||
Prepaid
expenses and other
|
420
|
489
|
|||||
Total
current assets
|
6,249
|
5,385
|
|||||
PROPERTY
AND EQUIPMENT:
|
|||||||
Flight
equipment
|
9,176
|
17,641
|
|||||
Accumulated
depreciation
|
(76
|
)
|
(6,800
|
)
|
|||
Flight
equipment, net
|
9,100
|
10,841
|
|||||
Ground
property and equipment
|
1,750
|
4,575
|
|||||
Accumulated
depreciation
|
(64
|
)
|
(2,838
|
)
|
|||
Ground
property and equipment, net
|
1,686
|
1,737
|
|||||
Flight
and ground equipment under capital leases
|
556
|
474
|
|||||
Accumulated
amortization
|
(14
|
)
|
(136
|
)
|
|||
Flight
and ground equipment under capital leases, net
|
542
|
338
|
|||||
Advance
payments for equipment
|
141
|
57
|
|||||
Total
property and equipment, net
|
11,469
|
12,973
|
|||||
OTHER
ASSETS:
|
|||||||
Goodwill
|
12,373
|
227
|
|||||
Operating
rights and other intangibles, net of accumulated
amortization
|
|||||||
of
$35 at June 30, 2007 and $190 at December 31, 2006
|
2,918
|
89
|
|||||
Other
noncurrent assets
|
725
|
948
|
|||||
Total
other assets
|
16,016
|
1,264
|
|||||
Total
assets
|
$
|
33,734
|
$
|
19,622
|
|||
The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
|
DELTA
AIR LINES, INC.
|
|||||||
Consolidated
Balance Sheets
|
|||||||
Successor
|
Predecessor
|
||||||
LIABILITIES
AND SHAREOWNERS' EQUITY (DEFICIT)
|
June
30,
|
December
31,
|
|||||
(in
millions, except share data)
|
2007
|
2006
|
|||||
(Unaudited)
|
|||||||
CURRENT
LIABILITIES:
|
|||||||
Current
maturities of long-term debt and capital leases
|
$
|
1,386
|
$
|
1,503
|
|||
Air
traffic liability
|
2,684
|
1,797
|
|||||
Accounts
payable
|
1,288
|
936
|
|||||
Taxes
payable
|
438
|
500
|
|||||
Deferred
revenue
|
1,155
|
363
|
|||||
Accrued
salaries and related benefits
|
621
|
405
|
|||||
Other
accrued liabilities
|
159
|
265
|
|||||
Total
current liabilities
|
7,731
|
5,769
|
|||||
NONCURRENT
LIABILITIES:
|
|||||||
Long-term
debt and capital leases
|
6,913
|
6,509
|
|||||
Pension
and related benefits
|
3,235
|
-
|
|||||
Postretirement
benefits
|
1,042
|
-
|
|||||
Deferred
income taxes, net
|
1,502
|
406
|
|||||
Deferred
revenue
|
2,599
|
346
|
|||||
Notes
payable
|
640
|
-
|
|||||
Other
|
600
|
368
|
|||||
Total
noncurrent liabilities
|
16,531
|
7,629
|
|||||
LIABILITIES
SUBJECT TO COMPROMISE
|
-
|
19,817
|
|||||
COMMITMENTS
AND CONTINGENCIES
|
|||||||
SHAREOWNERS'
EQUITY (DEFICIT):
|
|||||||
Common
stock:
|
|||||||
Predecessor
common stock at $0.01 par value; 900,000,000 shares authorized,
|
|||||||
202,081,648
shares issued at December 31, 2006
|
-
|
2
|
|||||
Successor
common stock at $0.0001 par value; 1,500,000,000 shares
authorized,
|
|||||||
246,863,602
shares issued at June 30, 2007
|
-
|
-
|
|||||
Additional
paid-in capital
|
9,428
|
1,561
|
|||||
Retained
earnings (accumulated deficit)
|
164
|
(14,414
|
)
|
||||
Accumulated
other comprehensive income (loss)
|
8 |
(518
|
)
|
||||
Predecessor
stock held in treasury, at cost, 4,745,710 shares at December 31,
2006
|
-
|
(224
|
)
|
||||
Successor
stock held in treasury, at cost, 6,193,411 shares at June 30,
2007
|
(128
|
)
|
-
|
||||
Total
shareowners' equity (deficit)
|
9,472
|
(13,593
|
)
|
||||
Total
liabilities and shareowners' equity (deficit)
|
$
|
33,734
|
$
|
19,622
|
|||
The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
|
DELTA
AIR LINES,
INC.
|
|||||||||||||||||||
Consolidated
Statements of
Operations
|
|||||||||||||||||||
(Unaudited)
|
|||||||||||||||||||
Successor
|
|
Predecessor
|
|
Successor
|
|
Predecessor
|
|
||||||||||||
|
|
Two
Months
|
|
One
Month
|
|
Three
|
|
Two
Months
|
|
Four
Months
|
|
Six
|
|
||||||
|
|
Ended
|
|
Ended
|
|
Months
Ended
|
|
Ended
|
|
Ended
|
|
Months
Ended
|
|
||||||
|
|
June
30,
|
|
April
30,
|
|
June
30,
|
|
June
30,
|
|
April
30,
|
|
June
30,
|
|
||||||
(in
millions, except per share data)
|
|
2007
|
|
2007
|
|
2006
|
|
2007
|
|
2007
|
|
2006
|
|||||||
OPERATING
REVENUE:
|
|||||||||||||||||||
Passenger:
|
|||||||||||||||||||
Mainline
|
$
|
2,338
|
$
|
1,046
|
$
|
3,176
|
$
|
2,338
|
$
|
3,829
|
$
|
5,669
|
|||||||
Regional
affiliates
|
760
|
349
|
1,035
|
760
|
1,296
|
1,893
|
|||||||||||||
Cargo
|
82
|
36
|
128
|
82
|
148
|
251
|
|||||||||||||
Other,
net
|
268
|
124
|
402
|
268
|
523
|
722
|
|||||||||||||
Total
operating revenue
|
3,448
|
1,555
|
4,741
|
3,448
|
5,796
|
8,535
|
|||||||||||||
OPERATING
EXPENSE:
|
|||||||||||||||||||
Aircraft
fuel and related taxes
|
790
|
322
|
1,142
|
790
|
1,270
|
2,101
|
|||||||||||||
Salaries
and related costs
|
708
|
331
|
1,070
|
708
|
1,302
|
2,293
|
|||||||||||||
Contract
carrier arrangements
|
530
|
239
|
660
|
530
|
956
|
1,269
|
|||||||||||||
Depreciation
and amortization
|
193
|
95
|
318
|
193
|
386
|
619
|
|||||||||||||
Contracted
services
|
160
|
83
|
218
|
160
|
326
|
440
|
|||||||||||||
Aircraft
maintenance materials and outside repairs
|
165
|
82
|
232
|
165
|
320
|
459
|
|||||||||||||
Passenger
commissions and other selling expenses
|
175
|
78
|
234
|
175
|
298
|
446
|
|||||||||||||
Landing
fees and other rents
|
122
|
60
|
194
|
122
|
250
|
491
|
|||||||||||||
Passenger
service
|
61
|
24
|
81
|
61
|
95
|
154
|
|||||||||||||
Aircraft
rent
|
36
|
20
|
73
|
36
|
90
|
168
|
|||||||||||||
Profit
sharing
|
65
|
14
|
-
|
65
|
14
|
-
|
|||||||||||||
Other
|
98
|
62
|
150
|
98
|
189
|
211
|
|||||||||||||
Total
operating expense
|
3,103
|
1,410
|
4,372
|
3,103
|
5,496
|
8,651
|
|||||||||||||
OPERATING
INCOME (LOSS)
|
345
|
145
|
369
|
345
|
300
|
(116
|
)
|
||||||||||||
OTHER
(EXPENSE) INCOME:
|
|||||||||||||||||||
Interest
expense (contractual interest expense totaled $88 and $366 for
the
|
|||||||||||||||||||
one
month and four months ended April 30, 2007, respectively, and $306
|
|||||||||||||||||||
and
$615 for the three and six months ended June 30, 2006,
respectively)
|
(120
|
)
|
(62
|
)
|
(227
|
)
|
(120
|
)
|
(262
|
)
|
(441
|
)
|
|||||||
Interest
income
|
33
|
4
|
18
|
33
|
14
|
30
|
|||||||||||||
Miscellaneous,
net
|
9
|
(2
|
)
|
19
|
9
|
27
|
19
|
||||||||||||
Total
other expense, net
|
(78
|
)
|
(60
|
)
|
(190
|
)
|
(78
|
)
|
(221
|
)
|
(392
|
)
|
|||||||
INCOME
(LOSS) BEFORE REORGANIZATION
|
|||||||||||||||||||
ITEMS,
NET
|
267
|
85
|
179
|
267
|
79
|
(508
|
)
|
||||||||||||
REORGANIZATION
ITEMS, NET
|
-
|
1,339
|
(2,380
|
)
|
-
|
1,215
|
(3,783
|
)
|
|||||||||||
INCOME
(LOSS) BEFORE INCOME TAXES
|
267
|
1,424
|
(2,201
|
)
|
267
|
1,294
|
(4,291
|
)
|
|||||||||||
INCOME
TAX (PROVISION) BENEFIT
|
(103
|
)
|
4
|
(4
|
)
|
(103
|
)
|
4
|
17
|
||||||||||
NET
INCOME (LOSS)
|
164
|
1,428
|
(2,205
|
)
|
164
|
1,298
|
(4,274
|
)
|
|||||||||||
PREFERRED
STOCK DIVIDENDS
|
-
|
-
|
-
|
-
|
-
|
(2
|
)
|
||||||||||||
NET
INCOME (LOSS) ATTRIBUTABLE TO
|
|||||||||||||||||||
COMMON
SHAREOWNERS
|
$
|
164
|
$
|
1,428
|
$
|
(2,205
|
)
|
$
|
164
|
$
|
1,298
|
$
|
(4,276
|
)
|
|||||
BASIC
INCOME (LOSS) PER SHARE
|
$
|
0.42
|
$
|
7.24
|
$
|
(11.18
|
)
|
$
|
0.42
|
$
|
6.58
|
$
|
(21.86
|
)
|
|||||
DILUTED
INCOME (LOSS) PER SHARE
|
$
|
0.42
|
$
|
5.19
|
$
|
(11.18
|
)
|
$
|
0.42
|
$
|
4.63
|
$
|
(21.86
|
)
|
|||||
The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
|
DELTA
AIR LINES, INC.
