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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 1-5424
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DELTA AIR LINES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 58-0218548
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(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
HARTSFIELD ATLANTA INTERNATIONAL AIRPORT
ATLANTA, GEORGIA 30320
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(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 715-2600
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
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COMMON STOCK, PAR VALUE $3.00 PER SHARE NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
DEPOSITARY SHARES, EACH REPRESENTING NEW YORK STOCK EXCHANGE
1/1,000 OF A SHARE OF SERIES C
CONVERTIBLE PREFERRED STOCK
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
SERIES C CONVERTIBLE PREFERRED STOCK, PAR VALUE $1.00 PER SHARE, LIQUIDATION
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PREFERENCE $50,000 PER SHARE
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(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of August 31, 1994, was approximately $2,985,545,000. As of
August 31, 1994, 50,603,888 shares of the registrant's common stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II of this Form 10-K incorporate by reference certain information
from the registrant's 1994 Annual Report to Stockholders. Part III of this Form
10-K incorporates by reference certain information from the registrant's
definitive Proxy Statement dated September 13, 1994, for its Annual Meeting of
Stockholders to be held on October 27, 1994.
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DELTA AIR LINES, INC.
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PART I
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ITEM 1. BUSINESS
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General Description
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Delta Air Lines, Inc. ("Delta" or the "Company") is a major air carrier
providing scheduled air transportation for passengers, freight and mail over a
network of routes throughout the United States and abroad. At September 12,
1994, the Company served 153 domestic cities in 43 states, the District of
Columbia, Puerto Rico and the U. S. Virgin Islands, as well as 57 cities in 32
foreign countries.
An important characteristic of Delta's domestic route system is its six hub
airports in Atlanta, Cincinnati, Dallas/Ft. Worth, Los Angeles, Orlando and
Salt Lake City. Each of these hub operations includes Delta flights which
gather and distribute traffic from markets in the geographic region
surrounding the hub to other major cities and to other Delta hubs. These hubs
also provide access to Delta's international hubs at New York-Kennedy Airport
and Portland, Oregon, and its European hub in Frankfurt, Germany.
Delta has significantly expanded its international route structure in
recent years. Operating revenues from the Company's foreign operations were
approximately $2.8 billion, $2.6 billion and $1.9 billion in the years ended
June 30, 1994, 1993 and 1992, respectively. On November 1, 1991, Delta expanded
its foreign operations by purchasing substantially all the transatlantic route
authorities and related beyond rights of Pan American World Airways, Inc.
For the year ended June 30, 1994, passenger revenues accounted for 92% of
Delta's operating revenues. Cargo revenues, which include freight and mail,
accounted for 6% of Delta's operating revenues, and other sources accounted
for 2% of the Company's operating revenues.
Delta's operating results for any interim period are not necessarily
indicative of operating results for an entire year because of seasonal
variations in the demand for air travel. In general, demand for air travel is
higher in the June and September quarters, particularly in international
markets, because there is more vacation travel during these periods than
during the remainder of the year. Demand for air travel, especially by
leisure and other discretionary customers, is also affected by factors such as
general economic conditions and fare levels. The impact of seasonal
variations on Delta's business has increased as a result of the Company's
international expansion.
Delta is incorporated under the laws of the State of Delaware. Its
principal executive offices are located at Hartsfield Atlanta International
Airport, Atlanta, Georgia 30320, and its telephone number is (404) 715-2600.
Regulatory Environment
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While the United States Department of Transportation (the "DOT") and the
Federal Aviation Administration (the "FAA") exercise regulatory authority over
air carriers under the
Federal Aviation Act of 1958, as amended (the "Act"), most domestic economic
regulation of passenger and freight services was eliminated pursuant to the
Airline Deregulation Act of 1978 and other statutes amending the Act. The DOT
has jurisdiction over international tariffs and pricing; international routes;
and certain consumer protection matters such as advertising, denied boarding
compensation, baggage liability, smoking aboard aircraft and computer
reservations systems. The FAA regulates flying operations generally, including
control of navigable air space, flight personnel, aircraft certification and
maintenance, and other matters affecting air safety. The United States
Department of Justice has jurisdiction over airline mergers and acquisitions.
Because of the economic deregulation of the industry, unrestricted
authority to operate domestic air transportation (including the carriage of
passengers and cargo) is available to any air carrier which the DOT finds "fit"
to operate. Authority to operate international routes continues to be regulated
by the DOT and by the foreign governments involved. International route awards
are also subject to the approval of the President of the United States for
conformance with national defense and foreign policy objectives.
The economic deregulation of the industry permits unfettered competition
with respect to domestic routes, services, fares and rates, and competition on
Delta's routes continues to increase. Except for constraints imposed by the
Act's Essential Air Service provisions which are applicable to certain small
communities, airlines may terminate service to a city without restriction. The
International Air Transportation Competition Act of 1979 extended to
international air transportation certain procompetitive policies applicable to
domestic air transportation.
The FAA has implemented a number of provisions and requirements which are
being incorporated into Delta's maintenance program. These matters relate to,
among other things, inspection and maintenance of aging aircraft, corrosion
control, collision avoidance and windshear detection. Based on its current
implementation schedule, Delta expects to be in compliance with applicable
requirements within the required time periods.
Delta is also subject to various other federal, state, local and foreign
laws and regulations. The United States Postal Service has authority over
certain aspects of the transportation of mail, and rates for the carriage of
domestic mail are determined through negotiations or competitive bidding. The
Communications Act of 1934, as amended, governs Delta's use and operation of
radio facilities. Labor relations in the airline industry are generally governed
by the Railway Labor Act. Environmental matters (including noise pollution and
aircraft emissions) are regulated by various federal, state and local
governmental entities.
Fares and Rates
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Airlines are permitted to set their domestic prices without governmental
regulation, and the industry is characterized by substantial price competition.
With respect to foreign air transportation, the DOT retains authority over
fares, rates and charges, and air carriers are required to file and observe
tariffs covering such transportation. International fares and rates are also
subject to the jurisdiction of the governments of the foreign countries
involved. While air carriers are required to file and adhere to international
fare and rate tariffs, many international
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markets are characterized by substantial commissions, overrides and discounts
to travel agents, brokers and wholesalers.
Delta's financial results in fiscal 1994 were negatively impacted by
discount fare promotions in domestic and international markets, and the
increasing presence of low-cost, low-fare carriers in many domestic markets
served by the Company. These factors resulted in a 1% decrease in the passenger
mile yield in fiscal 1994 compared to fiscal 1993. As low-cost, low-fare
carriers enter new domestic markets, passenger mile yields quickly decline, most
often at a faster pace than traffic is stimulated. By the end of fiscal 1994,
approximately 57% of Delta's domestic origin and destination revenue passenger
miles were in markets also served by low-cost, low-fare carriers.
Delta's financial results in fiscal 1993 were negatively affected by a
change in the airline industry's domestic fare structure for most of the year,
which reduced the number of fare levels and generally lowered fares, a half-off
sale promotion during the September 1992 quarter, and discount fare promotions
in domestic and international markets. These fare initiatives contributed to a
3% decline in the passenger mile yield in fiscal 1993 compared to fiscal 1992.
Delta expects that price competition is likely to continue in domestic and
international markets. If fare reductions are not offset by increases in traffic
or changes in the mix of traffic that improve the passenger mile yield, Delta's
operating results will continue to be negatively affected.
Competition and Route Authority
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All domestic routes served by Delta are subject to competition from both
new and existing carriers, and service over virtually all of Delta's domestic
routes is highly competitive. On most of its principal routes, the Company
competes with at least one, and usually more than one, major airline. Delta also
competes with regional and national carriers, all-cargo carriers, charter
airlines and, particularly on its shorter routes, with surface transportation.
Service over most of Delta's international routes is also highly competitive.
International alliances between foreign and domestic carriers, such as the
marketing and code-sharing arrangements between British Airways Plc and USAir,
Inc., KLM-Royal Dutch Airlines and Northwest Airlines, Inc., and Lufthansa
German Airlines and United Air Lines, Inc., have significantly increased
competition in international markets. Through code-sharing arrangements with
U.S. carriers, British Airways, KLM and Lufthansa have obtained access to
interior U.S. passenger traffic. Similarly, Northwest and United have increased
their ability to sell transatlantic services and destinations to and beyond
European cities served by KLM and Lufthansa.
Delta's flight operations are authorized by certificates of public
convenience and necessity and, to a limited extent, by exemptions issued by the
DOT. The requisite approvals of other governments for international operations
are provided by bilateral agreements with, or permits issued by, foreign
countries. Because international air transportation is governed by bilateral or
other agreements between the United States and the foreign country or countries
involved, changes in United States or foreign government aviation policies could
result in the alteration or
-3-
termination of such agreements, diminish the value of Delta's international
authorities or otherwise affect Delta's international operations. Bilateral
agreements between the United States and various foreign countries served by
Delta are subject to renegotiation from time to time.
Certain Delta international authorities are subject to periodic renewal
requirements. Delta requests extension of these authorities when and as
appropriate. While the DOT usually renews temporary authorities on routes where
the authorized carrier is providing a reasonable level of service, there is no
assurance of this result. Dormant authority may not be renewed in some cases --
especially where another United States carrier indicates a willingness to
provide service.
On April 15, 1992, the DOT granted Delta final authority to serve the
Detroit-London route. Delta's Detroit-London authority is subject to termination
if a court issues a final judgment, not subject to further appeal, holding that
Pan American World Airways, Inc. was not obligated to transfer that route to
Delta.
Code-Sharing
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Delta has entered into marketing agreements with certain foreign carriers
to maintain or improve Delta's access to international markets. Under these dual
designator code-sharing arrangements, Delta and the foreign carrier publish
their respective airline designator codes on a single flight operation, thereby
allowing Delta and the foreign carrier to share costs by providing joint service
with one aircraft rather than operating separate services with two aircraft.
Most of Delta's international code-sharing arrangements operate in discrete
international city pairs. Delta purchases seats on foreign airlines that are
resold as Delta service under Delta's "DL" designator code pursuant to code-
sharing arrangements with Aeromexico, Austrian Airlines, Malev Hungarian
Airlines, Sabena Belgian World Airlines, Swissair and Varig. Delta sells seats
to foreign airlines for sale under those carriers' two-letter designator codes
pursuant to code-sharing arrangements with Aeroflot, Aeromexico, Sabena and
Swissair.
