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Delta reports 3Q adjusted net income of $1.4 billion

Delta Air Lines (Atlanta) today reported its financial results for the September 2015 (third) quarter, including adjusted net income of $1.4 billion or $1.74 per diluted share, up 45% from the September quarter of 2014.

Read the full report: CLICK HERE

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Formerly painted in AirTran Airways’ Atlanta Falcons special scheme, Boeing 717-2BD N891AT (msn 55043) now flies for Delta, leased from Southwest Airlines.

Delta Air Lines aircraft slide show: AG Airline Slide Show

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Delta reports adjusted earnings of $1 billion in the second quarter, up 22%, expects capacity to decrease 3% in the 3Q

Delta Air Lines (Atlanta) today reported its best second quarter financial results in its history:

Delta Air Lines today reported financial results for the second quarter (June) 2015 quarter, including adjusted net income of $1.0 billion or $1.27 per diluted share, up 22% from the same quarter in 2014.

“Delta’s record results have allowed the company to invest in its employees through higher wage rates and profit sharing; improve the experience for our customers through new aircraft and innovative partnerships with global carriers; and uniquely deliver value for our shareholders by accelerating our capital returns while also paying down debt,” said Richard Anderson, Delta’s chief executive officer. “We have more work and opportunity ahead of us on all of these fronts as we continue to execute on our long-term plan.”

Anderson continued, “Our significant fuel savings in the September quarter should allow us to produce another record quarter with more than 30% EPS growth, a 19-21% operating margin and $1.9 billion of operating cash flow.”

Delta 2Q Graph

Revenue Environment

Delta’s operating revenue for the June quarter increased 1%, despite $160 million in foreign currency pressures which reduced unit revenues by approximately 2 points. Passenger unit revenues declined 4.6% on a 3.9% decline in yields.

Delta saw solid progress with several of its revenue initiatives, including Branded Fares, which increased passenger revenues by $56 million, and its enhanced agreement with American Express, which produced an incremental $60 million in revenue.

“Our commercial initiatives continue to gain traction in the marketplace and we will produce summer margins in excess of any achieved in our history,” said Ed Bastian, Delta’s president. “However, unit revenue growth is an important component of our long-term plan to expand margins. We continue to project flat system capacity growth for the fourth quarter of 2015 – a level in line with current demand expectations, which should put the business on the right trajectory to stem the erosion in unit revenues by the end of the year.”

Investment Strengthens Partnership and Expands Global Reach

Strengthening its existing partnership with Gol, Delta recently agreed to purchase up to $56 million in preferred shares as part of a larger rights offering by the Brazilian carrier. In addition to the equity, Delta will guarantee up to $300 million in borrowings by Gol under a term loan with third-party lenders. Delta’s guarantee will be secured by Gol’s interest in SMILES, Gol’s publicly-traded loyalty program. Delta and Gol have also agreed to extend their exclusive commercial agreement for flights between the United States and Brazil, the largest aviation market in Latin America. This transaction is subject to normal closing conditions, including regulatory approvals.

Cost Performance

Adjusted fuel expense2 declined over $463 million compared to the same period in 2014, as 39% lower market fuel prices and a $77 million increase in profit at the refinery offset nearly $600 million in settled hedge losses. For the remainder of 2015, Delta expects its fuel expense to be $1.90 – $2.00 per gallon, a significant reduction to the $2.65 per gallon it realized in the first six months of the year.

CASM-Ex3 decreased 0.8% for the June quarter on a year-over-year basis, with foreign exchange and the benefits of Delta’s domestic refleeting and other cost initiatives offsetting the company’s investments in its employees, products and operations. This marks the eighth consecutive quarter of CASM growth below 2%, in line with the company’s long-term goals.

Delta’s debt reduction initiative continued to improve the company’s interest expense, producing $46 million in interest savings for the quarter compared to the same period in 2014.

“Because of the momentum we’ve built with our cost reduction initiatives, we expect to post our ninth consecutive quarter of sub-2% unit cost growth in September,” said Paul Jacobson, Delta’s chief financial officer. “Cost efficiency has contributed to the record results that allowed us to return $1 billion to shareholders in the June quarter while investing in our employees and customer experience.”