|
||||||||||
Condensed
Consolidated Statements of Cash Flows
|
||||||||||
(Unaudited)
|
||||||||||
|
|
Successor
|
|
Predecessor
|
|
|||||
|
|
Two
Months
|
|
Four
|
|
Six
|
|
|||
|
|
Ended
|
|
Months
Ended
|
|
Months
Ended
|
|
|||
|
|
June
30,
|
|
April
30,
|
|
June
30,
|
|
|||
(in
millions)
|
|
2007
|
|
2007
|
|
2006
|
||||
Net
cash (used in) provided by operating activities
|
$
|
(210
|
)
|
$
|
1,025
|
$
|
770
|
|||
|
||||||||||
Cash
Flows From Investing Activities:
|
||||||||||
Property
and equipment additions:
|
||||||||||
Flight
equipment, including advance payments
|
(89
|
)
|
(167
|
)
|
(102
|
)
|
||||
Ground
property and equipment, including technology
|
(31
|
)
|
(41
|
)
|
(62
|
)
|
||||
Proceeds
from sales of flight equipment
|
6
|
21
|
26
|
|||||||
Proceeds
from sales of investments
|
-
|
34
|
-
|
|||||||
Decrease
in restricted cash
|
58
|
56
|
8
|
|||||||
Other,
net
|
-
|
-
|
5
|
|||||||
Net
cash used in investing activities
|
(56
|
)
|
(97
|
)
|
(125
|
)
|
||||
|
||||||||||
Cash
Flows From Financing Activities:
|
||||||||||
Payments
on long-term debt and capital lease obligations
|
(74
|
)
|
(166
|
)
|
(217
|
)
|
||||
Proceeds
from Exit Facilities
|
-
|
1,500
|
-
|
|||||||
Payments
on DIP Facility
|
-
|
(2,076
|
)
|
-
|
||||||
Other,
net
|
-
|
(50
|
)
|
(5
|
)
|
|||||
Net
cash used in financing activities
|
(74
|
)
|
(792
|
)
|
(222
|
)
|
||||
|
||||||||||
Net
(Decrease) Increase in Cash and Cash Equivalents
|
(340
|
)
|
136
|
423
|
||||||
Cash
and cash equivalents at beginning of period
|
2,170
|
2,034
|
2,008
|
|||||||
Cash
and cash equivalents at end of period
|
$
|
1,830
|
$
|
2,170
|
$
|
2,431
|
||||
|
||||||||||
Supplemental
disclosure of cash paid (refunded) for:
|
||||||||||
Interest,
net of amounts capitalized
|
$
|
77
|
$
|
243
|
$
|
347
|
||||
Interest
received from the preservation of cash due to Chapter 11
filing
|
-
|
(50
|
)
|
(47
|
)
|
|||||
Cash
received from aircraft renegotiation
|
-
|
-
|
(10
|
)
|
||||||
|
||||||||||
Non-cash
transactions:
|
||||||||||
Flight
equipment
|
$
|
-
|
$
|
135
|
$
|
-
|
||||
Flight
equipment under capital leases
|
4
|
13
|
156
|
|||||||
Debt
extinguishment from aircraft renegotiation
|
-
|
-
|
171
|
|||||||
|
||||||||||
The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
|
Delta
Air Lines, Inc.
|
|||||||||||||||||||
Consolidated
Statements of Shareowners' Equity (Deficit)
|
|||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
Accumulated
|
|
|
|||||||||||||
|
|
|
Retained
|
Other
|
|
|
|||||||||||||
|
|
Additional
|
Earnings
|
Comprehensive
|
|
|
|||||||||||||
|
Common
|
Paid-In
|
(Accumulated
|
Income
|
Treasury
|
|
|||||||||||||
(in
millions, except share data)
|
Stock
|
Capital
|
Deficit)
|
(Loss)
|
Stock
|
Total
|
|||||||||||||
Balance
at January 1, 2007 (Predecessor)
|
$
|
2
|
$
|
1,561
|
$
|
(14,444
|
)
|
$
|
(518
|
)
|
$
|
(224
|
)
|
$
|
(13,623
|
)
|
|||
Comprehensive
income:
|
|||||||||||||||||||
Net
income from January 1 to April 30, 2007
|
-
|
-
|
1,298
|
-
|
-
|
1,298
|
|||||||||||||
Other
comprehensive income
|
-
|
-
|
-
|
75
|
-
|
75
|
|||||||||||||
Total
comprehensive income
|
-
|
-
|
-
|
-
|
-
|
1,373
|
|||||||||||||
Balance
at April 30, 2007 (Predecessor) (Unaudited)
|
2
|
1,561
|
(13,146
|
)
|
(443
|
)
|
(224
|
)
|
(12,250
|
)
|
|||||||||
Fresh
start adjustments:
|
|||||||||||||||||||
Cancellation
of Predecessor common stock
|
(2
|
)
|
(1,561
|
)
|
-
|
-
|
224
|
(1,339
|
)
|
||||||||||
Elimination
of Predecessor accumulated deficit and
|
|||||||||||||||||||
accumulated
other comprehensive loss
|
-
|
-
|
13,146
|
443
|
-
|
13,589
|
|||||||||||||
Reorganization
value ascribed to Successor
|
-
|
9,400
|
-
|
-
|
-
|
9,400
|
|||||||||||||
Balance
at May 1, 2007 (Successor) (Unaudited)
|
-
|
9,400
|
-
|
-
|
-
|
9,400
|
|||||||||||||
Issuance
of 246,863,602 shares of common stock in connection
|
|||||||||||||||||||
with
emergence from Chapter 11 ($0.0001 per share),
|
|||||||||||||||||||
including
6,193,411 shares held in Treasury ($20.60 per share)
|
-
|
-
|
-
|
-
|
(128
|
)
|
(128
|
)
|
|||||||||||
Comprehensive
income:
|
|||||||||||||||||||
Net
income from May 1 to June 30, 2007
|
-
|
-
|
164
|
-
|
-
|
164
|
|||||||||||||
Other
comprehensive income
|
-
|
-
|
-
|
8
|
-
|
8
|
|||||||||||||
Total
comprehensive income
|
172
|
||||||||||||||||||
Compensation
expense associated with equity awards
|
-
|
28
|
-
|
-
|
-
|
28
|
|||||||||||||
Balance
at June 30, 2007 (Successor) (Unaudited)
|
$
|
-
|
$
|
9,428
|
$
|
164
|
$
|
8
|
$
|
(128
|
)
|
$
|
9,472
|
||||||
|
|||||||||||||||||||
The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
|
|||||||||||||||||||
·
|
254
million shares of common stock to holders of allowed general, unsecured
claims with respect to allowed general, unsecured claims of $11.4
billion.
We have reserved 132 million shares of common stock for future
distributions to holders of allowed general, unsecured claims when
disputed claims are resolved.
|
·
|
Approximately
all 14 million shares of common stock to eligible non-contract,
non-management employees. We expect to issue the remaining shares
as
eligible employees return to work during
2007.
|
·
|
$66
million principal amount of senior unsecured notes in connection
with our
settlement agreement relating to the restructuring of certain of
our lease
and other obligations at the Cincinnati-Northern Kentucky International
Airport (the “Cincinnati Airport Settlement Agreement”). For additional
information on this subject, see Note 4;
|
·
|
an
aggregate of $78 million in cash to holders in satisfaction of their
claims, including to holders of administrative claims, state and
local
priority tax claims and de minimis allowed unsecured claims;
|
·
|
$225
million in cash to the Pension Benefit Guaranty Corporation (the
“PBGC”)
in connection with the termination of our qualified defined benefit
pension plan for pilots (the “Pilot
Plan”).
|
|
Predecessor
|
|||
(in
millions)
|
December
31,
2006
|
|||
Pension,
postretirement and other benefits
|
$
|
10,329
|
||
Debt
and accrued interest
|
5,079
|
|||
Aircraft
lease related obligations
|
3,115
|
|||
Accounts
payable and other accrued liabilities
|
1,294
|
|||
Total
liabilities subject to compromise
|
$
|
19,817
|
|
Predecessor
|
||||||||||||
(in
millions)
|
One
Month
Ended
April
30,
2007
|
Three
Months
Ended
June
30,
2006
|
Four
Months
Ended
April
30,
2007
|
Six
Months
Ended
June
30,
2006
|
|||||||||
Discharge
of claims and liabilities(1)
|
$
|
4,424
|
$
|
-
|
$
|
4,424
|
$
|
-
|
|||||
Revaluation
of frequent flyer obligation(2)
|
(2,586
|
)
|
-
|
(2,586
|
)
|
-
|
|||||||
Revaluation
of other assets and liabilities(3)
|
238
|
-
|
238
|
-
|
|||||||||
Aircraft
financing renegotiations and rejections(4)
|
(438
|
)
|
(284
|
)
|
(440
|
)
|
(1,590
|
)
|
|||||
Contract
carrier agreements(5)
|
-
|
-
|
(163
|
)
|
-
|
||||||||
Emergence
compensation(6)
|
(162
|
)
|
-
|
(162
|
)
|
-
|
|||||||
Professional
fees
|
(51
|
)
|
(25
|
)
|
(88
|
)
|
(53
|
)
|
|||||
Pilot
collective bargaining agreement(7)
|
-
|
(2,100
|
)
|
(83
|
)
|
(2,100
|
)
|
||||||
Interest
income(8)
|
12
|
26
|
50
|
47
|
|||||||||
Facility
leases(9)
|
(81
|
)
|
11
|
43
|
(24
|
)
|
|||||||
Vendor
waived pre-petition debt
|
5
|
-
|
29
|
-
|
|||||||||
Retiree
healthcare claims(10)
|
-
|
-
|
(26
|
)
|
-
|
||||||||
Debt
issuance costs
|
-
|
(13
|
)
|
-
|
(13
|
)
|
|||||||
Compensation
expense(11)
|
-
|
-
|
-
|
(55
|
)
|
||||||||
Other
|
(22
|
)
|
5
|
(21
|
)
|
5
|
|||||||
Total
reorganization items, net
|
$
|
1,339
|
$
|
(2,380
|
)
|
$
|
1,215
|
$
|
(3,783
|
)
|
(1)
|
The
discharge of claims and liabilities primarily relates to allowed
general,
unsecured claims in our Chapter 11 proceedings, such as (a) ALPA’s claim
under our comprehensive agreement reducing pilot labor costs; (b)
the
PBGC’s claim relating to the termination of the Pilot Plan; (c) claims
relating to changes in postretirement healthcare benefits and the
rejection of our non-qualified retirement plans; (d) claims associated
with debt and certain municipal bond obligations based upon their
rejection; (e) claims relating to the restructuring of financing
arrangements or the rejection of leases for aircraft; and (f) other
claims
due to the rejection or modification of certain executory contracts,
unexpired leases and contract carrier agreements. For additional
information on these subjects, see Notes 1 and 10 of the Notes to
the
Consolidated Financial Statements in our Form 10-K.
In
accordance with the Plan, we discharged our obligations to holders
of
allowed general, unsecured claims in exchange for the distribution
of 386
million newly issued shares of common stock and the issuance of
certain
debt securities and obligations. Accordingly, in discharging our
liabilities subject to compromise, we recognized a reorganization
gain of
$4.4 billion as follows:
|
(in
millions)
|
||||
Liabilities
subject to compromise
|
$
|
19,345
|
||
Reorganization
equity value
|
(9,400
|
)
|
||
Liabilities
reinstated
|
(4,429
|
)
|
||
Issuance
of new debt securities and obligations, net of discounts of
$22
|
(938
|
)
|
||
Other
|
(154
|
)
|
||
Discharge
of claims and liabilities
|
$
|
4,424
|
(2) |
We
revalued our SkyMiles frequent flyer obligation at fair value as
a result
of fresh start reporting, which resulted in a $2.6 billion reorganization
charge. For information about a change in our accounting policy
for the
SkyMiles program, see Note 2.
|
(3) |
We
revalued our assets and liabilities at estimated fair value as
a result of
fresh start reporting. This resulted in a $238 million gain, primarily
reflecting the fair value of newly recognized intangible assets,
which was
partially offset by reductions in the fair value of tangible property
and
equipment.
|
(4) |
Estimated
claims for the one month ended April 30, 2007 relate to the
restructuring of the financing arrangements for 127
aircraft, the rejection of two aircraft leases and adjustments to
prior claims estimates. Estimated claims for the four months ended
April
30, 2007 relate to the restructuring of the financing arrangements
for 143 aircraft, the rejection of two aircraft leases and
adjustments to prior claims estimates. Estimated claims for the
three months ended June 30, 2006 related to the restructuring of
the
financing arrangements for 17 aircraft and the rejection of 14
aircraft
leases. Estimated claims for the six months ended June 30, 2006
relate to
the restructuring of the financing arrangements for 143 aircraft
and the
rejection of 16 aircraft leases.
|
(5) |
In
connection with amendments to our contract carrier agreements with
Chautauqua Airlines, Inc. (“Chautauqua”) and Shuttle America Corporation
(“Shuttle America”), both subsidiaries of Republic Airways Holdings, Inc.