Delta and Virgin Atlantic Airways have entered into a blocked-space, code-
sharing agreement under which Delta would purchase seats on Virgin Atlantic's
flights between (1) London-Heathrow and Los Angeles, New York-Kennedy, Newark
and San Francisco; and (2) London-Gatwick and Boston, Miami and Orlando. The
agreement is subject to DOT approval.
Slot Allocations
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Operations at four major United States and certain foreign airports served
by Delta are regulated by governmental entities through "slot" allocations. Each
slot represents the authorization to land or take off from the particular
airport during a specified time period. In the United States, the FAA regulates
slot allocations at New York-Kennedy Airport, LaGuardia Airport in New York,
National Airport in Washington, D. C. and O'Hare International Airport in
Chicago. The Delta Shuttle requires slot allocations at LaGuardia and National
Airports, as do Delta's other operations at those four airports. Certain foreign
airports, including Delta's European hub in Frankfurt, also have slot
allocations.
-4-
Delta currently has sufficient slot authorizations to operate its existing
flights, and has generally been able to obtain slots to expand its operations
and to change its schedules. There is no assurance, however, that Delta will be
able to obtain slots for these purposes in the future because, among other
reasons, slot allocations are subject to changes in governmental policies.
The Delta Connection
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Delta has marketing agreements with four commuter carriers serving
principally the following regions of the United States: Atlantic Southeast
Airlines, Inc. ("ASA") operates in the Southeast through Atlanta and in the
Southwest through Dallas/Fort Worth; Business Express, Inc. serves the
Northeast; Comair Inc. ("Comair") serves Florida and operates in the Midwest
through Cincinnati; and SkyWest Airlines, Inc. ("SkyWest") serves California and
operates in other western states through Salt Lake City. These carriers, which
are known as "Delta Connection" airlines, use Delta's "DL" code on their flights
and exchange connecting traffic with Delta in the regions served by each
carrier. At June 30, 1994, Delta held equity interests in ASA, Comair Holdings,
Inc. (the parent of Comair) and SkyWest, Inc. (the parent of SkyWest) of 23.3%,
20.6% and 13.6%, respectively.
Computer Reservation System Partnership
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Delta owns 38% of WORLDSPAN, L.P. ("WORLDSPAN"), a Delaware limited
partnership formed to develop, operate and market a computer reservation system
("CRS") for the travel industry. Northwest Airlines, Inc., Trans World Airlines,
Inc. and ABACUS Distribution Systems Pte Ltd. own 32%, 25% and 5%, respectively,
of WORLDSPAN.
CRS services are used primarily by travel agents to book airline, hotel and
car rental reservations and issue airline tickets. CRS services are provided by
several companies in the United States and worldwide. In the United States,
other CRS competitors are SABRE (owned by American Airlines, Inc.), the Covia
Partnership (owned by United Air Lines, Inc., USAir, Inc. and certain foreign
carriers) and System One (owned by Continental Airlines, Inc.). CRS vendors are
subject to regulations promulgated by the DOT.
The CRS industry is highly competitive. Delta believes that WORLDSPAN ranks
third, behind SABRE and the Covia Partnership, in market share among travel
agents in the United States.
Fuel
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Delta's operations are significantly affected by the availability and price
of jet fuel. Based on the Company's fiscal 1994 fuel consumption, a one-cent
change in the average annual price-per-gallon of jet fuel would have caused an
approximately $25 million change in Delta's annual fuel costs. The following
table shows Delta's jet fuel consumption and costs for fiscal years 1990-1994.
-5-
Gallons Percent of
Fiscal Consumed Cost Average Price Operating
Year (Millions) (Millions) Per Gallon Expenses*
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1990 1,966 $1,233 62.71c 15%
1991 2,060 1,599 77.63 17
1992 2,384 1,482 62.19 13
1993 2,529 1,592 62.95 13
1994 2,550 1,411 55.34 12
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* Excluding restructuring charges.
Aircraft fuel expense decreased 11% in fiscal 1994 compared to fiscal 1993,
as fuel gallons consumed increased 1% and the average price per fuel gallon
decreased 12% to 55.34 cents, Delta's lowest average price per fuel gallon for
any fiscal year since fiscal 1989.
Changes in fuel prices have industry-wide impact and benefit or harm
Delta's competitors as well as Delta. Accordingly, lower fuel prices may be
offset by increased price competition and lower revenues for all air carriers.
Moreover, there can be no assurance that Delta will be able to increase its
fares in response to any future increases in fuel prices.
Delta purchases most of its jet fuel from petroleum refiners under
contracts which permit the refiners to set the price, and give the Company the
right to terminate upon short notice if the price is unacceptable. The Company
also purchases aircraft fuel on the spot market, from off-shore sources and
under contracts which establish the price based on various market indices.
Although Delta is currently able to obtain adequate supplies of jet fuel,
it is impossible to predict the future availability or price of jet fuel.
Political disruptions in the oil producing countries, changes in government
policy concerning aircraft fuel production, transportation or marketing, changes
in aircraft fuel production capacity, environmental concerns, and other
unpredictable events may result in fuel supply shortages and fuel price
increases in the future. Such shortages and price increases could have a
material adverse effect on Delta's business.
The Omnibus Budget Reconciliation Act imposes a 4.3 cents per gallon tax on
commercial aviation jet fuel purchased for use in domestic operations, effective
October 1, 1995. Based on Delta's fiscal 1994 domestic fuel requirement of 1.9
billion gallons, the new fuel tax, when effective, is expected to increase
Delta's operating expenses by approximately $82 million annually.
Leadership 7.5
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On April 28, 1994, Delta announced "Leadership 7.5," a three-year plan with
the goal of reducing the Company's annual operating expenses by approximately $2
billion by the end of the June 1997 quarter. Delta has established operating
cost per available seat mile ("unit cost") goals
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of 8.6 cents by the June 1995 quarter, 8.0 cents by the June 1996 quarter and
7.5 cents by the June 1997 quarter. These unit cost goals reflect the phase-in
of the approximately $2 billion in targeted cost savings, exclude restructuring
and other nonrecurring charges, and assume other costs and operating capacity
remain at calendar 1993 levels. To the extent that other costs increase, Delta
will seek additional cost reductions to achieve its goals.
The Leadership 7.5 program includes planned workforce reductions of 12,000
to 15,000 jobs. Delta is offering voluntary early retirement incentives, leaves
of absence and severance programs, but furloughs of personnel will also be
necessary to achieve these reductions.
The support and participation of the Air Line Pilots Association ("ALPA"),
which represents Delta pilots, is critical to the success of Leadership 7.5. The
Company is seeking $320 million to $340 million in annual productivity
improvements and wage and benefit reductions from ALPA in connection with
contract negotiations expected to commence in November 1994.
Delta's cost reduction and unit cost goals under Leadership 7.5 are
aggressive, and no assurance can be given that Delta will achieve these goals.
Additional information regarding Leadership 7.5 is set forth under
"Operational Review - Leadership 7.5" on pages 4-5 of Delta's 1994 Annual
Report to Stockholders, and is incorporated herein by reference.
Information Technology Joint Venture
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On August 23, 1994, Delta and AT&T Global Information Solutions ("AT&T")
announced a memorandum of understanding to form a joint venture to provide
certain information technology services and products to Delta and other
companies in the travel and transportation industries. The memorandum of
understanding contemplates that Delta and AT&T will each own 50% of the joint
venture, which would manage Delta's computing and communications requirements
except for the Company's reservation and related systems. The establishment of
the joint venture is subject to the negotiation and completion of definitive
documents.
Personnel
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At June 30, 1994, Delta employed 71,412 active personnel, including 5,817
temporary and part-time personnel, compared to 73,533 active personnel,
including 5,809 temporary and part-time personnel, at June 30, 1993. This
reduction was primarily due to an early retirement program accepted by
approximately 1,500 employees effective November 1, 1993. Delta's Leadership 7.5
program includes planned workforce reductions of 12,000 to 15,000 jobs. See
"Leadership 7.5" above.
Approximately 13% of Delta's personnel in the United States are represented
by unions. The following table presents certain information concerning Delta's
domestic collective bargaining agreements.
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Approximate
Number of Contract
Personnel Amendable
Personnel Group Represented Union Date
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Pilots 9,100 Air Line Pilots 1/1/95
Association
Flight 170 Professional Airline 1/1/95
Superintendents Flight Control
Association
Approximately 3,700 of Delta's personnel are based outside the United
States. Delta personnel in certain foreign countries, including most of Delta's
personnel in Germany, are represented by labor organizations.
The Company implemented a 5% salary reduction for domestic non-contract
personnel effective February 1, 1993. During fiscal 1994, the Professional
Airline Flight Control Association ("PAFCA") agreed to a 5% salary reduction but
ALPA did not. Subject to the completion of a definitive agreement, ALPA has
agreed to defer a 2% pay raise originally scheduled to become effective
August 1, 1994 for one year, following which time ALPA would have the right to
make that pay raise retroactive to its original effective date.
Delta's collective bargaining agreements with ALPA and PAFCA become
amendable January 1, 1995, and negotiations are expected to begin in November
1994. The outcome of these negotiations cannot presently be determined.
Environmental Matters
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The Airport Noise and Capacity Act of 1990 (the "ANCA") requires the phase-
out of Stage 2 aircraft by December 31, 1999, subject to certain exceptions. In
1991, the FAA issued regulations which implement the ANCA by requiring air
carriers to reduce (by modification or retirement) the number of Stage 2
aircraft operated by 25% by December 31, 1994, 50% by December 31, 1996, 75% by
December 31, 1998, and 100% by December 31, 1999. Alternatively, a carrier may
satisfy the regulations by operating a fleet that is at least 55%, 65%, 75% and
100% Stage 3 by the respective dates set forth in the preceding sentence.
At June 30, 1994, Delta operated 184 Stage 2 aircraft, constituting 33% of
the Company's fleet. Accordingly, Delta anticipates that it will be able to
comply with the requirements for December 31, 1994, by operating a fleet
comprised of at least 55% Stage 3 aircraft. With respect to the later compliance
deadlines, Delta has not yet determined which alternative it will select.
The ANCA recognizes the rights of operators of airports with noise problems
to implement local noise abatement procedures so long as such procedures do not
interfere unreasonably with
-8-
interstate or foreign commerce or the national air transportation system. It
generally provides that local noise restrictions on Stage 3 aircraft first
effective after October 1, 1990, require FAA approval, and establishes a
regulatory notice and review process for local restrictions on Stage 2
aircraft first proposed after October 1, 1990. While Delta has had sufficient
scheduling flexibility to accommodate local noise restrictions in the past,
the Company's operations could be adversely impacted if locally-imposed
regulations become more restrictive or widespread.