Cash Flow, Shareholder Returns, and Adjusted Net Debt

Delta generated $2.5 billion of adjusted operating cash flow and $1.6 billion of free cash flow during the quarter. The company used this strong cash generation to reinvest nearly $1 billion back into the business, primarily for aircraft purchases. The company returned $1.0 billion to its owners through $72 million of dividends and $925 million of share repurchases, while also strengthening its balance sheet by reducing its adjusted net debt to $7.1 billion.

September 2015 Quarter Guidance

Following are Delta’s projections for the September 2015 quarter:

3Q15 Forecast

Unit Revenue (compared to 3Q14)

(4.5%) – (6.5%)

Operating margin

19% – 21%

Fuel price, including taxes, settled hedges and refinery impact

$1.90-$1.95

CASM – Ex (compared to 3Q14)

Flat

System capacity (compared to 3Q14)

~3%

Special Items

Special items, net of taxes, in the June 2015 quarter totaled $458 million, including:

$454 million for mark-to-market adjustments and settlements on fuel hedges;

a $16 million charge for fleet and other items, primarily associated with Delta’s domestic fleet restructuring initiative; and

$20 million for mark-to-market adjustments on hedges owned by Virgin Atlantic.
Special items, net of taxes, in the June 2014 quarter totaled $88 million, including:

a $69 million charge for debt extinguishment associated with Delta’s debt reduction initiative; and

a $20 million charge associated with Delta’s domestic fleet restructuring.

Top Copyright Photo: Fred Freketic/AirlinersGallery.com. Delta has been introducing the former AirTran Airways Boeing 717s around the country including the West Coast. Boeing 717-2BD N966AT (msn 55027) departs from the New York (JFK) hub. All 717s are leased from Southwest Airlines.

Delta Air Lines aircraft slide show (current livery):

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Delta confirms it will operate the Boeing 717 between Los Angeles and San Francisco

Delta Air Lines (Atlanta) has now confirmed our previous report of adding the Boeing 717 type to the West Coast Delta Shuttle between Los Angeles and San Francisco. The airline issued this statement today:

Delta Air Lines will introduce Boeing 717 aircraft on eight of the 15 daily flights between Los Angeles International and San Francisco International airports in June, offering 40 percent more seats on its hourly nonstop Delta Shuttle.

Delta launched its hourly nonstop Delta Shuttle product from Los Angeles to San Francisco in September 2013, adding a California perspective to its long relied-upon New York-based Shuttle. The mainline 717s seat 110 passengers and offer access to power from every seat. The remaining seven daily West Coast Shuttle flights will continue to be operated by Delta Connection partner Compass Airlines using 76-seat Embraer ERJ 175 aircraft. All Shuttle flights offer access to First Class and Economy Comfort seating and feature Wi-Fi service, as does nearly every domestic Delta flight out of Los Angeles.

The 717 upgrade on the West Coast Shuttle is the latest in a series of investments in Los Angeles by the airline. Last month, Delta announced plans to begin daily nonstop service to Shanghai in July. Pending foreign government approval, seasonal service from Los Angeles to Managua, Nicaragua, will also begin this summer. These new routes build on Delta’s expansion in both international and domestic service from Los Angeles in recent months, including London-Heathrow in October; Dallas/Fort Worth* and Austin, Texas* in November; and Vancouver, Canada* in December.

*Flight operated by Delta Connection carrier Compass Airlines

From Los Angeles, Delta currently operates 154 peak-day departures to 48 destinations. At the airport, travelers passing through Los Angeles continue to enjoy the benefits of the $229 million expansion and enhancement of Terminal 5 at LAX, scheduled for completion in May 2015. Once onboard, Delta supports and markets the music of emerging artists and short-form content creators through exclusive partnerships that provide in-flight content for customers, who can now enjoy free entertainment from every seat out of Los Angeles through the new Delta Studio product.

Copyright Photo: Tony Storck/AirlinersGallery.com. Boeing 717-2BD N894AT (msn 55003) taxies to the runway at Baltimore/Washington.

Delta Air Lines aircraft slide show (current livery):

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AirTran Airways operates its last flight, now fully integrated into Southwest Airlines

AirTran 717-200 N717JL taxies into the gate at TPA (Southwest)(LR)

AirTran Airways (Orlando), as planned ended its operations last night (December 28) on its original Atlanta-Tampa route. Special flight FL 1 arrived at the gate at Tampa International Airport (TPA) at 2339 (11:39) EST. As a result, the AirTran brand was retired and the flight marked the full integration of AirTran into Southwest Airlines (Dallas). The last flight was operated with Boeing 717-2BD B717JL (msn 55042).