(“Republic Holdings”), which, among other things, reduced the rates we pay
those carriers, we recorded (1) a $91 million allowed general,
unsecured
claim and (2) a $37 million net charge related to our surrender
of
warrants to purchase up to 3.5 million shares of Republic Holdings
common
stock. Additionally, in connection with an amendment to our contract
carrier agreement with Freedom Airlines, Inc. (“Freedom”), a subsidiary of
Mesa Air Group, Inc., which, among other things, reduced the rates
we pay
that carrier, we recorded a $35 million allowed general, unsecured
claim.
|
(6) |
In
accordance with the Plan, we made $130 million in lump-sum cash
payment to
approximately 39,000 eligible non-contract, non-management
employees. We also recorded an additional charge of $32 million
related to our portion of payroll related taxes associated with
the
issuance, as contemplated by the Plan, of approximately 14
million shares of common stock to these employees. For additional
information regarding the stock grants, see Note
10.
|
(7) |
Allowed
general, unsecured claims of $83 million for the four months ended
April
30, 2007 and $2.1 billion for the three months and six months ended
June
30, 2006 in connection with Comair’s and Delta’s respective comprehensive
agreements with ALPA reducing pilot labor costs.
|
(8) |
Reflects
interest earned due to the preservation of cash during our Chapter
11
proceedings.
|
(9) |
Primarily
reflects a net $80 million charge from an allowed general, unsecured
claim
under the Cincinnati Airport Settlement Agreement for the one month
ended
April 30, 2007. For the four months ended April 30, 2007, we recorded
a
net $43 million gain, primarily reflecting a $126 million net gain
in
connection with our settlement agreement with the Massachusetts
Port
Authority (“Massport”) which was partially offset by the aforementioned
$80 million charge. For additional information regarding the Cincinnati
Airport Settlement Agreement and our settlement agreement with
Massport,
see Note 4.
|
(10) |
Allowed
general, unsecured claims in connection with agreements reached
with
committees representing pilot and non-pilot retired employees reducing
their postretirement healthcare
benefits.
|
(11) |
Reflects
a charge for rejecting substantially all of our stock options in
our
Chapter 11 proceedings. For additional information regarding this
matter,
see Note 2 of the Notes to the Consolidated Financial Statements
in our
Form 10-K.
|
(in
millions)
|
(Predecessor)
April
30, 2007
|
Debt
Discharge,
Reclassifications
and
Distribution
to
Creditors
|
Repayment
of
DIP
Facility
and
New Exit
Financing
|
Revaluation
of
Assets and
Liabilities
|
(Successor)
Reorganized
Balance
Sheet
May
1, 2007
|
|||||||||||
CURRENT
ASSETS
|
||||||||||||||||
Cash,
cash equivalents and short-term investments
|
$
|
2,915
|
$
|
—
|
$
|
(557
|
)
|
$
|
—
|
$
|
2,358
|
|||||
Restricted
and designated cash
|
1,069
|
—
|
—
|
—
|
1,069
|
|||||||||||
Accounts
receivable, net
|
1,086
|
—
|
—
|
—
|
1,086
|
|||||||||||
Expendable
parts and supplies inventories, net
|
183
|
—
|
—
|
58
|
241
|
|||||||||||
Deferred
income taxes, net
|
441
|
—
|
—
|
296
|
737
|
|||||||||||
Prepaid
expenses and other
|
437
|
(19
|
)
|
—
|
(69
|
)
|
349
|
|||||||||
Total
current assets
|
6,131
|
(19
|
)
|
(557
|
)
|
285
|
5,840
|
|||||||||
PROPERTY
AND EQUIPMENT
|
||||||||||||||||
Net
flight equipment and net flight equipment under capital
lease
|
11,087
|
—
|
—
|
(1,254
|
)
|
9,833
|
||||||||||
Other
property and equipment, net
|
1,498
|
—
|
—
|
215
|
1,713
|
|||||||||||
Total
property and equipment, net
|
12,585
|
—
|
—
|
(1,039
|
)
|
11,546
|
||||||||||
OTHER
ASSETS
|
||||||||||||||||
Goodwill
|
227
|
—
|
—
|
12,249
|
12,476
|
|||||||||||
Intangibles,
net
|
88
|
—
|
—
|
2,865
|
2,953
|
|||||||||||
Other
noncurrent assets
|
740
|
—
|
48
|
87
|
875
|
|||||||||||
Total
other assets
|
1,055
|
—
|
48
|
15,201
|
16,304
|
|||||||||||
Total
assets
|
$
|
19,771
|
$
|
(19
|
)
|
$
|
(509
|
)
|
$
|
14,447
|
$
|
33,690
|
||||
CURRENT
LIABILITIES
|
||||||||||||||||
Current
maturities of long-term debt and capital leases
|
$
|
1,292
|
$
|
5
|
$
|
—
|
$
|
35
|
$
|
1,332
|
||||||
DIP
Facility
|
1,959
|
—
|
(1,959
|
)
|
—
|
—
|
||||||||||
Accounts
payable, accrued salaries and related benefits
|
1,396
|
561
|
(50
|
)
|
155
|
2,062
|
||||||||||
SkyMiles
deferred revenue
|
602
|
—
|
620
|
1,222
|
||||||||||||
Air
traffic liability
|
2,567
|
—
|
—
|
—
|
2,567
|
|||||||||||
Taxes
payable
|
423
|
—
|
—
|
(2
|
)
|
421
|
||||||||||
Total
current liabilities
|
8,239
|
566
|
(2,009
|
)
|
808
|
7,604
|
||||||||||
NONCURRENT
LIABILITIES
|
||||||||||||||||
Long-term
debt and capital leases
|
5,132
|
37
|
—
|
398
|
5,567
|
|||||||||||
Exit
Facilities
|
—
|
—
|
1,500
|
—
|
1,500
|
|||||||||||
SkyMiles
deferred revenue
|
294
|
—
|
—
|
1,966
|
2,260
|
|||||||||||
Other
notes payable
|
—
|
697
|
—
|
—
|
697
|
|||||||||||
Pension,
postretirement and related benefits
|
62
|
4,202
|
—
|
—
|
4,264
|
|||||||||||
Other
|
1,026
|
—
|
—
|
1,372
|
2,398
|
|||||||||||
Total
noncurrent liabilities
|
6,514
|
4,936
|
1,500
|
3,736
|
16,686
|
|||||||||||
Liabilities
subject to compromise
|
19,345
|
(19,345
|
)
|
—
|
—
|
—
|
||||||||||
SHAREOWNERS’
(DEFICIT) EQUITY
|
||||||||||||||||
Debtors
|
||||||||||||||||
Common
stock and additional paid in capital - Debtors
|
1,563
|
—
|
—
|
(1,563
|
)
|
—
|
||||||||||
Retained
deficit and other - Debtors
|
(15,890
|
)
|
4,424
|
__
|
11,466
|
—
|
||||||||||
Reorganized
Debtors
|
||||||||||||||||
Common
stock and additional paid in capital - Reorganized Debtors
|
—
|
9,400
|
—
|
—
|
9,400
|
|||||||||||
Total
liabilities and shareowners’ (deficit) equity
|
$
|
19,771
|
$
|
(19
|
)
|
$
|
(509
|
)
|
$
|
14,447
|
$
|
33,690
|
· |
Debt
Discharge, Reclassifications and Distribution to Creditors.
Adjustments
reflect the elimination of liabilities subject to compromise totaling
$19.3 billion on our Consolidated Balance Sheet immediately prior
to the
Effective Date. Excluding certain liabilities, which were assumed
by the
Successor, liabilities subject to compromise of $13.8 billion were
discharged in the Chapter 11 cases. Adjustments
include:
|
(a) |
The
recognition or reinstatement of $561 million to accounts payable,
accrued
salaries and related benefits comprised of (1) a $225 million obligation
to the PBGC relating to the termination of the Pilot Plan (which is
reflected on the Consolidated Balance Sheet net of a $3 million discount)
and (2) $339 million to reinstate or accrue certain liabilities related
to
the current portion of our pension and postretirement benefit plans
and
for certain administrative claims and cure
costs.
|
(b) |
The
recognition of $697 million in other notes payable comprised of (1) the
$650 million Pilot Obligation relating to our comprehensive agreement
with
ALPA reducing pilot labor costs (which is reflected on the Consolidated
Balance Sheet net of a $19 million discount) and (2) $66 million
principal amount of senior unsecured notes (following the reduction
of the
$85 million face value of the notes for the application of certain
payments made by us in 2006 and 2007) under the Cincinnati Airport
Settlement Agreement. For additional information on the Cincinnati
Airport
Settlement Agreement, see Note 4.
|
(c) |
The
reinstatement from liabilities subject to compromise of $3.2 billion
associated with our non-pilot defined benefit pension plan (the “Non-pilot
Plan”) and other long-term accrued benefits and $1.0 billion associated
with postretirement benefits.
|
·
|
Repayment
of DIP Facility and New Exit Financing.
Adjustments reflect the repayment of the DIP Facility and borrowing
under
the Exit Facilities. Financing fees related to (1) the DIP Facility
were
written off at the Effective Date and (2) fees related to the Exit
Facilities were capitalized and will be amortized over the term of
the facility. For additional information regarding the Exit Facilities,
see Note 4.
|
·
|
Revaluation
of Assets and Liabilities.
Significant adjustments reflected in the Fresh Start Consolidated
Balance
Sheet based on the revaluation of assets and liabilities are summarized
as
follows:
|
(a) |
Property
and equipment, net.
A
net adjustment of $1.0 billion was recorded to reduce the net book
value
of fixed assets to their estimated fair value.
|
(b) |
Goodwill.
An adjustment of $12.2 billion was recorded to reflect reorganization
value of the Successor in excess of the fair value of tangible and
identified intangible assets.
|
(c) |
Intangibles.
An adjustment of $2.9 billion was recorded to recognize identifiable
intangible assets. These intangible assets reflect the estimated
fair
value of our trade name, takeoff and arrival slots, SkyTeam
alliance agreements, marketing agreements, customer relationships
and
certain contracts. Certain of these assets will be subject to an
annual
impairment review. For additional information on intangible assets,
see
Note 2.
|
(d) |
Long-term
debt and capital leases.
An adjustment of $398 million was recorded primarily to reflect a
$223
million net premium associated with long-term debt and a $138 million
net
premium associated with capital lease obligations to be amortized
to
interest expense over the life of such debt and capital lease obligations.
|
(e) |
SkyMiles
deferred revenue.
An
adjustment to revalue our obligation under the SkyMiles frequent
flyer
program was recorded to reflect the estimated fair value of miles
to be
redeemed in the future. An adjustment of $2.0 billion and $620 million
was
reflected for the fair value of these miles in long-term and current
classifications, respectively. Effective with our emergence from
bankruptcy, we changed our accounting policy from an incremental cost
basis to a deferred revenue model for miles earned through travel.