The European Union has adopted a uniform policy requiring member states to
phase-out Stage 2 aircraft. Under the policy provisions, the phase-out of Stage
2 aircraft will begin on April 1, 1995, and will extend for seven years. Each
Stage 2 aircraft will be assured a 25 year operating life, but not extending
beyond April 1, 2002. Delta anticipates it will be able to comply with this
Stage 2 aircraft phase-out program, which will apply at all airports in the
member states. Other local European airport regulations which penalize or
restrict operations by Stage 2 aircraft have not in the past had an adverse
effect on Delta's operations; Delta's operations could be adversely impacted,
however, if such regulations become more restrictive or widespread.
The United States Environmental Protection Agency (the "EPA") is authorized
to regulate aircraft emissions. The engines on Delta's aircraft comply with the
applicable EPA standards.
Delta has been identified by the EPA as a potentially responsible party (a
"PRP") with respect to the following federal Superfund Sites: the Operating
Industries, Inc. Site in Monterey Park, California; and the Peak Oil Site in
Tampa, Florida. In addition, Delta is a third party defendant in United States
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of America v. J.B. Stringfellow, Jr., a lawsuit involving the cleanup of the
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Stringfellow Superfund Site in Los Angeles, California. Delta's alleged
volumetric contribution to these sites is limited. Delta is also the subject of
an administrative enforcement action brought by the Georgia Environmental
Protection Division (the "Georgia EPD") concerning alleged violations of certain
air permitting regulations and other provisions of the Clean Air Act and the
Georgia air quality rules at Delta's aircraft maintenance facility at Hartsfield
Atlanta International Airport. Delta is negotiating a consent order with the
Georgia EPD, which has proposed a monetary penalty of $315,000 and an
unspecified monetary settlement equal to Delta's economic benefit from its
alleged noncompliance. Management presently believes that the resolution of
these matters is not likely to have a material adverse effect on the Company's
consolidated financial condition, results of operations or liquidity.
Frequent Flyer Program
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Delta, like other major airlines, has established a Frequent Flyer Program
offering incentives to maximize travel on Delta. This program allows
participants to accrue mileage for award travel while flying on Delta, the Delta
Connection carriers and participating airlines. Mileage credit may also be
accrued for the use of certain services offered by Frequent Flyer Program
partners such as hotels, car rental agencies and credit card companies. Delta
reserves the right to terminate the program with six months advance notice, and
to change the program's terms and conditions without notice.
Mileage credits earned can be redeemed for free, discounted or upgraded
travel, for membership in Delta's Crown Room Club and for other Frequent Flyer
Program partner awards.
-9-
Once issued, modification or reissuance of an award is limited. Travel awards
are subject to transfer restrictions and, in most cases, blackout dates and
capacity controlled seating.
As of June 30, 1992, a participant in the Frequent Flyer Program generally
became eligible for a free travel award after accruing 40,000 miles, and for two
free travel awards after accruing 60,000 miles. Delta subsequently modified the
Frequent Flyer Program by reducing the number of miles required to become
eligible for a free travel award to 30,000 effective October 1, 1992 and 25,000
effective May 1, 1995. Delta estimates the potential number of roundtrip flight
awards outstanding to be 3.2 million at June 30, 1992, 5.0 million at June 30,
1993 and 7.9 million at June 30, 1994 (based on program accounts with balances
in excess of 40,000 miles, 30,000 miles and 25,000 miles, respectively). Of
these earned awards, Delta expects up to approximately 2.4 million, 3.3 million
and 5.1 million, respectively, to be redeemed. The difference between the
roundtrip awards outstanding and the awards expected to be redeemed is the
estimate, based on historical data, of awards which will (1) never be redeemed;
(2) be redeemed for something other than a free trip; or (3) be redeemed on
another carrier participating in the Frequent Flyer Program. Accounts with
balances in excess of 40,000 miles represented 41% of the total mileage balance
of all program participants at June 30, 1992. Accounts with balances in excess
of 30,000 miles represented 52% of the total mileage balance of all participants
at June 30, 1993. Accounts with balances in excess of 25,000 miles represented
61% of the total mileage balance of all participants at June 30, 1994.
Delta accounts for its Frequent Flyer Program obligations by recording the
estimated incremental cost associated with the potential flight awards as a
liability and passenger service expense. Delta monitors changes in the potential
free travel awards under the program, and the liability and appropriate expense
account balances are adjusted as necessary. The estimated incremental cost
associated with a potential flight award is based on Delta's system average cost
per passenger for fuel; food and food supplies; passenger insurance, injuries,
losses and damages; interrupted trips and oversales; porter service; ticket
forms; bag tags; boarding forms; in-flight entertainment; and customs. The trip
length is determined by calculating the average trip length to the various award
destinations weighted by the historical number of redemptions for each
destination. Delta does not record a liability for mileage earned by
participants who have not reached the level to become eligible for a free travel
award. Delta believes this exclusion is immaterial and appropriate because the
large majority of these participants are not expected to earn a free flight
award. Delta does not account for the redemption of non-travel awards since the
cost of these awards to Delta is negligible. At June 30, 1992, 1993 and 1994,
the accrued liability was $45.7 million, $69.0 million and $95.0 million,
respectively. The $95.0 million accrued liability at June 30, 1994 includes a
$14.0 million one-time charge in fiscal 1994 related to Frequent Flyer Program
changes that will become effective May 1, 1995.
Frequent Flyer Program participants flew 3.1 million, 4.5 million and 5.7
million free round-trips in fiscal years 1992, 1993 and 1994, respectively.
These round-trips accounted for approximately 5%, 6% and 7% of the total
passenger miles flown for the respective periods. Delta believes that the low
percentage of free passenger miles, its load factor and the restrictions applied
to free travel awards minimize the displacement of revenue passengers.
-10-
Transactions with Pan Am Corporation
- ------------------------------------
Asset Purchase Agreement. Pursuant to an asset purchase agreement dated
------------------------
July 27, 1991, as amended (the "Asset Purchase Agreement"), with Pan Am
Corporation and certain of its subsidiaries, debtors-in-possession under Chapter
11 of the Bankruptcy Code ("Pan Am"), Delta purchased certain assets relating to
Pan Am's Boston-New York-Washington, D. C. Shuttle (the "Shuttle Assets") and
route authorities to Europe, Asia and Africa (the "North Atlantic Assets"). The
purchased assets included (1) substantially all of Pan Am's then-existing
transatlantic route authorities and related beyond rights; (2) certain take-off
and landing authorizations and slots; (3) equity interests in three used
A310-200 aircraft as well as certain aircraft spare engines and spare parts; and
(4) leasehold interests in certain airport facilities.
On September 1, 1991, Delta acquired the Shuttle Assets and began operating
the Delta Shuttle between Boston and New York and between Washington, D. C.
and New York. On November 1, 1991, Delta purchased the North Atlantic Assets
and started service between New York-Kennedy Airport and 15 nonstop
transatlantic destinations; between Miami and London; between Washington,
D.C. and Frankfurt; and between Frankfurt and nine nonstop destinations in
Europe, the Middle East and India.
Delta's purchase price under the Asset Purchase Agreement was $416 million,
subject to certain adjustments. Under the Asset Purchase Agreement, Delta
also assumed certain liabilities, including $66 million in mortgages on
acquired assets and up to $100 million of Pan Am's passenger tickets under
certain circumstances. In connection with these asset acquisitions, Delta
hired approximately 7,800 Pan Am personnel and entered into operating leases
for 42 used aircraft.
Participation in Plan of Reorganization. Pursuant to a letter dated
---------------------------------------
August 11, 1991, as amended on October 22, 1991 (the "Letter Agreement"), among
Delta, Pan Am and the Official Committee of Unsecured Creditors of Pan Am (the
"Creditors Committee"), Delta agreed, subject to certain terms and conditions,
to participate in a plan of reorganization for Pan Am, to provide certain
debtor-in-possession financing (the "DIP Loan") to Pan Am prior to the effective
date of Pan Am's proposed plan of reorganization and to amend the Asset Purchase
Agreement in certain respects (including increasing the purchase price
thereunder to the purchase price indicated above).
On December 1, 1991, Delta advised Pan Am that it could not agree to Pan
Am's request to provide additional financing to Pan Am prior to the effective
date of Pan Am's proposed plan of reorganization. Pan Am ceased operations on
December 4, 1991, and its proposed plan of reorganization before the United
States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court") was not confirmed. Pan Am is liquidating its assets.
The $115 million principal amount of the DIP Loan, plus accrued interest of
$30 million, is outstanding and reflected as an asset in Delta's Consolidated
Balance Sheets as of June 30, 1994. These amounts are secured by a lien on
substantially all of Pan Am's remaining assets, but are subject to prior liens
of approximately $60 million in favor of the Pan Am Shuttle bankruptcy estate
and certain other liens on specific assets. As a result of the sale of Pan
Am's assets, Delta
-11-
expects Pan Am will have sufficient funds to repay in full these amounts due
Delta under the DIP Loan, although there can be no assurance this will be the
case. Delta believes the book value of the DIP Loan as recorded in the
Company's Consolidated Balance Sheets approximates its fair value.
On February 24, 1993, Delta filed a motion requesting the Bankruptcy Court
to order Pan Am to repay to Delta the outstanding principal amount of the DIP
Loan plus certain accrued interest. Pan Am and the Creditors Committee opposed
Delta's motion, and filed a cross-motion requesting the Bankruptcy Court to
provide for the repayment of the DIP Loan, if at all, at the conclusion of the
lawsuit discussed below filed against Delta by Pan Am, the Creditors Committee
and the Ad Hoc Committee of Administrative and Priority Creditors of Pan Am (the
"Ad Hoc Committee"). On May 20, 1993, the Bankruptcy Court consolidated these
motions with the lawsuit described in the first three paragraphs under
"Litigation Relating to Delta's Participation in Pan Am's Plan of
Reorganization" below. Delta appealed this ruling to the United States District
Court for the Southern District of New York (the "District Court") which, on
December 27, 1993, remanded this matter to the Bankruptcy Court for (1) a
statement of reasons for the Bankruptcy Court's ruling; and (2) reconsideration.
The Bankruptcy Court has not yet taken any action on this remand.