Read about the history of AirTran Airways: CLICK HERE

Southwest Airlines issued this statement:

Southwest Airlines embarked on a new era on December 28 as it celebrated the last AirTran Airways revenue flight. At 10:25pm EST, AirTran Airways Flight 1 departed Hartsfield-Jackson Atlanta International Airport to Tampa Bay International Airport.

“With this special flight, we are celebrating history and setting our sights on a bright future for all of Southwest Airlines,” said Bob Jordan, Southwest Airlines’ Chief Commercial Officer and AirTran Airways President, who was on the flight to Tampa. “The work of so many People culminates in this moment as we salute the enormous accomplishments of AirTran and Southwest. For our Customers and Employees, we now move forward with one airline, one Customer Experience, one flight schedule, one Rapid Rewards frequent flyer program, and one award-winning Brand.”

More than 400 AirTran and Southwest Employees and special guests gathered in Atlanta Sunday evening to commemorate the milestone. AirTran Flight 1 retraced a route that is a nod to AirTran’s first commercial flight in October 1993. Flight 1’s flight crew consisted of longtime AirTran Employees, including the airline’s Chief Pilot, Floy Ponder, a 19-year veteran of AirTran Airways. Each of the flight’s 117 passengers, consisting of many former AirTran Employees, retirees, special guests, and aviation enthusiasts received a special keepsake celebrating the historic flight.

“As we’ve grown in both the domestic and international markets, I can’t help but think about all the doors the AirTran acquisition has opened for Southwest Airlines,” said Gary Kelly, Southwest Airlines Chairman, President & CEO, who was in Atlanta for the send-off. “The most important things—which cannot be measured and are irreplaceable—are the great People of AirTran who have worked hard to achieve this milestone, and are all soon to be part of the Southwest Airlines family.”

The acquisition of AirTran was a unique opportunity to extend the Southwest network into key markets it didn’t yet serve, such as Atlanta and the greater Washington, D.C., area, via Ronald Reagan National Airport. The integration gives Southwest the opportunity to serve Customers from 93 airports in the U.S. and near-international destinations, providing Customers more low-fare destinations as it expands the well-known “Southwest Effect” to hundreds of additional low-fare itineraries for the traveling public.

Southwest Airlines acquired AirTran Airways in 2011.

Photo: Southwest Airlines. Boeing 717-2BD N717JL taxies into the gate at TPA ending the history of the airline.

AirTran Airways aircraft slide show: AG Slide Show

Video: Southwest Airlines. The last AirTran flight from Atlanta to Tampa:

Video:

<p><a href=”http://vimeo.com/115567085″>The last departure of AirTran Airways</a> from <a href=”http://vimeo.com/user19954503″>Bruce Drum</a> on <a href=”https://vimeo.com”>Vimeo</a&gt;.</p>

 

Delta to move its Boston Delta Shuttle flights to Terminal C at LaGuardia Airport

Delta Air Lines (Atlanta) will move New York operations of its Delta Shuttle between Boston-Logan International Airport and New York’s LaGuardia Airport from the Marine Air Terminal to Terminal C beginning on November 2.

Boston Shuttle customers will enjoy new departure and arrival facilities at LaGuardia in Terminal C as well as upgraded service to Boeing 717 aircraft. The move is part of Delta’s strategy of adding bigger aircraft on more routes.

In 2012, Delta completed renovations to Terminal C as part of its $160 million investment to modernize and connect Terminals C and D at LaGuardia and opened a new 7,600 square foot Delta Sky Club featuring a full wall of windows with runway views. Customers will also have access to Delta’s five new restaurants with menus led by celebrity chefs, an expansive food hall and fresh markets.

Weekday flights depart near the top of the hour from 6 a.m. through 8 p.m. and will be operated by Delta using Boeing 717 aircraft which accommodates 110 passengers including 12 First Class seats in a two by two configuration, 15 Economy Comfort and 83 economy seats in a two by three configuration. Boston-based customers will now be able connect through Delta’s LaGuardia hub for access to 64 additional cities.