For additional information on the accounting policy for our SkyMiles
frequent flyer program, see Note 2.
|
(f) |
Noncurrent
liabilities - other.
An adjustment of $1.4 billion was recorded primarily related to the
tax
effect of fresh start valuation adjustments.
|
(g) |
Total
shareowners’ deficit.
The adoption of fresh start reporting resulted in a new reporting
entity with no beginning retained earnings or accumulated deficit.
All
common stock of the Predecessor was eliminated and replaced by the
new
equity structure of the Successor based on the Plan. The Fresh Start
Consolidated Balance Sheet reflects initial shareowners’ equity value of
$9.4 billion, representing the low end in the range of $9.4 billion
to $12.0 billion estimated in our financial projections developed
in
connection with the Plan. The low end of the range is estimated to
reflect
market conditions as of the Effective Date and therefore was used
to
establish initial shareowners’ equity value.
|
· |
In-sourcing
revenue.
We reclassified $75 million and $136 million, respectively, associated
with revenue for our maintenance in-sourcing business to other,
net
revenue, and reclassified the related costs to (1) salaries and
related
costs, (2) aircraft maintenance materials and outside repairs
and (3)
other operating expense. Previously, these revenues and expenses
were
reflected on a net basis in other operating expense.
|
·
|
Delta
Global Services, LLC (“DGS”).
We reclassified $41 million and $82 million, respectively, associated
with
salaries for employees at our wholly owned subsidiary, DGS, to
salaries
and related costs. DGS provides staffing services to both internal
and
external customers. Previously, these costs were recorded in
contracted
services.
|
·
|
Fuel
taxes.
We reclassified $31 million and $61 million, respectively, to aircraft
fuel expense. Previously, fuel taxes were recorded in other operating
expense.
|
·
|
Crown
Room Club.
We reclassified $11 million and $25 million, respectively, associated
with
the expense of our Crown Room Club operations to several operating
expense
line items, primarily salaries and related costs and contracted services.
Our Crown Room Club provides amenities to members when traveling.
Previously, these expenses were recorded net in other, net
revenue.
|
·
|
Arrangements
with Other Airlines.
We reclassified to passenger revenue $17 million and $96 million,
respectively, of revenue associated with (1) SkyMiles earned or
redeemed on other airlines and (2) frequent flyer miles of other
airlines
earned or redeemed on Delta. Previously, these amounts were reflected
in
other, net revenue.
|
Estimated
Useful Life
|
||||
Asset
Classification
|
Successor
|
Predecessor
|
||
Flight
equipment
|
25-30
years
|
25
years
|
||
Capitalized
software
|
5-7
years
|
5-7
years
|
||
Ground
property and equipment
|
3-40
years
|
3-40
years
|
||
Leasehold
improvements
|
Shorter
of lease term or estimated useful life
|
Shorter
of lease term or estimated useful life
|
||
Flight
equipment under capital lease
|
Shorter
of lease term or estimated useful life
|
Shorter
of lease term or estimated useful
life
|
|
Successor
|
Predecessor
|
|||||
|
June
30,
2007
|
December
31,
2006
|
|||||
|
Gross
Carrying
|
Gross
Carrying
|
|||||
(in
millions)
|
Amount
|
Amount
|
|||||
Goodwill
|
$
|
12,373
|
$
|
227
|
|||
Trade
name
|
880
|
1
|
|||||
Takeoff
and arrival slots
|
635
|
71
|
|||||
SkyTeam
alliance
|
480
|
-
|
|||||
Other
|
2
|
-
|
|||||
Total
|
$
|
14,370
|
$
|
299
|
|
Successor
|
Predecessor
|
|||||||||||||||||
|
June
30, 2007
|
December
31, 2006
|
|||||||||||||||||
|
Estimated
|
Gross
Carrying
|
Accumulated
|
Estimated
|
Gross
Carrying
|
Accumulated
|
|||||||||||||
(in
millions)
|
life
|
Amount
|
Amortization
|
life
|
Amount
|
Amortization
|
|||||||||||||
Marketing
agreements
|
4
years
|
$
|
710
|
$
|
(32
|
)
|
$
|
-
|
$
|
-
|
|||||||||
Contracts
|
17 to 34
years
|
205
|
(3
|
)
|
-
|
-
|
|||||||||||||
Customer
relationships
|
4
years
|
40
|
-
|
-
|
-
|
||||||||||||||
Operating
rights
|
-
|
-
|
9
to 19 years
|
121
|
(104
|
)
|
|||||||||||||
Other
|
1
year
|
1
|
-
|
3
to 5 years
|
3
|
(3
|
)
|
||||||||||||
Total
|
$
|
956
|
$
|
(35
|
)
|
$
|
124
|
$
|
(107
|
)
|
(in
millions)
|
||||
Six
months ending December 31, 2007
|
$
|
112
|
||
2008
|
217
|
|||
2009
|
217
|
|||
2010
|
217
|
|||
2011
|
18
|
|||
After
2011
|
140
|
|||
Total
|
$
|
921
|
Aircraft
fuel and related taxes
|
Other
income (expense)
|
||||||||||||||||||
Successor
|
Predecessor
|
Successor
|
Predecessor
|
||||||||||||||||
Two
Months
|
One
Month
|
Three
Months
|
Two
Months
|
One
Month
|
Three
Months
|
||||||||||||||
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
||||||||||||||
June
30,
|
April
30,
|
June
30,
|
June
30,
|
April
30,
|
June
30,
|
||||||||||||||
(in
millions)
|
|
2007
|
|
2007
|
|
2006
|
|
2007
|
|
2007
|
|
2006
|
|
||||||
Open
fuel hedge contracts
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
2
|
$
|
(7
|
)
|
$
|
7
|
||||||
Settled
fuel hedge contracts
|
4
|
10
|
1
|
-
|
(2
|
)
|
-
|
||||||||||||
Total
|
$
|
4
|
$
|
10
|
$
|
1
|
$
|
2
|
$
|
(9
|
)
|
$
|
7
|
Aircraft
fuel and related taxes
|
Other
income (expense)
|
||||||||||||||||||
Successor
|
Predecessor
|
Successor
|
Predecessor
|
||||||||||||||||
Two
Months
|
Four
Months
|
Six
Months
|
Two
Months
|
Four
Months
|
Six
Months
|
||||||||||||||
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
||||||||||||||
June
30,
|
April
30,
|
June
30,
|
June
30,
|
April
30,
|
June
30,
|
||||||||||||||
(in
millions)
|
2007
|
2007
|
2006
|
2007
|
2007
|
2006
|
|||||||||||||
Open
fuel hedge contracts
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
2
|
$
|
15
|
$
|
7
|
|||||||
Settled
fuel hedge contracts
|
4
|
(8
|
)
|
4
|
-
|
(1
|
)
|
-
|
|||||||||||
Total
|
$
|
4
|
$
|
(8
|
)
|
$
|
4
|
$
|
2
|
$
|
14
|
$
|
7
|
Successor
|
Predecessor
|
||||||
(in
millions)
|
June
30,
2007
|
December
31,
2006
|
|||||
Senior
Secured(1)
|
|||||||
Senior
Secured Exit Financing Facility(2)
|
|||||||
7.36%
First-Lien Synthetic Revolving Facility due April 30, 2012
|
$
|
600
|
$
|
—
|
|||
8.61%
Second-Lien Term Loan due April 30, 2014
|
900
|
—
|
|||||
1,500
|
—
|
||||||
Secured
Super-Priority Debtor-in-Possession Credit Agreement(2)
|
|||||||
8.12%
GE DIP Credit Facility Term Loan A due March 16, 2008
|
—
|
600
|
|||||
10.12%
GE DIP Credit Facility Term Loan B due March 16, 2008
|
—
|
700
|
|||||
12.87%
GE DIP Credit Facility Term Loan C due March 16, 2008
|
—
|
600
|
|||||
—
|
1,900
|
||||||
Other
senior secured debt(2)
|
|||||||
14.11%
Amex Facility Note due in installments during 2007
|
—
|
176
|
|||||
|
—
|
176
|
|||||
Secured(1)
|
|||||||
Series
2000-1 Enhanced Equipment Trust Certificates
|
|||||||
7.38%
Class A-1 due in installments from 2007 to May 18, 2010
|
120
|
136
|
|||||
7.57%
Class A-2 due November 18, 2010
|
738
|
738
|
|||||
7.92%
Class B due November 18, 2010
|
182
|
182
|
|||||
|
1,040
|
1,056
|
|||||
Series
2001-1 Enhanced Equipment Trust Certificates
|
|||||||
6.62%
Class A-1 due in installments from 2007 to March 18, 2011
|
130
|
130
|
|||||
7.11%
Class A-2 due September 18, 2011
|
571
|
571
|
|||||
7.71%
Class B due September 18, 2011
|
207
|
207
|
|||||
|
908
|
908
|
|||||
Series
2001-2 Enhanced Equipment Trust Certificates(2)
|
|||||||
7.06%
Class A due in installments from 2007 to December 18, 2011
|
298
|
313
|
|||||
8.26%
Class B due in installments from 2007 to December 18, 2011
|
131
|
145
|
|||||
9.61%
Class C due in installments from 2007 to December 18, 2011
|
58
|
64
|
|||||
|
487
|
522
|
|||||
Series
2002-1 Enhanced Equipment Trust Certificates
|
|||||||
6.72%
Class G-1 due in installments from 2007 to January 2, 2023
|
421
|
454
|
|||||
6.42%
Class G-2 due July 2, 2012
|
370
|
370
|
|||||
7.78%
Class C due in installments from 2007 to January 2, 2012
|
95
|
111
|
|||||
|
886
|
935
|
|||||
Series
2003-1 Enhanced Equipment Trust Certificates(2)
|
|||||||
6.11%
Class G due in installments from 2007 to January 25, 2008
|
279
|
291
|
|||||
9.11%
Class C due in installments from 2007 to January 25, 2008
|
135
|
135
|
|||||
|
414
|
426
|
Successor
|
|
Predecessor
|
|
||||
(in
millions)
|
|
June
30,
2007
|
|
December
31, 2006
|
|||
General
Electric Capital Corporation(2)(3)(4)
|
|||||||
9.85%
Notes due in installments from 2007 to July 7, 2011
|
153
|
168
|
|||||
9.85%
Notes due in installments from 2007 to July 7, 2011
|
109
|
119
|
|||||
9.85%
Notes due in installments from 2007 to July 7, 2011
|
246
|
271
|
|||||
|
508
|
558
|
|||||
Other
secured debt(2)
|
|||||||
8.86%
Senior Secured Notes due in installments from 2007 to September
29,
2012
|
175
|
189
|
|||||
5.00%
to 8.83% Other secured financings due in installments from 2007
to June
19, 2021(5)(6)
|
1,040
|
1,354
|
|||||
Total
senior secured and secured debt
|
$
|
6,958
|
$
|
8,024
|
|||
Unsecured(5)
|
|||||||
Massachusetts
Port Authority Special Facilities Revenue Bonds
|
|||||||
5.0-5.5%
Series 2001A due in installments from 2012 to January 1, 2027
|
$
|
—
|
$
|
338
|
|||
4.25%
Series 2001B due in installments from 2027 to January 1, 2031(2)
|
—
|
80
|
|||||
4.3%
Series 2001C due in installments from 2027 to January 1, 2031(2)
|
—
|
80
|
|||||
8.75%
Boston Terminal A due in installments from 2007 to June 30,
2016
|
204
|
—
|
|||||
Development
Authority of Clayton County, loan agreement(2)
|
|||||||
3.82%
Series 2000A due June 1, 2029
|
65
|
65
|
|||||
3.89%
Series 2000B due May 1, 2035
|
110
|
110
|
|||||
3.89%
Series 2000C due May 1, 2035
|
120
|
120
|
|||||
Other
unsecured debt
|
|||||||
7.7%
Notes due December 15, 2005
|
—
|
122
|
|||||
7.9%
Notes due December 15, 2009
|
—
|
499
|
|||||
9.75%
Debentures due May 15, 2021
|
—
|
106
|
|||||
8.3%
Notes due December 15, 2029
|
—
|
925
|
|||||
8.125%
Notes due July 1, 2039
|
—
|
538
|
|||||
10.0%
Senior Notes due August 15, 2008
|
—
|
248
|
|||||
8.0%
Convertible Senior Notes due June 3, 2023
|
—
|
350
|
|||||
2
7/8%
Convertible Senior Notes due February 18, 2024
|
—
|
325
|
|||||
3.01%
to 8.00% Other unsecured debt due in installments from 2007 to
December 1,
2030
|
72
|
703
|
|||||
Total
unsecured debt
|
571
|
4,609
|
|||||
Total
secured and unsecured debt, including liabilities subject to
compromise
|
7,529
|
12,633
|
|||||
Plus:
unamortized premiums, net
|
214
|
—
|
|||||
Total
secured and unsecured debt, including liabilities subject to
compromise
|
7,743
|
12,633
|
|||||
Less:
pre-petition debt classified as liabilities subject to
compromise(5)(6)
|
—
|
(4,945
|
)
|
||||
Total
debt
|
7,743
|
7,688
|
|||||
Less:
current maturities
|
(1,305
|
)
|
(1,466
|
)
|
|||
Total
long-term debt
|
$
|
6,438
|
$
|
6,222
|
(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 Senior Secured Exit Financing
Facility, see “Exit Financing” 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
June 30,
2007, if applicable. For our long-term debt discharged as part of
our
emergence from bankruptcy, the rates shown were in effect at December
31,
2006.