CRAF. To resolve certain claims against Pan Am by the United States Air
----
Force (the "Air Force") related to Pan Am's participation in the Civil Reserve
Air Fleet Enhancement Program (the "CRAF Program"), Delta entered into an
agreement in principle dated October 17, 1991, with the Air Force. Under the
agreement in principle, Delta committed to the CRAF Program, for five years,
aircraft having a certain point value under the CRAF Program. This commitment is
currently being met by Delta's agreeing to make available 43 of its
international-range aircraft (which will be reduced to 26 aircraft as of October
1, 1994) for use by the military under certain stages of readiness related to
national emergencies.
Litigation Relating to Delta's Participation in Pan Am's Plan of
----------------------------------------------------------------
Reorganization. On March 6, 1992, Pan Am, the Creditors Committee and the Ad
- --------------
Hoc Committee filed a consolidated amended complaint (the "Complaint") in the
Bankruptcy Court against Delta relating to Delta's participation in Pan Am's
proposed plan of reorganization. The Complaint alleges, among other things,
that Delta breached its contractual obligations and promises to participate in
the plan of reorganization; violated its duty of good faith and fair dealing;
breached its fiduciary duties to Pan Am and its creditors; and acted in bad
faith. The Complaint also asserts, among other things, that Delta induced Pan
Am and the Creditors Committee to approve the sale to Delta of the Shuttle
Assets and the North Atlantic Assets in exchange for Delta's commitment to
participate in the proposed plan of reorganization; that once it acquired the
Shuttle Assets and the North Atlantic Assets, Delta, in bad faith, refused to
participate in the plan of reorganization; that Delta erected substantial
obstacles to the successful completion of the plan of reorganization; that
Delta failed to provide all the financing it committed to provide and delayed
making known its decision not to participate in the plan of reorganization
until the last possible moment, thereby knowingly precipitating Pan Am's
shutdown; that, following the Bankruptcy Court's approval of the sale of the
Shuttle Assets and North Atlantic Assets, Delta controlled Pan Am and was an
active participant in every material decision concerning Pan Am's operations,
including the development of a business plan for reorganized Pan Am; and that,
to the degree there was any deterioration of
-12-
the business plan for reorganized Pan Am, Delta either caused or materially
contributed to such deterioration. In the Complaint, the plaintiffs seek to
disallow, or to subordinate to the claims of Pan Am's general unsecured
creditors, all claims Delta may have against Pan Am, including the repayment of
the DIP Loan; to impose a constructive trust for the benefit of Pan Am's
creditors on the profits Delta receives or should have received from the Shuttle
Assets and the North Atlantic Assets; to recover at least $2.5 billion in
compensatory damages plus punitive damages, costs and attorneys' fees; and to
obtain such other relief as the Bankruptcy Court deems appropriate. In addition,
in the Complaint, the Creditors Committee seeks, independently and in its own
right, unspecified compensatory and punitive damages for, among other things,
loss of its potential equity interest in, and loss of employment by Pan Am
employees with, a reorganized Pan Am.
On April 6, 1992, Delta filed its answer denying liability under the
Complaint and asserting various affirmative defenses. Additionally, Delta filed
counterclaims against the Creditors Committee, its individual members and Pan
Am. Delta's counterclaims allege, among other things, that the Creditors
Committee and its members (1) violated their duty of good faith and fair dealing
to Delta by engaging in destructive and manipulative acts which undermined Pan
Am's proposed reorganization; and (2) interfered improperly with Delta's
agreements with Pan Am. In its counterclaims against the Creditors Committee and
its members, Delta is seeking compensatory and punitive damages in an amount to
be determined at trial. In its counterclaims against Pan Am, Delta is seeking
actual damages for Pan Am's failure to pay Delta amounts owed, including the DIP
Loan. Pan Am filed an answer denying liability to Delta; the Creditors Committee
and its members filed a motion to dismiss Delta's counterclaims. On November 5,
1992, the Bankruptcy Court denied the motion to dismiss Delta's counterclaims
against the Creditors Committee, but dismissed Delta's counterclaims against the
individual members of the Creditors Committee. Delta appealed this dismissal to
the District Court which, on August 20, 1993, dismissed Delta's appeal as not
then appealable.
On December 23, 1993, the District Court granted Delta's motion requesting
that Court (before which are pending the two lawsuits filed against Delta by
former Pan Am employees which are described below), rather than the Bankruptcy
Court, to conduct the trial of this action. On May 2, 1994, the District Court
(1) denied the plaintiffs' motion requesting a jury trial or, alternatively,
trial by an advisory jury; and (2) ruled that this lawsuit would be tried
separately from the two lawsuits filed against Delta by former Pan Am employees
which are described below. On May 3, 1994, the District Court denied Delta's
motion for partial summary judgment, as well as the Creditors Committee's motion
for summary judgment on Delta's counterclaims. The trial of liability issues
(but not possible damages) in this lawsuit occurred between May 4, 1994, and
June 10, 1994. The District Court has not yet issued its decision or indicated
when such a decision may be forthcoming.
Several other legal actions relating to Delta's participation in Pan Am's
proposed plan of reorganization are also pending including, among others, the
following actions. Pan Am, which has been sued by the Air Force for, among other
things, $382.4 million for Pan Am's alleged breach of its obligations under the
CRAF Program, has filed a third party complaint in the Bankruptcy Court against
Delta alleging that, to the extent the Air Force has a valid claim against Pan
Am, Pan Am is entitled to recover from Delta such amounts as are required to
satisfy any
-13-
such claim. On April 6, 1992, Delta filed its answer denying liability under Pan
Am's third party complaint and asserting various affirmative defenses.
Additionally, Delta filed a counterclaim against Pan Am and a third party
complaint against the Creditors Committee and its individual members. Delta's
counterclaim and third party complaint in this case are similar to Delta's
counterclaims against Pan Am, and the Creditors Committee and its members,
respectively, described in the second preceding paragraph. Pan Am filed an
answer denying liability to Delta; the Creditors Committee and its members filed
a motion to dismiss Delta's third party complaint. On November 5, 1992, the
Bankruptcy Court denied the motion to dismiss Delta's third party complaint
against the Creditors Committee, but dismissed Delta's third party complaint
against the individual members of the Creditors Committee. Delta appealed this
dismissal to the District Court which, on August 20, 1993, dismissed Delta's
appeal as not then appealable. On September 16, 1994, Pan Am objected to the
assertions of the Air Force that certain of its alleged claims against Pan Am
are secured or are otherwise entitled to priority treatment, and moved for
partial summary judgment with respect to such assertions.
On March 12, 1992, a purported class action complaint was filed against
Delta in the District Court by former Pan Am employees who allege, among other
things, that they were intended third-party beneficiaries of Delta's agreement
with Pan Am to participate in Pan Am's proposed plan of reorganization. The
former employees, who have requested and are entitled to a jury trial, make
allegations and claims similar to those asserted in the Complaint described
above. In their complaint, the former employees seek damages of at least $1.1
billion for loss of employment, loss of continued wages and benefits with a
reorganized Pan Am and out-of-pocket losses; costs and attorneys' fees; and
other unspecified relief. On July 8, 1992, Delta filed its answer denying
liability in this lawsuit and asserting various affirmative defenses.
Additionally, Delta filed a third party complaint against the Creditors
Committee, its individual members and Pan Am alleging that these parties are
liable to Delta for any amounts that plaintiffs in this lawsuit may recover from
Delta. Pan Am filed an answer denying liability to Delta; the Creditors
Committee and its members filed a motion to dismiss Delta's third party
complaint. On December 4, 1992, the District Court dismissed Delta's third party
complaint against the Creditors Committee and its members, but granted Delta
permission to replead its claims. On January 25, 1993, Delta filed an amended
third party complaint against the Creditors Committee and its members, who filed
a motion to dismiss Delta's amended claims. The District Court (1) denied
plaintiffs' motion for class action certification on March 10, 1993 and
reaffirmed this order on August 6, 1993; and (2) denied the motion by the
Creditors Committee and its members to dismiss Delta's amended third party
complaint on August 18, 1993. On September 24, 1993, the Creditors Committee and
its members answered Delta's amended third party complaint, denying liability to
Delta and asserting various affirmative defenses. On December 14, 1993, the
District Court denied plaintiffs' motion requesting the District Court to
reconsider its order denying plaintiffs' motion for class action certification
or, alternatively, to permit an immediate appeal of that order. On February 28,
1994, Delta filed a motion for summary judgment on all of plaintiffs' claims in
this lawsuit; the plaintiffs are opposing this motion. Also on February 28,
1994, the Creditors Committee and its members filed motions for summary judgment
on Delta's third party claims for indemnification and contribution in this
lawsuit; Delta is opposing these motions. The District Court has not yet ruled
on these motions or scheduled the trial of this lawsuit.
-14-
On September 10, 1992, a lawsuit was filed against Delta in the District
Court by approximately 120 former Pan Am pilots who make allegations and claims
similar to those asserted in the purported class action complaint by former Pan
Am employees described in the preceding paragraph. In their complaint, the
plaintiffs, who have requested and are entitled to a jury trial, seek
unspecified damages for lost wages and benefits and out-of-pocket losses; costs
and attorneys' fees; and other unspecified relief. On January 8, 1993, Delta
filed its answer denying liability in this lawsuit and asserting various
affirmative defenses. Additionally, Delta filed a third party complaint against
the Creditors Committee and its individual members alleging that these parties
are liable to Delta for any amounts that plaintiffs in this lawsuit may recover
from Delta. The Creditors Committee and its members filed a motion to dismiss
Delta's third party complaint. On August 18, 1993, the District Court denied
this motion. On September 24, 1993, the Creditors Committee and its members
answered Delta's third party complaint, denying liability to Delta and asserting
various affirmative defenses. On February 28, 1994, Delta filed a motion for
summary judgment on all of plaintiffs' claims in this lawsuit; the plaintiffs
are opposing this motion. Also on February 28, 1994, the Creditors Committee and
its members filed motions for summary judgment on Delta's third party claims for
indemnification and contribution in this lawsuit; Delta is opposing these
motions. The District Court has not yet ruled on these motions or scheduled the
trial of this lawsuit.
A purported class action complaint was commenced against Delta in the
Supreme Court of the State of New York, County of New York, on behalf of
participants of Pan Am's WorldPass Frequent Flyer Program ("WorldPass") who
elected to obtain Pan Am WorldPass travel certificates rather than to transfer
their accumulated miles into Delta's Frequent Flyer Program. The WorldPass
participants are seeking unspecified damages, costs and attorneys' fees, and
other unspecified relief. Delta has removed this action to the Bankruptcy Court.
On April 6, 1992, Delta filed its answer denying liability in this lawsuit and
asserting various affirmative defenses.