Delta Shuttle service began on its Boston to New York and Washington, D.C. to New York routes on September 1, 1991 after Delta completed the purchase of the Pan Am Shuttle. For nearly a quarter century the Delta Shuttle has been a core part of its New York operations. In June 2010, Delta added New York to Chicago-O’Hare service to the Shuttle operation.

Customers flying the Delta Shuttle between New York-LaGuardia and Boston will enjoy:

Convenient, top of the hour schedule for Delta Shuttle customers including 15 weekday departures

Check-in as close as 15 minutes prior to departure without bags or 30 with checked bags

Dedicated check-in counters exclusively for Shuttle customers

Expedited security screening with nearby access to TSA Pre-Check lanes for eligible passengers

Dedicated gates – located near the Delta Sky Club in LaGuardia’s Terminal C – with access to complimentary coffee and newspapers for all customers including The New York Times, The Wall Street Journal, USA Today, Financial Times and power at the gate

Advanced seat selection on all Delta Shuttle flights and complimentary access to Economy Comfort seats for SkyMiles Gold, Platinum and Diamond Medallion members at the time of booking

Two classes of service with complimentary upgrades for SkyMiles Medallion members when available.
Complimentary onboard snacks including bagels in the morning before 10:30 a.m. or gourmet nut mix for flights after 10:30 a.m.

Complimentary beverages in-flight including craft beer and wine in all classes of service

Cocktails available for purchase in economy

Access to in-flight Wi-Fi on all Shuttle flights

Access to power from every seat on the Boeing 717 aircraft

The November 2014 schedule between New York–LaGuardia and Boston is below.

Delta Shuttle LGA-BOS Schedule (LRW)

 

 

Delta Shuttle flights between New York and Chicago-O’Hare International Airport or Washington Reagan-National Airport will continue to operate from LaGuardia’s Marine Air Terminal operated by Delta Connection partner, Shuttle America using Embraer E175 aircraft.

Copyright Photo: Brian McDonough/AirlinersGallery.com. Ex-AirTran Airways Boeing 717-2BD N995AT (msn 55139), now with Delta, arrives at Washington (Dulles).

Delta Air Lines (current): AG Slide Show

Southwest Airlines announces new routes from Dallas and Washington’s Reagan National Airport, Mexico City and AirTran Airways final flight on December 28

Southwest Airlines (Dallas) adding to what we previously reported, today published dozens of new nonstop markets for Customers flying the carrier from Dallas Love Field and Ronald Reagan Washington National Airport. The schedule also includes new Southwest Airlines service to an additional Caribbean destination—Punta Cana, Dominican Republic—as well as to North America’s largest metropolitan area, Mexico City (replacing AirTran Airways).

New, nonstop service for Dallas Love Field:

Beginning October 13, 2014, Southwest will offer nonstop service between Dallas and:

Baltimore/Washington (three roundtrips a day)
Chicago Midway (five roundtrips a day, up to six as of November 2)
Denver (three roundtrips a day)
Las Vegas (three roundtrips a day, up to four as of November 2)
Los Angeles (three roundtrips a day, up to four as of November 2)
Orlando (two roundtrips a day, up to three as of November 2)
Washington Reagan National (three roundtrips a day, up to six as of November 2)

Beginning November 2, 2014, Southwest will offer nonstop service between Dallas and:

Atlanta (four roundtrips a day)
Fort Lauderdale/Hollywood (two roundtrips a day)
Nashville (two roundtrips a day)
New York LaGuardia (three roundtrips a day)
Phoenix (four roundtrips a day)
San Diego (two roundtrips a day)
Santa Ana/Orange County (one roundtrip a day)
Tampa (two roundtrips a day)

Southwest Airlines also announced today new nonstop service between Washington Reagan National Airport and both Akron/Canton and Indianapolis beginning on November 2, 2014, increasing the carrier’s service at Reagan National from a present day offering of 17 departures to 44 departures a day by year’s end to a total 14 destinations: Atlanta, Akron/Canton, Austin, Chicago Midway, Dallas Love Field, Houston Hobby, Fort Myers, Indianapolis, Kansas City, Milwaukee, Nashville, New Orleans, St. Louis, and Tampa.

Southwest Airlines also will add new nonstop service between Washington Dulles and both Las Vegas and San Diego, and to existing nonstop destinations of Chicago Midway and Denver.