|
(3) |
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 Note 6 of the Notes
to the Consolidated Financial Statements in our Form
10-K.
|
(4) |
For
additional information about this debt, as amended, see “Reimbursement
Agreement and Other GECC Agreements” in Note 6 of the Notes to the
Consolidated Financial Statements in our Form
10-K.
|
(5) |
In
accordance with SOP 90-7, substantially all of our unsecured debt
had been
classified as liabilities subject to compromise at December 31, 2006.
Additionally, certain of our undersecured debt had been classified
as
liabilities subject to compromise at December 31, 2006. For more
information on liabilities subject to compromise, see Note
1.
|
(6) |
Certain
of our secured and undersecured debt, which was classified as liabilities
subject to compromise at December 31, 2006, has been reclassified
from
liabilities subject to compromise to long-term debt or converted
to
operating leases as of June 30, 2007 in connection with restructuring
initiatives during our Chapter 11
reorganization.
|
Years
Ending December 31,
(in
millions)
|
Principal
Amount
|
|||
Six
months ending December 31, 2007
|
$
|
515
|
||
2008
|
982
|
|||
2009
|
487
|
|||
2010
|
1,392
|
|||
2011
|
1,389
|
|||
After
2011
|
2,978
|
|||
Total
|
$
|
7,743
|
· |
maintain
a minimum fixed charge coverage ratio (defined as the ratio of
(1)
earnings before interest, taxes, depreciation, amortization and
aircraft
rent, and subject to other adjustments to net income (“EBITDAR”) to (2)
the sum of gross cash interest expense, cash aircraft rent expense
and the
interest portion of our capitalized lease obligations, for successive
trailing 12-month periods ending at each quarter-end date through
the
maturity date of the respective Exit Facilities), which minimum
ratio will
range from 1.00:1 to 1.20:1 in the case of the First-Lien Facilities
and
from 0.85:1 to 1.02:1 in the case of the Second-Lien Facility;
|
· |
maintain
unrestricted cash, cash equivalents and short-term investments of
not less
than $750 million in the case of the First-Lien Facilities and $650
million in the case of the Second-Lien Facility, in each case at
all times
following the 30th
day after the Closing Date;
|
· |
maintain
a minimum total collateral coverage ratio (defined as the ratio of
(1)
certain of our Collateral that meets specified eligibility standards
(“Eligible Collateral”) to (2) the sum of the aggregate outstanding
exposure under the First-Lien Facilities and the Second-Lien Facility
and
the aggregate termination value of certain hedging agreements) of
125% at
all times; and
|
· |
in
the case of the First-Lien Facilities, also maintain a minimum first-lien
collateral coverage ratio (together with the total collateral coverage
ratio described above, the “collateral coverage ratios”) (defined as
the ratio of (1) Eligible Collateral to (2) the sum of the aggregate
outstanding exposure under the First Lien Facilities and the aggregate
termination value of certain hedging agreements) of 175% at all
times.
|
· |
provides
for agreements under which we will continue to use certain facilities
at
the Cincinnati Airport at substantially reduced costs;
|
· |
settles
all disputes among us, the KCAB, the Bond Trustee and the former,
present
and future holders of the 1992 Bonds (the “1992 Bondholders”);
|
· |
gives
the Bond Trustee, on behalf of the 1992 Bondholders, a $260 million
allowed general, unsecured pre-petition claim in our bankruptcy
proceedings; and
|
· |
provides
for our issuance of $66 million principal amount of senior unsecured
notes
to the Bond Trustee on behalf of the 1992
Bondholders.
|
Year
Ending December 31,
(in
millions)
|
Amount
|
|||
Six
months ending December 31, 2007
|
$
|
576
|
||
2008
|
1,207
|
|||
2009
|
1,050
|
|||
2010
|
712
|
|||
Total
|
$
|
3,545
|
Carrier
|
Aircraft
in
Operation as
of
June
30, 2007
|
Number
of
Aircraft
Scheduled
to
be in
Operation
as of
December
31,
2007
|
Number
of Aircraft Scheduled
to
be in
Operation
Immediately
Prior
to the
Expiration
Date
of
the Agreement
|
Expiration
Date
of
Agreement
|
|||||||||
Atlantic
Southeast Airlines, Inc. (“ASA”)
|
153
|
153
|
149
|
2020
|
|||||||||
SkyWest
Airlines, Inc. (“SkyWest”)
|
78
|
82
|
82
|
2020
|
|||||||||
SkyWest/ASA
|
8
|
12
|
12
|
2012
|
|||||||||
Chautauqua
|
39
|
39
|
24
|
2016
|
|||||||||
Freedom
(ERJ-145 aircraft)(1)
|
33
|
36
|
22
|
2017
|
|||||||||
Freedom
(CRJ-900 aircraft)(1)
|
—
|
2
|
14
|
2017
|
|||||||||
Freedom
(Dash 8 Turboprop aircraft)(1)
|
9
|
—
|
9
|
2007
|
|||||||||
Shuttle
America
|
16
|
16
|
16
|
2019
|
|||||||||
ExpressJet
Airlines, Inc. (“ExpressJet”)
|
7
|
10
|
10
|
2009
|
|||||||||
Pinnacle
Airlines, Inc.
|
—
|
1
|
16
|
2019
|
(1) |
We
have separate agreements with Freedom that involve different aircraft
types, expiration dates and terms. These agreements are shown
separately to illustrate the variance in the number of aircraft that
will
be operated during the term of each
agreement.
|
· |
ASA,
SkyWest, Chautauqua, Freedom and Shuttle America for all periods
presented; and
|
· |
ExpressJet
from February 27, 2007 to June 30,
2007.
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
(in
millions)
|
2007
|
|
2006
|
|
2007
|
|
2006
|
||||||
ASMs
|
4,427
|
3,805
|
8,682
|
7,277
|
|||||||||
RPMs
|
3,528
|
3,004
|
6,779
|
5,714
|
|||||||||
Number
of aircraft operated, end of period
|
343
|
289
|
343
|
289
|
Employee
Group
|
Approximate
Number
of
Employees
Represented
|
Union
|
Date
on which Collective
Bargaining
Agreement
Becomes
Amendable
|
||||
Delta
Pilots
|
6,050
|
ALPA
|
December
31, 2009
|
||||
Delta
Flight Superintendents
|
180
|
PAFCA(1)
|
January
1, 2010
|
||||
Comair
Pilots
|
1,560
|
ALPA
|
March
2, 2011
|
||||
Comair
Maintenance Employees
|
520
|
IAM(2)
|
December
31, 2010
|
||||
Comair
Flight Attendants
|
910
|
IBT(3)
|
December
31, 2010
|
(1) |
PAFCA
- Professional Airline Flight Controllers’
Association
|
(2) |
IAM
- International Association of Machinists and Aerospace
Workers
|
(3) |
IBT
- International Brotherhood of
Teamsters
|
Current
Fleet
|
|||||||||||||||||
Aircraft
Type
|
Owned
|
Capital
Lease
|
Operating
Lease
|
Total
|
Average
Age
|
Orders
|
Options
|
Rolling
Options
|
|||||||||
B-737-700
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
10
|
|
—
|
|
—
|
|
B-737-800
|
|
71
|
|
—
|
|
—
|
|
71
|
|
6.7
|
|
46
|
(1)
|
60
|
|
120
|
|
B-757-200
|
|
68
|
|
34
|
|
19
|
|
121
|
|
15.8
|
|
—
|
|
—
|
|
—
|
|
B-767-300
|
|
4
|
|
—
|
|
20
|
|
24
|
|
16.9
|
|
—
|
|
—
|
|
—
|
|
B-767-300ER
|
|
50
|
|
—
|
|
9
|
|
59
|
|
11.3
|
|
—
|
|
10
|
|
1
|
|
B-767-400ER
|
|
21
|
|
—
|
|
—
|
|
21
|
|
6.3
|
|
—
|
|
17
|
|
—
|
|
B-777-200ER
|
|
8
|
|
—
|
|
—
|
|
8
|
|
7.4
|
|
—
|
|
—
|
|
—
|
|
B-777-200LR
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6
|
|
11
|
|
12
|
|
MD-88
|
|
63
|
|
32
|
|
25
|
|
120
|
|
17.0
|
|
—
|
|
—
|
|
—
|
|
MD-90
|
|
16
|
|
—
|
|
—
|
|
16
|
|
11.6
|
|
—
|
|
—
|
|
—
|
|
CRJ-100
|
|
10
|
|
38
|
|
51
|
|
99
|
|
9.7
|
|
—
|
|
—
|
|
—
|
|
CRJ-200
|
|
5
|
|
—
|
|
12
|
|
17
|
|
5.0
|
|
—
|
|
25
|
|
—
|
|
CRJ-700
|
|
17
|
|
—
|
|
—
|
|
17
|
|
3.7
|
|
—
|
|
29
|
|
—
|
|
CRJ-900
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
28
|
(2)
|
30
|
|
—
|
|
Total
|
|
333
|
|
104
|
|
136
|
|
573
|
|
12.2
|
|
90
|
|
182
|
|
133
|
(1)
|
Includes
44 aircraft which we have entered into definitive agreements to sell
to
third parties immediately following delivery of these aircraft to
us by
the manufacturer.
|
(2) |
Excludes
16 aircraft orders we assigned to a regional air carrier in April
2007. See “Aircraft
Order Commitments”
in Note 5
for additional information regarding this
matter.