Delta believes that it complied with all of its obligations to Pan Am and
the Creditors Committee and that the actions filed against it are without merit,
and it intends to defend these matters vigorously. Although the ultimate outcome
of these matters cannot be predicted with certainty and could have a material
adverse effect on Delta's consolidated financial condition, results of
operations or liquidity, management presently believes that the resolution of
these actions is not likely to have a material adverse effect on Delta's
consolidated financial condition, results of operations or liquidity. It is
possible that other actions and claims will be filed against Delta relating to
its participation in Pan Am's proposed plan of reorganization.
ITEM 2. PROPERTIES
- ------ ----------
Flight Equipment
- ----------------
Information relating to Delta's aircraft fleet is set forth under
"Operational Review - Aircraft Fleet" on page 6, and in Notes 2 and 6 of the
Notes to Consolidated Financial Statements on pages 28 and 31, respectively, of
Delta's 1994 Annual Report to Stockholders, and is incorporated herein by
reference.
-15-
Ground Facilities
- -----------------
Delta leases most of the land and buildings that it occupies. The Company's
largest aircraft maintenance base, various computer, cargo, flight kitchen and
training facilities and most of its principal offices are located at or near
Hartsfield Atlanta International Airport, in Atlanta, Georgia, on land leased
from the City of Atlanta under long-term leases. Delta owns a portion of its
principal offices, its Atlanta reservations center and other improved and
unimproved real property in Atlanta, as well as a limited number of radio
transmitting and receiving sites and certain other facilities.
Delta leases ticket counter and other terminal space, operating areas and
air cargo facilities in most of the airports which it serves. These leases
generally run for periods of from less than one year to thirty years or more,
are based on fixed rental charges per square foot of floor space occupied, and
contain provisions for periodic adjustment of rates. At most airports which it
serves, Delta has entered into use agreements which provide for the non-
exclusive use of runways, taxiways, and other facilities; landing fees under
these agreements normally are based on the number of landings and weight of
aircraft. The Company also leases aircraft maintenance facilities at certain
airports, generally under long-term leases which cover the cost of providing,
operating and maintaining such facilities. In addition, Delta leases marketing,
ticket and reservations offices in certain major cities which it serves; these
leases are normally for shorter terms than the airport leases. Additional
information relating to Delta's ground facilities is set forth in Note 6 of the
Notes to Consolidated Financial Statements on page 31 of Delta's 1994 Annual
Report to Stockholders, and is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
- ------ -----------------
On September 19, 1986, a purported class action lawsuit was filed against
Delta, Western Air Lines, Inc. ("Western") and certain directors of Western in
the Court of Chancery of the State of Delaware in New Castle County (the
"Chancery Court") on behalf of persons who owned Western securities on
September 9, 1986, the date Western and Delta entered into a merger agreement
(the "Merger Agreement") providing for the merger (the "Merger") of a wholly
owned subsidiary of Delta into Western. (The Merger was consummated on
December 18, 1986 and Western was merged into Delta on April 1, 1987.) In
their amended complaint, the plaintiffs, who are seeking unspecified
compensatory and rescissionary damages, allege, among other things, that the
consideration paid in the Merger was grossly inadequate, that Western's
directors breached their fiduciary duties to Western stockholders by approving
the Merger despite their knowledge that Western's common stock had a value of
up to more than double the merger price, by agreeing to a "lock-up option" and
a "no shop/no talk" clause in the Merger Agreement, by acquiescing in certain
"golden parachute" arrangements and by failing to disclose certain information
concerning the value of Western, and that Delta aided and abetted such
breaches of duty. On September 11, 1989, the Chancery Court granted in part
and denied in part Western's and the individual defendants' motions to dismiss
the amended complaint, and granted Delta's motion to dismiss the amended
complaint. The Chancery Court ruled that the amended complaint stated two
claims against Western and the individual defendants that could not be
resolved on a motion to dismiss: whether Western and the individual
defendants failed (1) to act in the best interests of
-16-
Western's stockholders in conducting the sale of Western; and (2) to disclose
certain information concerning the value of Western. On November 23, 1992,
Western and the individual defendants filed a motion for summary judgment, which
the Chancery Court granted on February 25, 1994. The plaintiffs have appealed
this ruling to the Delaware Supreme Court. Delta believes that the defendants'
conduct has been entirely proper and lawful, and it intends to continue to
defend this lawsuit vigorously.
In January 1987, the Association of Flight Attendants ("AFA"), the
collective bargaining agent for the flight attendants at Western prior to the
merger of Western into Delta on April 1, 1987 (the "Second Merger"), filed suit
against Western in the United States District Court for the District of
Columbia. The AFA suit sought to compel Western to arbitrate a grievance
alleging that Western breached the AFA-Western collective bargaining agreement
by not requiring Delta (1) to be bound by that agreement; and (2) to recognize
the AFA as representing the former Western flight attendants after the Second
Merger. The District Court dismissed the action on the grounds that the
grievance raised representation matters which under the Railway Labor Act are
within the exclusive jurisdiction of the National Mediation Board (which
subsequently ruled that the representation certification of the AFA at Western
terminated on April 1, 1987). The AFA appealed to the United States Court of
Appeals for the District of Columbia, which reversed the District Court's
dismissal of the AFA's action to compel arbitration, ruling (1) that the AFA's
claim based on any right of continued representation is moot; (2) that the AFA's
claim for damages is not moot; and (3) that an arbitrator has authority under
the Railway Labor Act to adjudicate the AFA's grievance to the extent it seeks
damages for Western's alleged breach of the collective bargaining agreement.
Delta then filed a petition for certiorari in the United States Supreme Court
which, on April 2, 1990, refused to review the Court of Appeals' decision. As a
result, arbitration of the AFA's grievance will proceed and, if the AFA's claim
is upheld, damages could be assessed against Delta. Delta has a number of
defenses which it considers to be valid, and will vigorously assert these
defenses in the arbitration.
On May 16, 1994, a purported class action complaint was filed in the United
States District Court for the Northern District of Georgia against Delta and
certain Delta officers in their capacity as members of the Administrative
Committee responsible for administering certain Company employee benefit
plans. The plaintiffs, who have requested a jury trial, are 21 former Delta
employees who seek to represent the class consisting of the approximately
1,800 former non-pilot employees of Delta who retired from active service
between July 23, 1992 and January 1, 1993. The complaint alleges that Delta
violated the Employee Retirement Income Security Act by (1) modifying health
benefits for this group of retirees in spite of alleged oral and written
representations that it would not make any such modifications; (2) breaching
its fiduciary duties and interfering with plaintiffs' benefits by making such
modifications and by allegedly giving false assurances that no enhanced
retirement benefit incentives were being considered or would be offered in the
future; and (3) discriminating against certain benefit plan participants. The
complaint also alleges, among other things, that Delta breached a contract
with plaintiffs by amending Delta's pass policy to suspend the flight
privileges of a retiree during any period such retiree is employed by certain
other airlines. Plaintiffs are seeking injunctive relief, unspecified
compensatory and punitive damages, costs and attorneys' fees, and such other
relief as the District Court deems appropriate. On July 18, 1994, Delta filed
its answer denying liability under the complaint and asserting various
affirmative defenses. Delta intends to defend this matter vigorously.
-17-
Delta is also a defendant in certain other legal actions relating to
alleged employment discrimination practices, other matters concerning past and
present employees, environmental issues and other matters concerning Delta's
business. Although the ultimate outcome of these matters and the matters
discussed above in this item 3 cannot be predicted with certainty and could have
a material adverse effect on Delta's consolidated financial condition, results
of operations or liquidity, management presently believes that the resolution of
these actions is not likely to have a material adverse effect on Delta's
consolidated financial condition, results of operations or liquidity.
For a discussion of certain environmental matters and litigation relating
to Delta's participation in Pan Am's proposed plan of reorganization, see "ITEM
1. BUSINESS - Environmental Matters" on pages 8-9, and "ITEM 1. BUSINESS -
Transactions with Pan Am Corporation" on pages 11-15, respectively, of this Form
10-K. For a discussion of the settlement of certain antitrust litigation, see
"Capitalization, Financing and Liquidity - Fiscal Year 1994 -Antitrust
Settlement" on page 14 of Delta's 1994 Annual Report to Stockholders, which is
incorporated herein by reference.
On December 21, 1992, the United States Department of Justice filed a civil
complaint in the United States District Court for the District of Columbia
against Delta, seven other major domestic airlines and the Airline Tariff
Publishing Company ("ATP"), a computerized fare publishing service owned by
domestic and international air carriers. The complaint alleges that the
defendants and unnamed co-conspirators violated Section 1 of the Sherman Act
by engaging in price fixing and by operating the ATP's computerized fare
exchange system in a manner that unreasonably restrains competition in the
domestic air passenger transportation system. In March 1994, Delta, the ATP
and five other airline defendants agreed to settle this lawsuit without
admitting liability by entering into a stipulated final judgment that (1)
prohibits the announcement of fare increases before their effective date; (2)
restricts the use of fares which require that tickets be purchased by a
specified date; and (3) bars or limits certain other pricing activities. On
August 10, 1994, the District Court approved the final judgment, which is
similar to a final judgment entered into by the two other airline defendants
that was approved by the District Court in November 1993. Delta believes that
its compliance with the stipulated final judgment will not have a material
adverse effect on its operations.
The Attorneys General of several States are investigating whether several
major airlines, including Delta, have engaged in price fixing and other
unlawful restraints of trade. The States have issued a subpoena to the
Company and other major airlines requiring them to provide certain information
and documents. Delta and other airlines have met with the States to discuss a
possible settlement of the States' potential claims, but there can be no
assurance that a settlement will be reached. Delta believes that its pricing
activities are legal and that it has not violated the antitrust laws.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
Not applicable.
-18-
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
Certain information concerning Delta's executive officers follows. All
positions shown are with Delta. There are no family relationships between any
of Delta's executive officers.
Ronald W. Allen Mr. Allen has been Chairman of the Board and Chief
Executive Officer since August 1, 1987. On March 1,
1993, Mr. Allen was elected to the additional office
of President, a position he also held from August 9,
1990 through April 30, 1991. He was President and
Chief Operating Officer from November 1983 through
July 1987. Age 52.
H. C. Alger Executive Vice President - Operations, March 1993 to
date; Senior Vice President - Operations, February
1992 through February 1993; Vice President - Flight
Operations, August 1987 through January 1992. Age 56.
