• Excluding special items(1), Delta’s net loss for the March 2012 quarter was $39 million, or $0.05 per share, and its pre-tax loss was $36 million. The pre-tax result is a $355 million improvement year over year despite $250 million higher fuel expense.
• Including a $163 million gain from special items, Delta’s GAAP net income was $124 million and its pre-tax income was $127 million.
• Delta’s passenger unit revenues increased 14% and the company produced a unit revenue premium to the industry.
• Delta ended the March 2012 quarter with $5.7 billion of unrestricted liquidity and adjusted net debt of $12.2 billion.
• Delta’s return on invested capital for the last twelve months was 10.6%.
“Our March quarter improvement in results and operations are further evidence of the building momentum at Delta. I want to thank Delta employees worldwide for the hard work that produced these results,” said Richard Anderson, Delta’s chief executive officer. “By staying true to our plan and doing more of the same — increasing revenues, maintaining discipline with costs, capacity and capital, running a great operation and taking care of our employees and customers — we expect the June quarter and full year will be not only solidly profitable but also a significant improvement over last year, despite higher fuel prices.”
Operational Performance
For the March quarter, Delta’s on time arrival rate improved by 7.3 points to 87.3% and its completion factor increased 2.8 points to 99.6%. DOT baggage performance improved by 31% and DOT customer complaints for January and February dropped by 53%. Delta employees earned $22 million in Shared Rewards for achieving all of the quarter’s operational goals.
Revenue Environment
Delta’s operating revenue grew $665 million, or 9%, on 3% lower capacity in the March 2012 quarter compared to the March 2011 quarter. Despite lower capacity, traffic increased 1% as load factor increased 3.3 points to 79.7%.
• Passenger revenue increased 10%, or $651 million, compared to the prior year period. Passenger unit revenue (PRASM) increased 14%, driven by a 9% improvement in yield.
• Cargo revenue decreased 2%, or $6 million, with lower cargo yields partially offset by higher volumes.
• Other revenue increased 2%, or $21 million, from higher third-party maintenance revenue.
“By staying disciplined with capacity, making the right investments in our products, and pricing for what customers value, Delta has again generated a revenue premium to the industry,” said Ed Bastian, Delta’s president. “Customer demand remains solid with strong gains in corporate revenue and as a result, we expect our June quarter unit revenue improvement will continue to lead the industry.”
Cash Flow and Liquidity
As of March 31, 2012, Delta had $5.7 billion in unrestricted liquidity, including $3.9 billion in cash and short-term investments and $1.8 billion in undrawn revolving credit facilities.
Cash from operations during the March 2012 quarter was $947 million, driven by strong advance ticket sales.
Capital expenditures during the March 2012 quarter were $350 million, including $300 million in aircraft, parts and modifications.
During the quarter, Delta’s debt and capital lease payments were $450 million, which includes $40 million from the early retirement of debt. At March 31, 2012, Delta’s adjusted net debt was $12.2 billion and the company remains on track to reach $10 billion adjusted net debt in 2013.
Fuel
During the March 2012 quarter, Delta’s fuel expense rose by $250 million as a 14% increase in fuel price was offset by $45 million of fuel hedge gains and reduced consumption.
Excluding mark to market adjustments, Delta’s average fuel price(2) was $3.28 per gallon for the March quarter, which includes five cents per gallon in settled gains from its fuel hedging program. On a GAAP basis, which includes mark to market gains on open hedges, the company’s average fuel price was $3.11 per gallon.
Cost Performance
Delta’s operating expense excluding fuel increased $80 million in the March 2012 quarter, as higher ancillary business expenses and employee costs were offset by the benefits of lower capacity and lower weather-related costs.
The March 2012 quarter consolidated unit cost (CASM(3)), excluding fuel expense and special items, was 3.6% higher on 3% lower capacity compared to the prior year. On a GAAP basis, which includes fuel and special items, consolidated CASM increased 6%.
Compared to the prior year period, income tax expense increased $75 million as a result of the prior year’s $71 million benefit from tax credits.
“Through our focus on free cash flow generation, Delta has now achieved a nearly $5 billion debt reduction in the past two years,” said Paul Jacobson, Delta’s chief financial officer. “We have also begun to make the necessary changes to achieve our targeted cost levels, which should accelerate our cash generation and de-levering.” Special Items
Delta recorded special items totaling a $163 million gain in the March 2012 quarter, including:
• $151 million in mark-to-market gains for fuel hedges settling in future periods;
• a $39 million gain associated with the exchange of slots at New York-LaGuardia and Washington-Reagan National; and
• a $27 million charge for fleet, facilities and other items.
Delta recorded special items totaling a $2 million gain in the March 2011 quarter, including:
• $29 million in mark-to-market gains for fuel hedges settling in future periods;
• a $7 million charge associated fleet retirements; and
• a $20 million loss on extinguishment of debt.
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Source: Delta Air Lines
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