|
|
Pension
Benefits
|
||||||||||||||||||
|
Successor
|
Predecessor
|
Successor
|
Predecessor
|
|||||||||||||||
|
Two
Months
|
One
Month
|
Three
Months
|
Two
Months
|
Four
Months
|
Six
Months
|
|||||||||||||
|
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
|||||||||||||
|
June
30,
|
April
30,
|
June
30,
|
June
30,
|
April
30,
|
June
30,
|
|||||||||||||
(in
millions)
|
2007
|
2007
|
2006
|
2007
|
2007
|
2006
|
|||||||||||||
|
|
|
|
|
|
|
|||||||||||||
Service
cost
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
35
|
|||||||
Interest
cost
|
74
|
36
|
178
|
74
|
145
|
356
|
|||||||||||||
Expected
return on plan assets
|
(70
|
)
|
(32
|
)
|
(130
|
)
|
(70
|
)
|
(129
|
)
|
(260
|
)
|
|||||||
Amortization
of prior service cost
|
-
|
-
|
-
|
-
|
-
|
1
|
|||||||||||||
Recognized
net actuarial loss
|
-
|
5
|
57
|
-
|
19
|
114
|
|||||||||||||
Settlement
gain on termination
|
-
|
(30
|
)
|
-
|
-
|
(30
|
)
|
-
|
|||||||||||
Revaluation
of liability
|
-
|
(143
|
)
|
-
|
-
|
(143
|
)
|
-
|
|||||||||||
Net
periodic (benefit) cost
|
$
|
4
|
$
|
(164
|
)
|
$
|
105
|
$
|
4
|
$
|
(138
|
)
|
$
|
246
|
|
Other
Postretirement Benefits
|
||||||||||||||||||
|
Successor
|
Predecessor
|
Successor
|
Predecessor
|
|||||||||||||||
|
Two
Months
|
One
Month
|
Three
Months
|
Two
Months
|
Four
Months
|
Six
Months
|
|||||||||||||
|
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
|||||||||||||
|
June
30,
|
April
30,
|
June
30,
|
June
30,
|
April
30,
|
June
30,
|
|||||||||||||
(in
millions)
|
2007
|
2007
|
2006
|
2007
|
2007
|
2006
|
|||||||||||||
|
|
|
|
|
|
|
|||||||||||||
Service
cost
|
$
|
2
|
$
|
1
|
$
|
5
|
$
|
2
|
$
|
4
|
$
|
10
|
|||||||
Interest
cost
|
10
|
5
|
25
|
10
|
21
|
49
|
|||||||||||||
Amortization
of prior service benefit
|
-
|
(8
|
)
|
(10
|
)
|
-
|
(31
|
)
|
(21
|
)
|
|||||||||
Recognized
net actuarial loss
|
-
|
2
|
2
|
-
|
8
|
4
|
|||||||||||||
Revaluation
of liability
|
-
|
49
|
-
|
-
|
49
|
-
|
|||||||||||||
Net
periodic cost
|
$
|
12
|
$
|
49
|
$
|
22
|
$
|
12
|
$
|
51
|
$
|
42
|
|
Other
Postemployment Benefits
|
||||||||||||||||||
|
Successor
|
Predecessor
|
Successor
|
Predecessor
|
|||||||||||||||
|
Two
Months
|
One
Month
|
Three
Months
|
Two
Months
|
Four
Months
|
Six
Months
|
|||||||||||||
|
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
|||||||||||||
|
June
30,
|
April
30,
|
June
30,
|
June
30,
|
April
30,
|
June
30,
|
|||||||||||||
(in
millions)
|
2007
|
2007
|
2006
|
2007
|
2007
|
2006
|
|||||||||||||
|
|
|
|
|
|
|
|||||||||||||
Service
cost
|
$
|
5
|
$
|
3
|
$
|
13
|
$
|
5
|
$
|
8
|
$
|
27
|
|||||||
Interest
cost
|
21
|
10
|
31
|
21
|
41
|
62
|
|||||||||||||
Expected
return on plan assets
|
(26
|
)
|
(13
|
)
|
(41
|
)
|
(26
|
)
|
(51
|
)
|
(81
|
)
|
|||||||
Amortization
of prior service benefit
|
-
|
-
|
-
|
-
|
(2
|
)
|
-
|
||||||||||||
Recognized
net actuarial loss
|
-
|
1
|
3
|
-
|
5
|
6
|
|||||||||||||
Revaluation
of liability
|
-
|
(273
|
)
|
-
|
-
|
(273
|
)
|
-
|
|||||||||||
Net
periodic (benefit) cost
|
$
|
-
|
$
|
(272
|
)
|
$
|
6
|
$
|
-
|
$
|
(272
|
)
|
$
|
14
|
|
Successor
|
|
Predecessor
|
|
|||
(in
millions)
|
June
30,
2007
|
December
31,
2006
|
|||||
Deferred
tax assets:
|
|
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
$
|
3,217
|
|
$
|
2,921
|
|
Additional
minimum pension liability
|
|
|
—
|
|
|
615
|
|
AMT
credit carryforward
|
|
|
346
|
|
|
346
|
|
Employee
benefits
|
1,078
|
2,898
|
|||||
Deferred
revenue
|
1,318
|
311
|
|||||
Other
temporary differences (primarily reorganization charges)
|
|
|
2,566
|
|
|
2,183
|
|
Valuation
allowance
|
|
|
(4,835
|
)
|
|
(5,169
|
)
|
Total
deferred tax assets
|
|
$
|
3,690
|
|
$
|
4,105
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
Depreciation
|
|
$
|
3,158
|
|
$
|
3,870
|
|
Intangibles
|
1,092
|
(20
|
)
|
||||
Other
|
211
|
259
|
|||||
Total
deferred tax liabilities
|
|
$
|
4,461
|
|
$
|
4,109
|
|
Successor
|
Predecessor
|
||||||
(in
millions)
|
June
30,
2007
|
December
31,
2006
|
|||||
Current
deferred tax assets, net
|
$
|
731
|
$
|
402
|
|||
Noncurrent
deferred tax liabilities, net
|
(1,502
|
)
|
(406
|
)
|
|||
Net
deferred tax liabilities
|
$
|
(771
|
)
|
$
|
(4
|
)
|
(in
millions)
|
Unrecognized
Pension
Liability
|
Fuel
Derivative
Instruments
|
Marketable
Equity
Securities
|
Valuation
Allowance
|
Total
|
|||||||||||
Balance
at January 1, 2007 (Predecessor)
|
$
|
(727
|
)
|
$
|
(23
|
)
|
$
|
2
|
$
|
230
|
$
|
(518
|
)
|
|||
Unrealized
gain
|
—
|
68
|
—
|
—
|
68
|
|||||||||||
Realized
loss
|
—
|
9
|
—
|
—
|
9
|
|||||||||||
Balance
at March 31, 2007 (Predecessor)
|
(727
|
)
|
54
|
2
|
230
|
(441
|
)
|
|||||||||
SFAS
158
|
6
|
—
|
—
|
—
|
6
|
|||||||||||
Unrealized
gain
|
—
|
2
|
|
—
|
—
|
2
|
|
|||||||||
Realized
gain
|
—
|
(10
|
)
|
—
|
—
|
(10
|
)
|
|||||||||
Balance
at April 30, 2007 (Predecessor)
|
(721
|
)
|
46
|
2
|
230
|
(443
|
)
|
|||||||||
Elimination
of Predecessor other
comprehensive loss
|
721
|
(46
|
)
|
(2
|
)
|
(230
|
)
|
443
|
||||||||
Unrealized
gain
|
—
|
5
|
—
|
—
|
5
|
|||||||||||
Realized
gain
|
—
|
3
|
—
|
—
|
3
|
|||||||||||
Tax
effect
|
—
|
(3
|
)
|
—
|
3
|
—
|
||||||||||
Net
of tax
|
—
|
5
|
—
|
3
|
8
|
|||||||||||
Balance
at June 30, 2007 (Successor)
|
$
|
—
|
$
|
5
|
$
|
—
|
$
|
3
|
$
|
8
|
Predecessor
|
|||||||||||||||||||
(in
millions)
|
Additional
Minimum
Pension
Liability
|
Unrecognized
Pension
Liability
|
Fuel
Derivative
Instruments
|
Marketable
Equity
Securities
|
Valuation
Allowance
|
Total
|
|||||||||||||
Balance
at January 1, 2006
|
$
|
(2,553
|
)
|
$
|
—
|
$
|
—
|
$
|
1
|
$
|
(170
|
)
|
$
|
(2,722
|
)
|
||||
Unrealized
gain
|
—
|
—
|
1
|
—
|
—
|
1
|
|||||||||||||
Balance
at March 31, 2006
|
(2,553
|
)
|
—
|
1
|
1
|
(170
|
)
|
(2,721
|
)
|
||||||||||
Unrealized
gain
|
—
|
—
|
3
|
—
|
—
|
3
|
|||||||||||||
Realized
gain
|
—
|
—
|
(2
|
)
|
—
|
—
|
(2
|
)
|
|||||||||||
Balance
at June 30, 2006
|
$
|
(2,553
|
)
|
$
|
—
|
$
|
2
|
$
|
1
|
$
|
(170
|
)
|
$
|
(2,720
|
)
|
|
Shares
(000)
|
|||
Authorized
under the 2007 Plan
|
30,000
|
|||
Awarded(1)
|
(25,281
|
)
|
||
Forfeited
|
13
|
|||
Returned
to Treasury
|
5,176
|
|||
Available
for Future Grants
|
9,908
|
|
Shares
(000)
|
Weighted
Average
Grant-Date
Fair
Value
|
|||||
Granted
|
7,015
|
$
|
20.43
|
||||
Vested
|
-
|
-
|
|||||
Forfeited
|
(13
|
) |
-
|
||||
Non-vested
at June 30, 2007
|
7,002
|
$
|
20.43
|
Assumption
|
|
|||
Risk-free
interest rate
|
4.9
|
%
|
||
Average
expected life of stock options (in years)
|
6.0
|
|||
Expected
volatility of common stock
|
55.0
|
%
|
||
Weighted
average fair value of a stock option granted
|
$
|
10.76
|
|
Shares
(000)
|
Weighted
Average
Exercise
Price
|
|||||
Outstanding
at the beginning of the period
|
-
|
$
|
-
|
||||
Granted
|
3,024
|
18.84
|
|||||
Exercised
|
-
|
-
|
|||||
Forfeited
|
-
|
-
|
|||||
Outstanding
at the end of the period
|
3,024
|
$
|
18.84
|
||||
Exercisable
at the end of the period
|
-
|
-
|
|
Successor
|
Predecessor
|
Successor
|
Predecessor
|
|||||||||||||||
|
Two
Months
|
One
Month
|
Three
Months
|
Two
Months
|
Four
Months
|
Six
Months
|
|||||||||||||
|
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
|||||||||||||
|
June
30,
|
April
30,
|
June
30,
|
June
30,
|
April
30,
|
June
30,
|
|||||||||||||
(in
millions, except per share data)
|
2007
|
2007
|
2006
|
2007
|
2007
|
2006
|
|||||||||||||
Basic:
|
|||||||||||||||||||
Net
income (loss)
|
$
|
164
|
$
|
1,428
|
$
|
(2,205
|
)
|
$
|
164
|
$
|
1,298
|
$
|
(4,274
|
)
|
|||||
Dividends
on allocated Series B ESOP
|
|||||||||||||||||||
Convertible
Preferred Stock
|
-
|
-
|
-
|
-
|
-
|
(2
|
)
|
||||||||||||
Net
income (loss) attributable to
|
|||||||||||||||||||
common
shareowners
|
$
|
164
|
$
|
1,428
|
$
|
(2,205
|
)
|
$
|
164
|
$
|
1,298
|
$
|
(4,276
|
)
|
|||||
Basic
weighted average shares outstanding
|
393.6
|
197.3
|
197.3
|
393.6
|
197.3
|
195.6
|
|||||||||||||
Basic
earnings (loss) per share
|
$
|
0.42
|
$
|
7.24
|
$
|
(11.18
|
)
|
$
|
0.42
|
$
|
6.58
|
$
|
(21.86
|
)
|
|||||
|
|||||||||||||||||||
Diluted:
|
|||||||||||||||||||
Net
income (loss) attributable to
|
|||||||||||||||||||
common
shareowners
|
$
|
164
|
$
|
1,428
|
$
|
(2,205
|
)
|
$
|
164
|
$
|
1,298
|
$
|
(4,276
|
)
|
|||||
Gain
recognized on the forgiveness
|
|||||||||||||||||||
of
convertible debt
|
-
|
(216
|
)
|
-
|
-
|
(216
|
)
|
-
|
|||||||||||
Net
income (loss) attibutable to common
|
|||||||||||||||||||
shareowners
assuming conversion
|
$
|
164
|
$
|
1,212
|
$
|
(2,205
|
)
|
$
|
164
|
$
|
1,082
|
$
|
(4,276
|
)
|
|||||
|
|||||||||||||||||||
Basic
weighted average shares outstanding
|
393.6
|
197.3
|
197.3
|
393.6
|
197.3
|
195.6
|
|||||||||||||
Additional
shares assuming:
|
|||||||||||||||||||
Restricted
shares
|
0.2
|
-
|
-
|
0.2
|
-
|
-
|
|||||||||||||
Conversion
of 8.0% Convertible
|
|||||||||||||||||||
Senior
Notes
|
-
|
12.5
|
-
|
-
|
12.5
|
-
|
|||||||||||||
Conversion
of 2 7/8% Convertible
|
|||||||||||||||||||
Senior
Notes
|
-
|
23.9
|
-
|
-
|
23.9
|
-
|
|||||||||||||
Weighted
average shares outstanding,
|
|||||||||||||||||||
as
adjusted
|
393.8
|
233.7
|
197.3
|
393.8
|
233.7
|
195.6
|
|||||||||||||
Dilutive
earnings (loss) per share
|
$
|
0.42
|
$
|
5.19
|
$
|
(11.18
|
)
|
$
|
0.42
|
$
|
4.63
|
$
|
(21.86
|
)
|
(a) |
Market
approach - prices
and other relevant information generated by market transactions
involving
identical or comparable assets or
liabilities
|
(b) |
Cost
approach - amount
that would be required to replace the service capacity of an asset
(replacement cost)
|
(c) |
Income
approach -
techniques to convert future amounts to a single present amount
based on
market expectations (including present value techniques, option-pricing
and excess earnings models).