W. Martin Braham Senior Vice President - Airport Customer Service,
March 1993 to date; Vice President - Airport Customer
Service, August 1992 through February 1993; Assistant
Vice President - International Airport Customer
Service, February 1992 through July 1992; Assistant
Vice President - Stations, August 1991 through January
1992; Director - Stations, August 1989 through July
1991. Age 49.
Robert W. Coggin Senior Vice President - Marketing, August 1992 to
date; Senior Vice President - Marketing Development
and Planning, February 1992 through July 1992; Vice
President - Marketing Development and Planning,
November 1991 through January 1992; Vice President -
Marketing Development, November 1988 through October
1991. Age 58.
Robert S. Harkey Senior Vice President - General Counsel, November 1990
to date; Vice President - General Counsel, November
1988 through October 1990. Age 53.
Russell H. Heil Senior Vice President - Technical Operations, February
1992 to date; Executive Vice President - Technical
Operations, May 1991 through January 1992; Executive
Vice President - Operations and Personnel, August 16,
1990 through April 1991; Senior Vice President -
Personnel, November 1984 through August 15, 1990. Age
52.
-19-
Rex A. McClelland Senior Vice President - Corporate Services, August
1993 to date; Senior Vice President - Administrative
Services, February 1992 through July 1993; Senior Vice
President - Operations, August 1987 through January
1992. Age 58.
Thomas J. Roeck, Jr. Senior Vice President - Finance and Chief Financial
Officer, June 1988 to date. Age 50.
Maurice W. Worth Senior Vice President - Personnel, May 1991 to date;
Vice President - Personnel, November 1989 through
April 1991; Assistant Vice President - Personnel
Administration, February 1987 through October 1989.
Age 54.
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------ ---------------------------------------------------------------------
Information required by this item is set forth under "Common Stock and
Depositary Shares Representing Series C Convertible Preferred Stock", "Number
of Stockholders" and "Market Prices and Dividends" on page 17 of Delta's 1994
Annual Report to Stockholders, and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
- ------ -----------------------
Information required by this item is set forth on page 38 and the inside
back cover of Delta's 1994 Annual Report to Stockholders, and is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------ -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Information required by this item is set forth under "Operational Review -
Leadership 7.5" on pages 4-5, and pages 7-14, of Delta's 1994 Annual Report
to Stockholders, and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
Information required by this item is set forth on pages 22-37, and in
"Report of Independent Public Accountants" on page 21, of Delta's 1994 Annual
Report to Stockholders, and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not applicable.
-20-
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------- --------------------------------------------------
Information required by this item is set forth on pages 4-7, and under
"Other Matters Involving Directors and Executive Officers - Legal Services"
and " - Compliance with Section 16(a) of the Securities Exchange Act of 1934"
on page 12, of Delta's Proxy Statement dated September 13, 1994, and is
incorporated herein by reference. Certain information regarding executive
officers is contained in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
------- ----------------------
Information required by this item is set forth under "General Information -
Compensation of Directors" on pages 3-4, and " - Charitable Award Program" on
page 4, and on pages 10 and 16-19, of Delta's Proxy Statement dated September
13, 1994, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
------- ---------------------------------------------------
MANAGEMENT
----------
Information required by this item is set forth on pages 7-9 of Delta's
Proxy Statement dated September 13, 1994, and is hereby incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
------- ----------------------------------------------
Information required by this item is set forth on pages 10-11, and under
"General Information - Legal Services" on page 12, of Delta's Proxy Statement
dated September 13, 1994, and is incorporated herein by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
------- ----------------------------------------------------
ON FORM 8-K
-----------
(a)(1), (2). The financial statements and schedules required by this item
are listed in the Index to Consolidated Financial Statements and Schedules on
page 24 of this Form 10-K.
(3). The exhibits required by this item are listed in the Exhibit
Index on pages 38-41 of this Form 10-K. The management contracts and
compensatory plans or arrangements required to be filed as an exhibit to this
Form 10-K are listed as Exhibits 10.7 to 10.14 in the Exhibit Index.
(b) During the quarter ended June 30, 1994, Delta did not file
any Current Reports on Form 8-K.
-21-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 26th day of
September, 1994.
DELTA AIR LINES, INC.
By: /s/ Ronald W. Allen
-----------------------------------
Ronald W. Allen
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on the 26th day of September, 1994 by the
following persons on behalf of the registrant and in the capacities indicated.
Signature Title
--------- -----
/s/ Ronald W. Allen Chairman of the Board, President
- -------------------------------- and Chief Executive Officer
Ronald W. Allen (Principal Executive Officer)
Edwin L. Artzt* Director
- --------------------------------
Edwin L. Artzt
Henry A. Biedenharn, III* Director
- --------------------------------
Henry A. Biedenharn, III
James L. Broadhead* Director
- --------------------------------
James L. Broadhead
Edward H. Budd* Director
- --------------------------------
Edward H. Budd
-22-
Signature Title
--------- -----
George D. Busbee* Director
- --------------------------------
George D. Busbee
R. Eugene Cartledge* Director
- --------------------------------
R. Eugene Cartledge
Mary Johnston Evans* Director
- --------------------------------
Mary Johnston Evans
David C. Garrett, Jr.* Director
- --------------------------------
David C. Garrett, Jr.
Gerald Grinstein* Director
- --------------------------------
Gerald Grinstein
Jesse Hill, Jr.* Director
- --------------------------------
Jesse Hill, Jr.
Andrew Young* Director
- --------------------------------
Andrew Young
/s/ Thomas J. Roeck, Jr. Senior Vice President-Finance
- -------------------------------- and Chief Financial Officer
Thomas J. Roeck, Jr. (Principal Financial Officer
and Principal Accounting Officer)
*By: /s/ Thomas J. Roeck, Jr. Attorney-In-Fact
---------------------------
Thomas J. Roeck, Jr.
-23-
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
--------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - Incorporated herein by reference to
"Report of Independent Public Accountants" on page 21 of Delta's 1994 Annual
Report to Stockholders.
FINANCIAL STATEMENTS - All of which are incorporated herein by reference to
Delta's 1994 Annual Report to Stockholders.
Consolidated Balance Sheets - June 30, 1994 and 1993
Consolidated Statements of Operations for the years ended June 30, 1994, 1993
and 1992
Consolidated Statements of Cash Flows for the years ended June 30, 1994, 1993
and 1992
Consolidated Statements of Stockholders' Equity for the years ended June 30,
1994, 1993 and 1992
Notes to Consolidated Financial Statements - June 30, 1994, 1993 and 1992
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
SCHEDULES SUPPORTING FINANCIAL STATEMENTS:
Schedule
Number
------
I Marketable Securities - Other Investments as of June 30, 1994
V Operating Property and Equipment for the years ended June 30,
1994, 1993 and 1992
VI Accumulated Depreciation and Amortization of Operating Property
and Equipment for the years ended June 30, 1994, 1993 and 1992
VII Guarantees of Securities of Other Issuers as of June 30, 1994
VIII Valuation and Qualifying Accounts for the years ended June 30,
1994, 1993 and 1992
X Supplementary Information on Statements of Operations for the
years ended June 30, 1994, 1993 and 1992
All other schedules have been omitted as not applicable or because the
required information is included in the financial statements or notes thereto.
-24-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
-----------------------------------------------------
To Delta Air Lines, Inc.:
We have audited, in accordance with generally accepted auditing standards, the
financial statements included in Delta Air Lines, Inc.'s annual report to
stockholders incorporated by reference in this Form 10-K and have issued our
report thereon dated August 12, 1994. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The schedules listed
in the accompanying index are the responsibility of the Company's management,
are presented for purposes of complying with the Securities and Exchange
Commission's rules, and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
August 12, 1994
SCHEDULE I
DELTA AIR LINES, INC.
---------------------
MARKETABLE SECURITIES - OTHER INVESTMENTS
-----------------------------------------
AS OF JUNE 30, 1994
-------------------
(In Millions, Except Share Amounts)
Column A Column B Column C Column D Column E
Number of Market Value Balance Sheet Value
Issuer and Title of Issue Shares Cost at End of Year at End of Year
------------------------- --------- -------- -------------- -------------------
Swissair, Swiss Air Transport Company Ltd 105,000 $ 85 $ 61 $ 61
Singapore Airlines Limited
Ordinary Shares 35,186,300 181 290 290
--- --- ---
$266 $351 $351
==== ==== ====
-26-
SCHEDULE V
DELTA AIR LINES, INC.
---------------------
OPERATING PROPERTY AND EQUIPMENT
--------------------------------
FOR THE YEAR ENDED JUNE 30, 1994
--------------------------------
(Amounts in Millions)
Column A Column B Column C Column D Column E Column F
Balance at Beginning Additions Retirements Other Changes Balance at End
Classifications of Period at Cost (a) or Sales (a) Add (Deduct) of Period
--------------- -------------------- ----------- ------------ ------------- --------------
Flight Equipment Owned $ 9,043 $1,125 $(842) $(263)(b) $ 9,063
Flight Equipment under Capital
Leases 173 - - - 173
Ground Property and Equipment 2,372 170 (116) (28)(c) 2,398
----- --- ----- ---- -----
$11,588 $1,295 $(958) $(291) $11,634
====== ===== ===== ===== ======
(a) Major additions included 8 A310-300 aircraft, 2 B-737-300 aircraft,
1 B-767-300 aircraft, 4 MD-11 aircraft and 4 MD-88 aircraft. The Company
completed sale and leaseback agreements for 8 A310-300 aircraft,
1 B-767-300 aircraft and 1 MD-11 aircraft. Three B-737-300 aircraft were
sold, and 3 A310-200 aircraft, 14 A310-300 aircraft, 11 B-727-200 aircraft
and 2 MD-11 aircraft were returned to lessors.
(b) Primarily represents net transfers to non-operating flight equipment.
(c) Primarily represents net transfers to non-operating property.
-27-
SCHEDULE V
DELTA AIR LINES, INC.