Southwest Airlines continues its historic launch of international service with two additional destinations—Mexico City and Punta Cana, Dominican Republic—to be added on November 2, 2014, to the carrier’s network map of more than 90 destinations across five countries in North America and the Caribbean.

AirTran Airways will be fully integrated into Southwest Airlines by the end of 2014:

AirTran Airways flight 1 (Southwest 5001) will operate on Sunday, December 28, 2014, as the carrier’s final scheduled departure. The evening flight from Atlanta Hartsfield-Jackson International Airport to Tampa reprises the first flight the carrier operated on October 26, 1993 (as ValuJet). Southwest Airlines Company announced its acquisition of AirTran Airways in September 2010, and closed the transaction on May 2, 2011. The FAA awarded the Company a single operating certificate for the two carriers on March 1, 2012, and the Company plans to close 2014 with wholly owned subsidiary AirTran fully-integrated into Southwest Airlines serving a network of 93 destinations in five countries.

Copyright Photo: Marcelo F. De Biasi/AirlinersGallery.com. Goodbye AirTran Airways. We now have the date when AirTran Airways will operate its last flight – December 28, 2014. The sun will set for AirTran in Tampa on that Sunday in December. Last flight 5001 is due to be operated with a 117-seat Boeing 717-200 (going to Delta on lease) departing ATL at 10:25 pm (2225) and arriving in TPA at 11:55 pm (2355). AirTran’s Boeing 717-2BD N996AT (msn 55140) soars into the sky at Washington’s Reagan National Airport (DCA).

AirTran Airways: AG Slide Show

Southwest Airlines: AG Slide Show

 

 

Delta opens up additional Boeing 717 routes and markets

Delta Air Lines (Atlanta) has opened up additional Boeing 717 routes and markets according to Airline Route. The former AirTran Airways 717s are leased from Southwest Airlines.

From Atlanta:

Abilene (April 1)

Augusta (April 1)

Dallas (Love Field)  (October 13)

Fayettevile (April 1)

Gainesville (April 1)

Grand Rapids (April 1)

Houston (Busch Intercontinental) (April 1)

Lexington (April 5)

Memphis (April 5)

Mobile (April 1)

Myrtle Beach (April 1)

Tri Cities (June 5)

Wichita (June 7)

From Detroit:

Austin (May 2)

Buffalo (June 5)

Chicago (Midway) (March 31)

Green Bay (April 8)

Houston (Bush Intercontinental) April 9

Indianapolis (June 5)

Kansas City (April 1)

Nashville (June 5)

New York (JFK) (September 2)

New York (LaGuardia) (September 2)

Philadelphia (April 8)

Traverse City (May 2)

From New York (JFK):

Boston (September 2)

Tampa (September 2)

From New York (LaGuardia):

Miami (September 2)

Tampa (September 2)

From Los Angeles:

Austin (June 6)

Copyright Photo: Tony Storck/AirlinersGallery.com. Formerly painted in the special Atlanta Falcons livery, ex AirTran Airways Boeing 717-2BD N891AT (msn 55043) is now in full Delta colors and lands at Baltimore/Washington.

Delta Air Lines: AG Slide Show

Delta to add two new routes from Los Angeles

Delta Air Lines (Atlanta) is planning to add two new routes from Los Angeles in June including the first Boeing 717 route. According to Airline Route the carrier will add Delta Connection daily service from LAX to Boise, Idaho with Embraer 175s starting on June 5.

The first Boeing 717 route from LAX will operate between LAX and Austin, Texas on a daily basis starting on June 16.

In other news, seasonal Delta Connection flights will be operated from the Minneapolis/St. Paul hub to Idaho Falls with Bombardier CRJ900s three days a week from June 7 through October 29 per Airline Route.

Copyright Photo: Jay Selman/AirlinersGallery.com. Boeing 717-2BD N995AT (msn 55139) lands at the Atlanta hub.