|
(in
millions)
|
Successor
June
30,
2007
|
Quoted
prices in
active
markets
for
identical
assets
(Level 1)
|
Significant
other
observable
inputs
(Level 2)
|
Valuation
Technique
|
|||||||||
|
|||||||||||||
Short
term investments
|
$
|
1,549
|
$
|
1,549
|
$
|
-
|
(a)
|
|
|||||
Fuel
hedging derivatives
|
37
|
-
|
37
|
(a)
|
|
(in
millions)
|
Successor
May
1,
2007
|
Significant
other
observable
inputs
(Level 2)
|
Significant
(1)
unobservable
inputs
(Level 3)
|
Valuation
technique
|
||||||||
|
||||||||||||
Expendable
parts and supplies inventories
|
$
|
241
|
$
|
241
|
$
|
-
|
(a)
(b)
|
|||||
Prepaid
expense and other
|
349
|
349
|
-
|
(a)
(b) (c)
|
||||||||
Net
flight equipment and net flight equipment under capital
lease
|
9,833
|
9,833
|
-
|
(a)
(b)
|
||||||||
Other
property and equipment
|
1,713
|
1,713
|
-
|
(a)
(b)
|
||||||||
Indefinite-lived
intangible assets (2)
|
1,997
|
-
|
1,997
|
(c)
|
||||||||
Definite-lived
intangible assets (2)
|
956
|
-
|
956
|
(c)
|
||||||||
Other
noncurrent assets
|
875
|
875
|
-
|
(a)
(b) (c)
|
||||||||
Debt
and obligations under capital lease
|
6,899
|
6,899
|
-
|
(a)
(c)
|
||||||||
SkyMiles
deferred revenue
(3)
|
3,482
|
-
|
3,482
|
(a)
|
||||||||
Accounts
payable and other noncurrent liabilities
|
405
|
405
|
-
|
(a)
(c)
|
||||||||
(1) |
These
valuations were based on the present value of future cash flows
for
specific assets derived from our projections of future revenue,
expense
and airline market conditions. These cash flows were then discounted
to
their present value using a rate of return that considers the relative
risk of not realizing the estimated annual cash flows and time
value of
money.
|
(2) |
Intangible
assets are identified by asset type in Note
2.
|
(3) |
The
fair value of our SkyMiles frequent flyer award liability was determined
based on the estimated price we would pay a third party to assume
the
obligation for miles expected to be redeemed under our SkyMiles
program.
These miles were valued based upon the weighted average of the
equivalent
ticket value of similar fares on Delta and the amounts paid to
other
SkyTeam alliance partners. See Note 2 for the accounting policy
related to
our SkyMiles frequent flyer
program.
|
· |
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 (“JFK”). 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 SFAS No. 13, “Accounting for
Leases.”
|
· |
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.
|
Combined
|
Predecessor
|
||||||||||||
|
Three
Months
|
Three
Months
|
|
%
|
|||||||||
|
Ended
|
Ended
|
Increase
|
Increase
|
|||||||||
(in
millions)
|
June
30, 2007
|
June
30, 2006
|
(Decrease)
|
(Decrease)
|
|||||||||
Operating
Revenue:
|
|
|
|
|
|||||||||
Passenger:
|
|||||||||||||
Mainline
|
$
|
3,384
|
$
|
3,176
|
$
|
208
|
7
|
%
|
|||||
Regional
affiliates
|
1,109
|
1,035
|
74
|
7
|
%
|
||||||||
Total
passenger revenue
|
4,493
|
4,211
|
282
|
7
|
%
|
||||||||
Cargo
|
118
|
128
|
(10
|
)
|
(8
|
)%
|
|||||||
Other,
net
|
392
|
402
|
(10
|
)
|
(2
|
)%
|
|||||||
Total
operating revenue
|
$
|
5,003
|
$
|
4,741
|
$
|
262
|
6
|
%
|
|
|
Increase
(Decrease)
|
||||||||||||||||||||
|
Combined
|
Three
Months Ended June 30, 2007 vs. 2006
|
||||||||||||||||||||
|
Three
Months
|
|
|
|
Passenger
|
|
|
|||||||||||||||
|
Ended
|
Passenger
|
|
|
Mile
|
|
Load
|
|||||||||||||||
(in
millions)
|
June
30, 2007
|
Revenue
|
RPMs
|
ASMs
|
Yield
|
PRASM
|
Factor
|
|||||||||||||||
Passenger
Revenue:
|
||||||||||||||||||||||
North
America
|
$
|
3,208
|
1
|
%
|
1
|
%
|
(5
|
)%
|
(1
|
)%
|
6
|
%
|
5.0
|
|||||||||
International
|
1,260
|
26
|
%
|
14
|
%
|
15
|
%
|
11
|
%
|
10
|
%
|
(0.7
|
)
|
|||||||||
Charter
revenue
|
25
|
12
|
%
|
75
|
%
|
25
|
%
|
(36
|
)%
|
(10
|
)%
|
10.9
|
||||||||||
Total
passenger revenue
|
$
|
4,493
|
7
|
%
|
5
|
%
|
1
|
%
|
2
|
%
|
6
|
%
|
3.1
|
Combined
|
Predecessor
|
||||||||||||||
Three
Months
|
Three
Months
|
%
|
|||||||||||||
|
Ended
|
Ended
|
Increase
|
|
Increase
|
||||||||||
(in
millions)
|
June
30, 2007
|
June
30, 2006
|
(Decrease)
|
|
(Decrease)
|
||||||||||
Operating
Expense:
|
|
|
|
|
|
||||||||||
Aircraft
fuel and related taxes
|
$
|
1,112
|
$
|
1,142
|
$
|
(30
|
)
|
(3
|
)%
|
||||||
Salaries
and related costs
|
1,039
|
1,070
|
(31
|
)
|
(3
|
)%
|
|||||||||
Contract
carrier arrangements
|
769
|
660
|
109
|
17
|
%
|
||||||||||
Depreciation
and amortization
|
288
|
318
|
(30
|
)
|
(9
|
)%
|
|||||||||
Contracted
services
|
243
|
218
|
25
|
11
|
%
|
||||||||||
Aircraft
maintenance materials and outside repairs
|
247
|
232
|
15
|
6
|
%
|
||||||||||
Passenger
commissions and other selling expenses
|
253
|
234
|
19
|
8
|
%
|
||||||||||
Landing
fees and other rents
|
182
|
194
|
(12
|
)
|
(6
|
)%
|
|||||||||
Passenger
service
|
85
|
81
|
4
|
5
|
%
|
||||||||||
Aircraft
rent
|
56
|
73
|
(17
|
)
|
(23
|
)%
|
|||||||||
Profit
sharing
|
79
|
-
|
79
|
NM
|
|||||||||||
Other
|
160
|
150
|
10
|
7
|
%
|
||||||||||
Total
operating expense
|
$
|
4,513
|
$
|
4,372
|
$
|
141
|
3
|
%
|
· |
Emergence
gain. A
net $2.1 billion gain due to our emergence from bankruptcy, comprised
of
(1) a $4.4 billion gain related to the discharge of liabilities subject
to
compromise in connection with the settlement of claims, (2) a $2.6
billion
charge associated with the revaluation of our SkyMiles frequent flyer
obligation and (3) a $238 million gain from the revaluation of our
remaining assets and liabilities to fair value. For additional information
regarding this emergence gain, see Note 1 of the Notes to the Condensed
Consolidated Financial Statements.
|
· |
Aircraft
financing renegotiations and rejections.
$438 million of estimated claims primarily associated with the
restructuring of the financing arrangements of 127 aircraft and
adjustments to prior claims estimates.
|
· |
Emergence
compensation.
In accordance with the Plan, we made $130 million in lump-sum cash
payments to approximately 39,000 eligible non-contract,
non-management employees. We also recorded an additional
charge of $32 million related to our portion of payroll related taxes
associated with the issuance, as contemplated by the Plan, of
approximately 14 million shares of common stock to those employees.
For
additional information regarding the common stock issuance, see Note
10 of
the Notes to the Condensed Consolidated Financial
Statements.
|
· |
Facility
leases.