---------------------
OPERATING PROPERTY AND EQUIPMENT
--------------------------------
FOR THE YEAR ENDED JUNE 30, 1993
--------------------------------
(Amounts in Millions)
Column A Column B Column C Column D Column E Column F
Balance at Beginning Additions Retirements Other Changes Balance at End
Classifications of Period at Cost (a) or Sales (a) Add (Deduct) of Period
--------------- -------------------- ----------- ------------ ------------- --------------
Flight Equipment Owned $ 8,354 $1,469 $(738) $(42)(b) $ 9,043
Flight Equipment under
Capital Leases 173 -- -- -- 173
Ground Property and
Equipment 2,210 245 (29) (54)(c) 2,372
----- --- --- --- -----
$10,737 $1,714 $(767) $(96) $11,588
------ ----- ---- --- ------
(a) Major additions included 1 A310-300 aircraft, 6 B-757-200 aircraft, 3
B-737-300 aircraft, 1 B-767-300 aircraft, 4 B-767-300ER aircraft, 3 MD-11
aircraft and 11 MD-88 aircraft. The Company completed sale and leaseback
agreements for 1 A310-300 aircraft, 5 B-757-200 aircraft, 1 B-767-300
aircraft, 2 B-767-300ER aircraft and 2 MD-11 aircraft. Eighteen DC-9
aircraft were sold, and 5 B-727-200 aircraft and 1 B-737-200 aircraft were
returned to lessors.
(b) Primarily represents net transfers to non-operating flight equipment.
(c) Primarily represents net transfers to non-operating property.
-28-
SCHEDULE V
DELTA AIR LINES, INC.
--------------------
OPERATING PROPERTY AND EQUIPMENT
--------------------------------
FOR THE YEAR ENDED JUNE 30, 1992
--------------------------------
(Amounts in Millions)
Column A Column B Column C Column D Column E Column F
Balance at Beginning Additions Retirements Other Changes Balance at End
Classifications of Period at Cost (a) or Sales (a) Add (Deduct) of Period
--------------- -------------------- ----------- ------------ ------------- --------------
Flight Equipment Owned $6,831 $2,053 $(671) $141(b) $ 8,354
Flight Equipment under Capital Leases 173 -- -- -- 173
Ground Property and Equipment 1,890 363 (54) 11(c) 2,210
----- --- ---- -- -----
$8,894 $2,416 $(725) $152 $10,737
----- ----- ----- --- ------
(a) Major additions were 3 used A310-200 aircraft, 9 B-757-200 aircraft,
3 B-767-300 aircraft, 1 B-767-300ER aircraft, 13 used L-1011 aircraft,
4 MD-11 aircraft and 22 MD-88 aircraft. The Company completed sale and
leaseback agreements for 1 B-767-300 aircraft, 1 B-767-300ER aircraft,
4 MD-11 aircraft and 9 MD-88 aircraft. Nine DC-9 aircraft were sold, and
5 DC-9 aircraft were returned to lessors. The Company acquired, under
operating leases, 4 used A310-200 aircraft, 14 used A310-300 aircraft and
24 used B-727-200 aircraft.
(b) Primarily represents net transfers from non-operating property.
(c) Primarily represents net transfers from flight equipment.
-29-
SCHEDULE VI
DELTA AIR LINES, INC.
---------------------
ACCUMULATED DEPRECIATION AND AMORTIZATION OF OPERATING PROPERTY AND EQUIPMENT
-----------------------------------------------------------------------------
FOR THE YEAR ENDED JUNE 30, 1994
--------------------------------
(Amounts in Millions)
Column A Column B Column C Column D Column E Column F
Additions
- - - - - - - - - Deductions
Balance at Beginning Provision Charged - - - - - - Other Changes Balance At End
Classifications of Period to Income (a) Retirements Add (Deduct) of Period
--------------- -------------------- ----------------- ----------- ------------ --------------
Flight Equipment Owned $3,559 $419 $ (34) $(64)(b) $3,880
Flight Equipment under Capital Leases 128 14 - - 142
Ground Property and Equipment 1,143 221 (108) (6)(b) 1,250
------ --- ----- ---- ------
$4,830 $654 $(142) $(70) $5,272
----- --- ----- ---- -----
(a) Provision charged to income as above $654
Amortization of cost in excess of net assets acquired 9
Amortization of leasehold and operating rights 64
Amortization of pre-operating expense 9
Amount shown as restructuring charge (58)
----
Depreciation and amortization as shown on consolidated statements of
income $678
---
(b) Primarily represents net transfers to non-operating property and flight
equipment.
-30-
SCHEDULE VI
DELTA AIR LINES, INC.
---------------------
ACCUMULATED DEPRECIATION AND AMORTIZATION OF OPERATING PROPERTY AND EQUIPMENT
-----------------------------------------------------------------------------
FOR THE YEAR ENDED JUNE 30, 1993
--------------------------------
(Amounts in Millions)
Column A Column B Column C Column D Column E Column F
Additions
- - - - - - - - - Deductions
Balance at Beginning Provision Charged - - - - - - Other Changes Balance At End
Classifications of Period to Income(a) Retirements Add (Deduct) of Period
--------------- -------------------- ----------------- ----------- ------------- --------------
Flight Equipment Owned $3,213 $476 $ (90) $(40)(b) $3,559
Flight Equipment under
Capital Leases 112 16 -- -- 128
Ground Property and
Equipment 983 186 (25) (1)(b) 1,143
----- --- --- --- -----
$4,308 $678 $(115) $(41) $4,830
===== === ==== === =====
(a) Provision charged to income as above $678
Amortization of cost in excess of net assets acquired 9
Amortization of leasehold and operating rights 64
Amortization of pre-operating expense 14
Amount shown as restructuring charge (30)
---
Depreciation and amortization as shown on consolidated statements
of income $735
===
(b) Primarily represents net transfers to non-operating property and flight
equipment.
-31-
SCHEDULE VI
DELTA AIR LINES, INC.
---------------------
ACCUMULATED DEPRECIATION AND AMORTIZATION OF OPERATING PROPERTY AND EQUIPMENT
-----------------------------------------------------------------------------
FOR THE YEAR ENDED JUNE 30, 1992
--------------------------------
(Amounts in Millions)
Column A Column B Column C Column D Column E Column F
Additions
- - - - - - - - - Deductions
Balance at Beginning Provision Charged - - - - - - Other Changes Balance at End
Classifications of Period to Income (a) Retirements Add (Deduct) of Period
--------------- -------------------- ------------------ ----------- ------------ --------------
Flight Equipment Owned $2,873 $390 $(26) $(24)(b) $3,213
Flight Equipment under Capital Leases 92 20 -- -- 112
Ground Property and Equipment 854 174 (43) (2)(b) 983
----- --- ---- --- -----
$3,819 $584 $(69) $(26) $4,308
===== === ==== ==== =====
(a) Provision charged to income as above $584
Amortization of cost in excess of net assets acquired 9
Amortization of leasehold and operating rights 36
Amortization of pre-operating expense 6
---
Depreciation and amortization as shown on consolidated
statements of income $635
===
(b) Primarily represents net transfers to non-operating property.
-32-
SCHEDULE VII
DELTA AIR LINES, INC.
---------------------
GUARANTEES OF SECURITIES OF OTHER ISSUERS
-----------------------------------------
AS OF JUNE 30, 1994
-------------------
(Amounts In Millions)
Name of Issuer of Securities Guaranteed Title of Issue of Each Class of Total Amount Guaranteed
by Person for Which Statement is Filed Securities Guaranteed and Outstanding Nature of Guarantee
--------------------------------------- ------------------------------ ----------------------- -------------------
Regional Airports Improvement Corporation Regional Airports Improvement Corporation $ 94 Principal and Interest
11 1/4% Facilities Sublease Revenue Bonds,
Issue of 1985
Dallas-Fort Worth International Airport Dallas-Fort Worth International Airport 117 Principal and Interest
Facility Improvement Corporation Facility Improvement Corporation Delta Air
Lines, Inc. Revenue Bonds, Series 1991
Kenton County Airport Board Kenton County Airport Board (Commonwealth 438 Principal and Interest
of Kentucky) Special Facilities Revenue
Bonds, Series 1992 (Delta Air Lines, Inc.
Project)
Dallas-Fort Worth International Airport Dallas-Fort Worth International Airport 26 Principal and Interest
Facility Improvement Corporation Facility Improvement Corporation Delta Air
Lines, Inc. Revenue Refunding Bonds, Series
1993
---
$ 675
---
-33-
SCHEDULE VIII
DELTA AIR LINES, INC.
---------------------
VALUATION AND QUALIFYING ACCOUNTS
---------------------------------
FOR THE YEAR ENDED JUNE 30, 1994
--------------------------------
(Amounts in Millions)
Column A Column B Column C Column D Column E
Additions
Balance At Beginning - - - - - - - - - - - - - - - - - Deductions from Balance At End
Description of Period Charged to Income Other Allowance of Period
----------- -------------------- ----------------- ----- --------------- --------------
DEDUCTED IN THE BALANCE
SHEET FROM THE ASSET TO
WHICH IT APPLIES:
Allowance for uncollectible
accounts receivable: $82 $23 $ - $55(a) $50
Allowance for
unrealized (gains)
losses on non-current
marketable securities: $ 1 $ - $(85)(b) $ 1(c) $(85)
(a) Represents write-off of accounts considered to be uncollectible, reversal of
amounts deemed collectible and collections.
(b) Represents net unrealized gain to reflect increase in market value resulting
from the adoption of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
(c) Represents reversal of previously recognized losses to reflect increases in
market value.
-34-
SCHEDULE VIII
DELTA AIR LINES, INC.
---------------------
VALUATION AND QUALIFYING ACCOUNTS
---------------------------------
FOR THE YEAR ENDED JUNE 30, 1993
--------------------------------
(Amounts in Millions)
Column A Column B Column C Column D Column E
Additions
Balance At Beginning - - - - - - - - - - - - - - - - - Deductions from Balance At End
Description of Period Charged to Income Other Allowance of Period
----------- -------------------- ----------------- ----- --------------- --------------
DEDUCTED IN THE BALANCE
SHEET FROM THE ASSET TO
WHICH IT APPLIES:
Allowance for uncollectible
accounts receivable: $67 $27 $ - $12(a) $82
Allowance for unrealized
losses on non-current
marketable securities: $19 $ - $ - $18(b) $ 1
(a) Represents write-off of accounts considered to be uncollectible, reversal of
amounts deemed collectible and collections.
(b) Represents reversal of previously recognized losses to reflect increases
in market value.
-35-
SCHEDULE VIII
DELTA AIR LINES, INC.
---------------------
VALUATION AND QUALIFYING ACCOUNTS
---------------------------------
FOR THE YEAR ENDED JUNE 30, 1992
--------------------------------
(Amounts in Millions)
Column A Column B Column C Column D Column E
Additions
Balance At Beginning - - - - - - - - - - - - - - - - - Deductions from Balance At End
Description of Period Charged to Income Other Allowance of Period
----------- -------------------- ----------------- ----- --------------- --------------
DEDUCTED IN THE BALANCE
SHEET FROM THE ASSET TO
WHICH IT APPLIES:
Allowance for uncollectible
accounts receivable: $59 $38 $ - $30(a) $67
Allowance for unrealized
losses on non-current
marketable securities: $22 $ - $ - $ 3(b) $19
(a) Represents write-off of accounts considered to be uncollectible, reversal of
amounts deemed collectible and collections.