Delta Air Lines: AG Slide Show

Delta reports fourth quarter net income of $558 million, $2.7 billion for 2013

Delta Air Lines (Atlanta) today reported financial results for the December 2013 (fourth) quarter.  Key points include:

  • Delta’s net income for the December 2013 quarter was $558 million, or $0.65 per diluted share, excluding special items1.
  • Delta’s net income for 2013 was $2.7 billion, excluding special items, a $1.1 billion increase over 2012.
  • Delta’s GAAP net income was $8.5 billion, or $9.89 per diluted share, for the December 2013 quarter and $10.5 billion for 2013.  These results include an $8.0 billion non-cash gain associated with the reversal of the company’s tax valuation allowance.
  • 2013 results include $506 million in profit sharing expense, including $119 million in the December quarter, recognizing Delta employees’ contributions toward meeting the company’s financial goals.
  • Delta generated nearly $5 billion of operating cash flow and $2.1 billion of free cash flow in 2013, allowing the company to reduce its adjusted net debt at the end of 2013 to $9.4 billion, contribute an incremental $250 million above required funding to its defined benefit pension plans, and return $350 million to shareholders through a combination of $100 million of dividends and $250 million of share repurchases.

Revenue Environment

Delta’s operating revenue improved 6 percent, or $474 million, in the December 2013 quarter compared to the December 2012 quarter.  Traffic increased 2.0 percent on a 2.9 percent increase in capacity.

  • Passenger revenue increased 6.1 percent, or $451 million, compared to the prior year period.  Passenger unit revenue (PRASM) increased 3.0 percent year over year with a 4.0 percent improvement in yield.
  • Cargo revenue decreased 1.0 percent, or $3 million, as higher freight volumes partially offset declining freight yields.
  • O ther revenue increased 2.8 percent, or $26 million, driven by higher SkyMiles revenue.

Comparisons of revenue-related statistics are as follows:

Increase (Decrease)
4Q13 versus 4Q12
Change Unit
Passenger Revenue 4Q13 ($M) YOY Revenue Yield Capacity
Domestic 3,784 9.4 % 6.6 % 7.9 % 2.6 %
Atlantic 1,208 1.9 % 0.1 % 0.7 % 1.8 %
Pacific 803 (1.6) % (2.2) % (1.5) % 0.6 %
Latin America 517 18.5 % 1.9 % 0.3 % 16.3 %
Total mainline 6,312 7.0 % 3.7 % 4.5 % 3.3 %
Regional 1,562 2.3 % 1.4 % 3.5 % 0.8 %
Consolidated 7,874 6.1 % 3.0 % 4.0 % 2.9 %

Cost Performance

Total operating expense in the quarter increased 1.5 percent, or $125 million, year-over-year driven by higher volume and revenue-related expenses; the impact of operational, service and employee investments; and $56 million higher profit sharing expense.  These cost increases were partially offset by lower fuel expense and the savings from Delta’s structural cost initiatives.

Non-operating expense declined by $116 million as a result of prior year special items for early debt extinguishment and lower interest expense from debt reduction.  These items were partially offset by a $17 million negative impact from changes in foreign exchange rates.

Consolidated unit cost excluding fuel expense, profit sharing and special items (CASM-Ex2), was 1.4 percent higher in the December 2013quarter on a year-over-year basis, driven by the impact of wage increases and operational and service investments.  GAAP consolidated CASM decreased 1.4 percent.

Fuel expense, excluding mark-to-market adjustments, declined $91 million as a result of lower market fuel prices and better settled hedge performance. Delta’s average fuel price3 was $3.05 per gallon for the December quarter, which includes $0.06 in settled hedge gains.  On a GAAP basis, fuel expense for the December quarter decreased $186 million year-over-year, driven by lower market fuel prices and mark-to-market gains on hedges in the current quarter.

Operations at the Trainer refinery produced a $46 million loss for the December quarter and a $116 million loss for the full year.  While lower crack spreads pressured results at the refinery, they also reduced market jet fuel prices and helped lower Delta’s overall fuel expense.

Cash Flow

Cash from operations during the December 2013 quarter was $1.2 billion, driven by the company’s December quarter profit and working capital initiatives, which were partially offset by the normal seasonal decline in advance ticket sales.  Cash from operations is net of a $250 million incremental contribution made by Delta to its defined benefit pension plans during the quarter.  The company generated $260 millionof free cash flow.

Capital expenditures during the December 2013 quarter were $900 million, including $835 million in fleet investments and $16 million for the purchase of 4 aircraft off lease. During the quarter, Delta’s net debt maturities and capital leases were $335 million.

In the December quarter, the company returned $200 million to shareholders.  On Nov. 26, the company paid $51 million to shareholders, which represents a $0.06 per share quarterly dividend.  In addition, the company repurchased 5.5 million shares at an average price of$27.39 for a total of $150 million.  The company has completed $250 million of the $500 million share repurchase plan authorized by Delta’s Board of Directors in May 2013.