A
net $80 million charge from an allowed general, unsecured claim in
connection with the settlement relating to the restructuring of certain
of
our lease and other obligations at the Cincinnati-Northern Kentucky
International Airport (“CVG”). For additional information regarding this
settlement, see Note 4 of the Notes to the Condensed Consolidated
Financial Statements.
|
|
Combined
|
Predecessor
|
|
|
|||||||||
|
Six
Months
|
Six
Months
|
|
%
|
|||||||||
|
Ended
|
Ended
|
Increase
|
Increase
|
|||||||||
(in
millions)
|
June
30, 2007
|
June
30, 2006
|
(Decrease)
|
(Decrease)
|
|||||||||
Operating
Revenue:
|
|||||||||||||
Passenger:
|
|||||||||||||
Mainline
|
$
|
6,167
|
$
|
5,669
|
$
|
498
|
9
|
%
|
|||||
Regional
affiliates
|
2,056
|
1,893
|
163
|
9
|
%
|
||||||||
Total
passenger revenue
|
8,223
|
7,562
|
661
|
9
|
%
|
||||||||
Cargo
|
230
|
251
|
(21
|
)
|
(8
|
)%
|
|||||||
Other,
net
|
791
|
722
|
69
|
10
|
%
|
||||||||
Total
operating revenue
|
$
|
9,244
|
$
|
8,535
|
$
|
709
|
8
|
%
|
|
|
Increase
(Decrease)
|
||||||||||||||||||||
|
Combined
|
Six
Months Ended June 30, 2007 vs. 2006
|
||||||||||||||||||||
|
Six
Months
|
|
|
|
Passenger
|
|
|
|||||||||||||||
|
Ended
|
Passenger
|
|
|
Mile
|
|
Load
|
|||||||||||||||
(in
millions)
|
June
30, 2007
|
Revenue
|
RPMs
|
ASMs
|
Yield
|
PRASM
|
Factor
|
|||||||||||||||
Passenger
Revenue:
|
||||||||||||||||||||||
North
American
|
$
|
5,996
|
3
|
%
|
(2
|
)%
|
(5
|
)%
|
4
|
%
|
8
|
%
|
3.0
|
|||||||||
International
|
2,176
|
32
|
%
|
19
|
%
|
19
|
%
|
10
|
%
|
11
|
%
|
0.1
|
||||||||||
Charter
revenue
|
51
|
(12
|
)%
|
(8
|
)%
|
(8
|
)%
|
(4
|
)%
|
(4
|
)%
|
(0.1
|
)
|
|||||||||
Total
passenger revenue
|
$
|
8,223
|
9
|
%
|
4
|
%
|
2
|
%
|
4
|
%
|
7
|
%
|
2.1
|
|
Combined
|
Predecessor
|
|
|
||||||||
|
Six
Months
|
Six
Months
|
|
%
|
||||||||
|
Ended
|
Ended
|
Increase
|
Increase
|
||||||||
(in
millions)
|
June
30, 2007
|
June
30, 2006
|
(Decrease)
|
(Decrease)
|
||||||||
Operating
Expense:
|
||||||||||||
Aircraft
fuel and related taxes
|
$
|
2,060
|
$
|
2,101
|
$
|
(41
|
)
|
(2
|
)%
|
|||
Salaries
and related costs
|
2,010
|
2,293
|
(283
|
)
|
(12
|
)%
|
||||||
Contract
carrier arrangements
|
1,486
|
1,269
|
217
|
17
|
%
|
|||||||
Depreciation
and amortization
|
579
|
619
|
(40
|
)
|
(6
|
)%
|
||||||
Contracted
services
|
486
|
440
|
46
|
10
|
%
|
|||||||
Aircraft
maintenance materials and outside repairs
|
485
|
459
|
26
|
6
|
%
|
|||||||
Passenger
commissions and other selling expenses
|
473
|
446
|
27
|
6
|
%
|
|||||||
Landing
fees and other rents
|
372
|
491
|
(119
|
)
|
(24
|
)%
|
||||||
Passenger
service
|
156
|
154
|
2
|
1
|
%
|
|||||||
Aircraft
rent
|
126
|
168
|
(42
|
)
|
(25
|
)%
|
||||||
Profit
sharing
|
79
|
-
|
79
|
NM
|
||||||||
Other
|
287
|
211
|
76
|
36
|
%
|
|||||||
Total
operating expense
|
$
|
8,599
|
$
|
8,651
|
$
|
(52
|
)
|
(1
|
)%
|
· |
Emergence
gain. A
net $2.1 billion gain due to our emergence from bankruptcy. For additional
information regarding this gain, see “Combined Results of Operations -
June 2007 and June 2006 Quarters - Reorganization Items, Net” above.
|
· |
Aircraft
financing renegotiations and rejections.
$440 million of estimated claims primarily associated with the
restructuring of the financing arrangements for 143 aircraft and
adjustments to prior claims estimates.
|
· |
Contract
carrier agreements.
A
net charge of $163 million in connection with amendments to certain
contract carrier agreements. For additional information regarding
this
charge and our contract carrier agreements, see Notes 1 and 5,
respectively, of the Notes to the Condensed Consolidated Financial
Statements.
|
· |
Emergence
compensation.
In accordance with the Plan, we made $130 million in lump-sum cash
payments to approximately 39,000 eligible non-contract,
non-management employees. We also recorded an additional charge
of $32 million related to our portion of payroll related taxes associated
with the issuance, as contemplated by the Plan, of approximately 14
million shares of common stock to those employees. For additional
information regarding the common stock issuance, see Note 10 of the
Notes
to the Condensed Consolidated Financial
Statements.
|
· |
Pilot
collective bargaining agreement.
An
$83 million allowed general, unsecured claim in connection with Comair’s
agreement with ALPA to reduce Comair’s pilot labor costs.
|
· |
Facility
leases.
A
net $43 million gain, which primarily reflects (1) a $126 million
net gain
related to our settlement agreement with the Massachusetts Port Authority
offset by (2) a net $80 million charge from an allowed general, unsecured
claim in connection with the settlement relating to the restructuring
of
certain of our lease and other obligations at CVG. For additional
information regarding these matters, see Notes 1 and 4 of the Notes
to the
Condensed Consolidated Financial Statements.
|
Combined
|
Predecessor |
Combined
|
Predecessor
|
||||||||||
Three
Months
Ended
June
30,
2007
|
Three
Months
Ended
June
30,
2006
|
Six
Months
Ended
June
30,
2007
|
Six
Months
Ended
June
30,
2006
|
||||||||||
Consolidated
Combined:
|
|||||||||||||
Revenue
Passenger Miles (millions) (1)
|
31,578
|
30,053
|
58,790
|
56,437
|
|||||||||
Available
Seat Miles (millions) (1)
|
38,127
|
37,718
|
73,407
|
72,321
|
|||||||||
Passenger
Mile Yield
(1)
|
14.23
|
¢
|
14.01
|
¢
|
13.99
|
¢
|
13.40
|
¢
|
|||||
Passenger
Revenue Per Available Seat Mile
(1)
|
11.78
|
¢
|
11.16
|
¢
|
11.20
|
¢
|
10.46
|
¢
|
|||||
Operating
Cost Per Available Seat Mile (1)
|
11.83
|
¢
|
11.59
|
¢
|
11.71
|
¢
|
11.96
|
¢
|
|||||
Passenger
Load Factor (1)
|
82.8
|
%
|
79.7
|
%
|
80.1
|
%
|
78.0
|
%
|
|||||
Breakeven
Passenger Load Factor (1)
|
73.8
|
%
|
72.7
|
%
|
73.8
|
%
|
79.2
|
%
|
|||||
Fuel
Gallons Consumed (millions)
|
531
|
534
|
1,022
|
1,034
|
|||||||||
Average
Price Per Fuel Gallon, Net of Hedging activity
|
$
|
2.09
|
$
|
2.14
|
$
|
2.02
|
$
|
2.03
|
|||||
Number
of Aircraft in Fleet, End of Period
|
573
|
625
|
573
|
625
|
|||||||||
Full-Time
Equivalent Employees, End of Period
|
55,542
|
51,736
|
55,542
|
51,736
|
|||||||||
Mainline:
|
|||||||||||||
Revenue
Passenger Miles (millions)
|
26,776
|
25,658
|
49,769
|
48,139
|
|||||||||
Available
Seat Miles (millions)
|
32,130
|
32,101
|
61,684
|
61,529
|
|||||||||
Operating
Cost Per Available Seat Mile
|
10.69
|
¢
|
10.49
|
¢
|
10.53
|
¢
|
10.91
|
¢
|
|||||
Number
of Aircraft in Fleet, End of Period
|
440
|
457
|
440
|
457
|
(1) |
Includes
the operations under contract carrier agreements with unaffiliated
regional air carriers:
|
l |
ASA,
Chautauqua Airlines, Inc., Freedom Airlines, Inc., Shuttle America
Corporation and SkyWest Airlines, Inc. for all periods presented
and
|
l |
ExpressJet
Airlines, Inc. from February 27, 2007 to June 30,
2007.
|
· |
provides
for agreements under which we will continue to use certain facilities
at
the Cincinnati Airport at substantially reduced costs;
|
· |
settles
all disputes among us, the KCAB, the Bond Trustee and the former,
present
and future holders of the 1992 Bonds (the “1992 Bondholders”);
|
· |
gives
the Bond Trustee, on behalf of the 1992 Bondholders, a $260 million
allowed general, unsecured pre-petition claim in our bankruptcy
proceedings; and
|
· |
provides
for our issuance of $66 million principal amount of senior unsecured
notes
to the Bond Trustee on behalf of the 1992
Bondholders.
|
(a)
|
Exhibits
|
10.1(a)
|
First
Lien Revolving Credit and Guaranty Agreement, dated as of April
30, 2007,
among Delta Air Lines, Inc., as Borrower, the subsidiaries of
the Borrower
named, as Guarantors, each of the Lenders from time to time party,
JPMorgan Chase Bank, N.A., as administrative agent and as collateral
agent, J.P. Morgan Securities, Inc. and Lehman Brothers Inc.,
as co-lead
arrangers and joint bookrunners, UBS Securities LLC, as syndication
agent
and as joint bookrunner, and Calyon New York Branch and RBS Securities
Corporation, as co-documentation agents
|
10.1(b)
|
Second
Lien Term Loan and Guaranty Agreement, dated as of April 30,
2007, among
Delta Air Lines, Inc., as Borrower, the subsidiaries of the Borrower
named, as Guarantors, each of the Lenders from time to time party,
Goldman
Sachs Credit Partners L.P. (“GSCP”), as administrative agent and as
collateral agent, GSCP and Merrill Lynch Commercial Finance Corp.,
as
co-lead arrangers and joint bookrunners, Barclays Capital, as
syndication
agent and as joint bookrunner, and Credit Suisse Securities (USA)
LLC and
C.I.T. Leasing Corporation, as co-documentation agents
|
10.2
|
Description
of Certain Benefits of Executive Officers
|
|
|
15
|
Letter
from Ernst & Young LLP regarding unaudited interim financial
information
|
31.1
|
Certification
by Delta’s Chief Executive Officer with respect to Delta’s Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
2007
|
31.2
|
Certification
by Delta’s Executive Vice President and Chief Financial Officer with
respect to Delta’s Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2007
|
32
|
Certification
pursuant to Section 1350 of Chapter 63 of Title 18 of the United
States
Code by Delta’s Chief Executive Officer and Executive Vice President and
Chief Financial Officer with respect to Delta’s Quarterly Report on Form
10-Q for the quarterly period ended June 30,
2007
|
Delta
Air Lines, Inc.
(Registrant)
|
|||
By:
|
/s/
Edward H. Bastian
|
||
Edward
H. Bastian
Executive
Vice President and
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|