(b) Represents reversal of previously recognized losses to reflect increases
in market value.
-36-
SCHEDULE X
DELTA AIR LINES, INC.
---------------------
SUPPLEMENTARY INFORMATION ON STATEMENTS OF OPERATIONS
-----------------------------------------------------
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
------------------------------------------------
(Amounts in Millions)
Column A Column B
Charged to Costs and Expenses
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Item (a) 1994 1993 1992
-------- ---- ---- ----
Maintenance and repairs $1,160 $1,190 $1,113
Taxes other than payroll and income 169 166 169
Advertising costs 196 193 234
(a) Amounts for royalties and depreciation and amortization of intangible
assets, pre-operating costs, and similar deferrals do not exceed 1% of total
operating revenues.
-37-
EXHIBIT INDEX
-------------
3.1 Delta's Certificate of Incorporation (Filed as Exhibit 3 to Delta's
Current Report on Form 8-K dated November 17, 1993).*
3.2 Delta's By-Laws (Filed as Exhibit 3 to Delta's Current Report on Form
8-K dated November 17, 1993).*
4.1 Rights Agreement dated as of October 23, 1986, and Amendment No. 1
thereto dated as of June 19, 1992, between Delta and NationsBank of Georgia,
N. A. (Filed as Exhibit 1 to Delta's Current Report on Form 8-K dated November
4, 1986, and Exhibit 4-I to Amendment No. 2 to Delta's Registration Statement
on Form S-3 (Registration No. 33-48136)).*
4.2 Resignation, Transfer and Acceptance Agreement dated November 30,
1992, among NationsBank of Georgia, N.A., First Chicago Trust Company of New
York, and Delta (Filed as Exhibit 4-G to Amendment No. 1 to Delta's Registration
Statement on Form S-3 (Registration No. 33-62048)).*
4.3 Certificate of Designations, Preferences and Rights of Series A Junior
Participating Preferred Stock, Series B ESOP Convertible Preferred Stock and
Series C Convertible Preferred Stock (Filed as part of Exhibit 3 to Delta's
Current Report on Form 8-K dated November 17, 1993).*
4.4 Indenture dated as of March 1, 1983, between Delta and The Citizens
and Southern National Bank, Trustee, as supplemented by the First and Second
Supplemental Indentures thereto dated as of January 27, 1986 and May 26, 1989,
respectively (Filed as Exhibit 4 to Delta's Registration Statement on Form S-3
(Registration No. 2-82412), Exhibit 4(b) to Delta's Registration Statement on
Form S-3 (Registration No. 33-2972), and Exhibit 4.5 to Delta's Annual Report on
Form 10-K for the year ended June 30, 1989).*
4.5 Agreement dated May 31, 1989, among Delta, The Citizens and Southern
National Bank and The Citizens and Southern National Bank of Florida relating
to the appointment of a successor trustee under the Indenture dated as of
March 1, 1983, as supplemented, between Delta and The Citizens and Southern
National Bank (Filed as Exhibit 4.6 to Delta's Annual Report on Form 10-K for
the year ended June 30, 1989).*
4.6 Indenture dated as of April 30, 1990, between Delta and The Citizens
and Southern National Bank of Florida, Trustee (Filed as Exhibit 4(a) to
Amendment No. 1 to Delta's Registration Statement on Form S-3 (Registration No.
33-34523)).*
4.7 Indenture dated as of May 1, 1991, between Delta and The Citizens and
Southern National Bank of Florida, Trustee (Filed as Exhibit 4 to Delta's
Registration Statement on Form S-3 (Registration No. 33-40190)).*
-38-
4.8 Indenture dated as of June 15, 1993, between Delta and NationsBank of
Georgia, N.A., Trustee, relating to Delta's 3.23% Convertible Subordinated
Notes due June 15, 2003 (Filed as Exhibit 4.2 to Delta's Current Report on
Form 8-K dated June 29, 1993).*
4.9 Note Purchase Agreement dated February 22, 1990, among the Delta
Family-Care Savings Plan, Issuer, Delta, Guarantor, and Various Lenders relating
to the Guaranteed Serial ESOP Notes (Filed as Exhibit 10 to Delta's Current
Report on Form 8-K dated April 25, 1990).*
4.10 Indenture of Trust dated as of August 1, 1993, among Delta, Fidelity
Management Trust Company, ESOP Trustee, and Wilmington Trust Company, Trustee,
relating to the Guaranteed Serial ESOP Notes (Filed as Exhibit 4.12 to Delta's
Annual Report on Form 10-K for the year ended June 30, 1993).*
4.11 Letter of Credit dated August 12, 1993, issued by NationsBank of
Georgia, N.A., to Wilmington Trust Company, Trustee, relating to the
Guaranteed Serial ESOP Notes (Filed as Exhibit 4.13 to Delta's Annual Report
on Form 10-K for the year ended June 30, 1993).*
4.12 Credit Agreement dated as of December 19, 1991, among Delta, Certain
Banks and NationsBank of Georgia, N.A., as Agent Bank, as amended by the First
and Second Amendments thereto dated as of November 3, 1992 and December 4,
1992, respectively (Filed as Exhibit 4 to Delta's Quarterly Report on Form
10-Q for the quarter ended December 31, 1991, Exhibit 4.1 to Delta's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1992, and Exhibit 4.2
to Delta's Quarterly Report on Form 10-Q for the quarter ended December 31,
1992).*
4.13 Amended and Restated Credit Agreement dated as of December 4, 1992,
among Delta, Certain Banks and NationsBank of Georgia, N.A., as Agent Bank, as
amended by the First Amendment thereto dated as of June 4, 1993 (Filed as
Exhibit 4.2 to Delta's Current Report on Form 8-K dated December 8, 1992 and
Exhibit 4-I to Amendment No. 2 to Delta's Registration Statement on Form S-3
(Registration No. 33-62048)).*
Delta is not filing any other instruments evidencing any indebtedness
because the total amount of securities authorized under any single such
instrument does not exceed 10% of the total assets of Delta and its subsidiaries
on a consolidated basis. Copies of such instruments will be furnished to the
Securities and Exchange Commission upon request.
10.1 Purchase Agreement No. 1646 between The Boeing Company and Delta
relating to Boeing Model 737-332 aircraft (Filed as Exhibit 10.8 to Delta's
Annual Report on Form 10-K for the year ended June 30, 1990).*
10.2 Stock Purchase Agreement dated July 10, 1989, between Delta and
Swissair, Swiss Air Transport Company Ltd. (Filed as Exhibit 10.2 to Delta's
Current Report on Form 8-K dated July 24, 1989).*
-39-
10.3 Stock Purchase Agreement dated August 21, 1989, between Delta and
Swissair, Swiss Air Transport Company Ltd. (Filed as Exhibit 10.9 to Delta's
Annual Report on Form 10-K for the year ended June 30, 1989)*.
10.4 Stock Purchase Agreement dated October 26, 1989, between Singapore
Airlines Limited and Delta (Filed as Exhibit 10.1 to Delta's Current Report on
Form 8-K dated November 2, 1989).*
10.5 Stock Purchase Agreement dated October 26, 1989, between Delta and
Singapore Airlines Limited (Filed as Exhibit 10.2 to Delta's Current Report on
Form 8-K dated November 2, 1989).*
10.6 Sixth Amended and Restated Limited Partnership Agreement of
WORLDSPAN, L.P. dated as of April 30, 1993 (Filed as Exhibit 10.6 to Delta's
Annual Report on Form 10-K for the year ended June 30, 1993).*
10.7 Employment Agreement dated May 1, 1979, as amended, between Delta
and Mr. David C. Garrett (Filed as Exhibit A(1) to Delta's Annual Report on Form
10-K for the year ended June 30, 1979, and Exhibit 10.6 to Delta's Annual Report
on Form 10-K for the year ended June 30, 1986).*
10.8 Employment Agreement dated July 29, 1987, between Delta and Mr.
Ronald W. Allen, as amended by the Amendments thereto dated February 1, 1992,
August 15, 1992, and October 28, 1993 (Filed as Exhibit 10.8 to Delta's Annual
Report on Form 10-K for the year ended June 30, 1987, Exhibit 10 to Delta's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1992, Exhibit
10.13 to Delta's Annual Report on Form 10-K for the year ended June 30, 1992,
and Exhibit 10 to Delta's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1993).*
10.9 Delta's Incentive Compensation Plan, as amended.
10.10 Delta's 1989 Stock Incentive Plan, as amended.
10.11 Delta's Executive Deferred Compensation Plan.
10.12 Directors' Deferred Compensation Plan (Filed as Exhibit 10.14 to
Delta's Annual Report on Form 10-K for the year ended June 30, 1987).*
10.13 Directors' Charitable Award Program (Filed as Exhibit 10.14 to
Delta's Annual Report on Form 10-K for the year ended June 30, 1993).*
10.14 1991 Delta Excess Benefit Plan, The Delta Supplemental Excess
Benefit Plan and Form of Excess Benefit Plan Agreement (Filed as Exhibit 10.18
to Delta's Annual Report on Form 10-K for the year ended June 30, 1992).*
-40-
10.15 Agreement between Delta and The Air Line Pilots in the Service of
Delta as Represented by The Air Line Pilots Association, International as
supplemented (Filed as Exhibit 10.28 to Delta's Annual Report on Form 10-K for
the year ended June 30, 1990 and Exhibit 10.20 to Delta's Annual Report on Form
10-K for the year ended June 30, 1992).*
10.16 Purchase Agreement No. DAC 90-10-D between McDonnell Douglas
Corporation and Delta relating to MD-90 aircraft (Filed as Exhibit 10.1 to
Delta's Quarterly Report on Form 10-Q for the quarter ended September 30,
1990).*
11. Statement regarding computation of per share earnings for the years
ended June 30, 1992, 1993 and 1994.
12. Statement regarding computation of ratio of earnings to fixed
charges for the years ended June 30, 1990, 1991, 1992, 1993 and 1994.
13. Portions of Delta's 1994 Annual Report to Stockholders.
21. Subsidiaries of Delta.
23. Consent of Arthur Andersen LLP.
24. Powers of Attorney.
27. Financial Data Schedule.
- ---------
*Incorporated herein by reference.
-41-