Delta ended the quarter with adjusted net debt of $9.4 billion and the company has now achieved over $7.5 billion in net debt reduction since 2009.  This debt reduction strategy produced a $28 million year-over-year reduction in interest expense in the December quarter and a $153 million reduction for 2013. 

Reversal of Tax Valuation Allowance

Delta’s expectations for sustainable future profitability combined with its consistent and strong profitability over the past four years resulted in the reversal of the company’s tax valuation allowance in the December quarter.  The reversal of the tax valuation allowance resulted in a non-cash net gain of $8.0 billion in the December quarter.  Beginning in the March 2014 quarter, net income will be reduced to reflect a 39% tax rate; however, there will be no cash impact as Delta’s net operating loss carryforwards will offset cash taxes on more than $15 billion of future taxable income.

Special Items

Delta recorded a $7.9 billion special items gain in the December 2013 quarter, including:

  • an $8.0 billion non-cash gain associated with the reversal of the Delta’s tax valuation allowance, as detailed above;
  • a $92 million mark-to-market gain on fuel hedges; and
  • a $160 million charge for facilities, fleet and other, including charges associated with Delta’s domestic fleet restructuring.

Delta recorded a $231 million special items charge in the December 2012 quarter, including:

  • a $122 million charge for facilities, fleet and other, including charges associated with the company’s domestic fleet restructuring;
  • a $106 million loss on early extinguishment of debt primarily due to the company’s Pacific route credit facility refinancing; and
  • a $3 million mark-to-market loss on fuel hedges.

March 201 4 Quarter Guidance

Following are Delta’s projections for the March 2014 quarter:

1Q 2014 Forecast
Operating margin 6 – 8%
Fuel price, including taxes, settled hedges and refinery impact $2.97 – $3.02
Non-operating expense $235 – $250 million
1Q 2014 Forecast(compared to 1Q 2013)
Consolidated unit costs – excluding fuel expense and profit sharing Up 0.5 – 1.5%
System capacity Up 2 – 3%

Other Matters

Included with this press release are Delta’s unaudited Consolidated Statements of Operations for the three and twelve months ended Dec. 31, 2013 and 2012; a statistical summary for those periods; selected balance sheet data as of Dec. 31, 2013 and 2012; and a reconciliation of non-GAAP financial measures.

End Notes
(1) Note A to the attached Consolidated Statements of Operations provides a reconciliation of non-GAAP financial measures used in this release and provides the reasons management uses those measures.
(2) CASM – Ex: In addition to fuel expense, profit sharing and special items, Delta believes excluding ancillary business costs is helpful to investors because ancillary business costs are not related to the generation of a seat mile. These businesses include aircraft maintenance and staffing services Delta provides to third parties and Delta’s vacation wholesale operations. The amounts excluded were $182 million and $185 million for the December 2013 and December 2012 quarters, respectively. Management believes this methodology provides a more consistent and comparable reflection of Delta’s airline operations.
(3) Average fuel price per gallon: Delta’s December 2013 quarter average fuel price of $3.05 per gallon reflects the consolidated cost per gallon for mainline and regional operations, including contract carrier operations, and includes the impact of fuel hedge contracts with original maturity dates in the December 2013 quarter. On a GAAP basis, fuel price includes $92 million in fuel hedge mark-to-market adjustments recorded in periods other than the settlement period. The net refinery loss for the quarter was $46 million.  See Note A for a reconciliation of average fuel price per gallon to the comparable GAAP metric.

Copyright Photo: Tony Storck/AirlinersGallery.com. Delta is adding leased Boeing 717s to the fleet. Formerly painted in the Atlanta Falcons special livery with AirTran Airways, Boeing 717-2BD N891AT (msn 55043) is now plying the skies with Delta. N891AT lands at Baltimore/Washington.

Delta Air Lines (current): AG Slide Show

Delta Air Lines (historic): AG Slide Show

Southwest Airlines to buy AirTran Airways, will now operate 717s

Southwest Airlines (Dallas) announced today (September 27) that it has entered into a definitive agreement to acquire all of the outstanding common stock of AirTran Holdings, Inc. (Orlando), the parent company of AirTran Airways (Orlando), for a combination of cash and Southwest Airlines’ common stock.

At Southwest Airlines’ closing stock price of $12.28 on September 24, 2010, the transaction values AirTran common stock at $7.69 per share, or approximately $1.4 billion in the aggregate, including AirTran’s outstanding convertible notes. This represents a premium of 69 percent over the September 24, 2010 closing price of AirTran stock. Under the agreement, each share of AirTran common stock will be exchanged for $3.75 in cash and 0.321 shares of Southwest Airlines’ common stock, subject to certain adjustments, based on Southwest Airlines’ share price prior to closing. Including the existing AirTran net indebtedness and capitalized aircraft operating leases, the transaction value is approximately $3.4 billion.

The agreement has been unanimously approved by the boards of directors of each company, and closing is subject to the approval of AirTran stockholders, receipt of certain regulatory clearances, and fulfillment of customary closing conditions.

The acquisition will significantly expand Southwest Airlines’ low-fare service to many more Customers in many more domestic markets (especially the mega hub at Atlanta), creating hundreds of additional low-fare itineraries for the traveling public. Moreover, the expansion of low fares should generate hundreds of millions in annual savings to consumers. Based on an economic analysis by Campbell-Hill Aviation Group, LLP*, Southwest Airlines’ more expansive low-fare service at Atlanta, alone, has the potential to stimulate over two million new passengers and over $200 million in consumer savings, annually. These savings would be created from the new low-fare competition that Southwest Airlines would be able to provide as a result of the acquisition, expanding the well-known “Southwest Effect'” of reducing fares and stimulating new passenger traffic wherever it flies.

AirTran revenues and operating income, excluding special items, for the twelve months ending June 30, 2010, were $2.5 billion and $128 million, respectively. Southwest Airlines revenues and operating income, excluding special items, for the twelve months ending June 30, 2010, were $11.2 billion and $843 million, respectively. The proposed transaction, including the anticipated benefit of net synergies, but excluding the impact of one-time acquisition and integration costs, is expected to be accretive to Southwest Airlines pro forma fully-diluted earnings per share in the first year after the close of the transaction and strongly accretive thereafter. Net annual synergies are expected to exceed $400 million by 2013. One-time costs related to the acquisition and integration of AirTran are expected to be in the range of $300 million to $500 million.

As of June 30, 2010, the combined unrestricted cash and short-term investments of the two companies was $3.7 billion. Southwest Airlines intends to fund approximately $670 million in cash consideration for the transaction out of cash on hand. Since June 30, Southwest’s cash and short-term investments balance has increased from $3.1 billion to $3.3 billion. In addition, Southwest Airlines has a fully available, unsecured revolving credit facility of $600 million.

Based on current operations, the combined organization would have nearly 43,000 Employees and serve more than 100 million Customers annually from more than 100 different airports in the U.S. and near-international destinations. In addition, the combined carriers’ all-Boeing fleet consisting of 685 active aircraft would include 401 Boeing 737-700s, 173 Boeing 737-300s, 25 Boeing 737-500s, and 86 Boeing 717s, with an average age of approximately 10 years, one of the youngest fleets in the industry. Southwest Airlines also announced, previously, that it is evaluating the opportunity to introduce the Boeing 737-800 into its domestic network to complement its current fleet, providing opportunities for longer-haul flying and service to high-demand, slot-controlled, or gate-restricted markets. This acquisition supports Southwest Airlines’ evaluation of the Boeing 737-800.

Until closing, Southwest Airlines and AirTran will continue to operate as independent companies. After closing, Bob Fornaro will continue to be involved in the integration of the two companies. Southwest Airlines plans to integrate AirTran into the Southwest Airlines Brand by transitioning the AirTran fleet to the Southwest Airlines livery, developing a consistent Customer Experience, and consolidating corporate functions into its Dallas headquarters. Subject to receipt of necessary approvals, Southwest Airlines’ integration plans include transitioning the operations of the two carriers to a Single Operating Certificate. Plans for existing AirTran facilities will be developed by integration teams and decisions will be announced at appropriate times. The carriers’ frequent-flyer programs will be combined over time, as well.

Copyright Photo: Dave Campbell. Southwest Airlines will become a new operator of the Boeing 717. Both companies are very supportive of logojets and special promotions. 717-2BD N949AT (msn 55003) in the Orlando Magic motif taxies to the runway at Fort Lauderdale/Hollywood.