Delta Air Lines, Inc. (DAL)

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Delta Air Lines Inc (DAL)

Q4 2009 Earnings Call

January 26, 2010 09:00 a.m. ET


Jill Greer - Director, Investor Relations

Richard Anderson - CEO

Ed Bastian - President

Hank Halter - CFO

Glen Hauenstein - EVP, Network & Revenue Management

Ben Hirst - SVP & General Counsel

Mike Campbell - EVP, Human Resources & Labor Relations

Steve Gorman - COO

Ned Walker - SVP& Chief Communications Officer


Bill Greene - Morgan Stanley

Gary Chase - Barclays Capital

Dan McKenzie - Next Generation Equity Research

Jamie Baker - JPMorgan

Mike Linenberg - Bank of America/Merrill Lynch

Hunter Keay - Stifel Nicolaus

Duane Pfennigwerth - Raymond James

Michael Derchin - FTN Equity Capital

Justine Fisher - Goldman Sachs

Helane Becker - Jesup & Lamont

Kevin Crissey - UBS

Mary Jane Credeur - Bloomberg News

Ann Keeton - Dow Jones

Micky Menon [ph] - New York Times

Kelly Yamanouchi - Atlantic Journal-Constitution

Harry Weber - Associated Press

James Pilcher - Cincinnati Enquirer



Good morning, ladies and gentlemen, and welcome to the Delta Air Lines December 2009 quarters financial results conference call. My name is Cindy and I will be your coordinator. At this time, all participants are on a listen-only mode until we conduct the question and answer session, following the presentation. (Operator Instructions).

I would now like to turn the call over to Jill Greer, Director of Investor Relations for Delta Air Lines.

Jill Greer

Thanks, Cindy. Good morning everyone and thanks for joining us to discuss Delta's December quarter and full year 2009 financial results. Joining us from Atlanta today are Richard Anderson, our CEO, our President Ed Bastian, Hank Halter our CFO, Steve Gorman our Chief Operating Officer, Glen Hauenstein our EVP of Network and Revenue Management, Mike Campbell EVP of HR and Labor Relations, Paul Jacobson [ph] our Treasurer, and Ned Walker, our Chief Communications Officer.

Richard will begin the call with a Delta and industry overview, Ed will then address our December 2009 quarter financial and revenue performance and also give an update on our merger integration. Hank will conclude with a review of Delta's cost performance and liquidity.

We have allocated about 25 minutes for executive comments and after their comments we've allocated 25 minutes for questions from the analysts. We'll then conclude the call with a 10 minute Q&A for the media. When we get to the Q&A, I'd like to request that you limit yourself to two questions and a follow-up. That should allow us to get to as many questions as possible during today’s call.

Today's discussion contains forward-looking statements that represent our beliefs or expectations about future events. All forward-looking statements involve risks and uncertainties that could cause the actual results to differ materially from the forward looking statements. Some of the factors that may cause these differences are described in Delta's SEC filings. Unless otherwise noted as GAAP all financial results we give today related to comparison to 2008, will be on a combined basis, including results for Delta and Northwest.

We'll also discuss certain non-GAAP financial measures. Operating expense, operating margin and unit cost results exclude special items unless otherwise noted. You can find a reconciliation of non-GAAP measures on our investor relations website at

And with that, I'll now turn the call over to our Chief Executive Officer, Richard Anderson.

Richard Anderson

Thank you Jill, and good morning everyone. And thank you for joining us on the call today. This morning, we announced a net loss for the December quarter of $225 million excluding special items. This is a $285 million improvement year-on-year. While we are disappointed to report a loss, we are encouraged that revenue and demand trends improved steadily throughout the December quarter. We are seeing positive passenger unit revenue improvement in January. And we expect to have positive year-on-year RASM improvement January through December of 2010.

For the full year, Delta reported a net loss of $1.1 billion excluding special items. At market prices though we would have reported a $291 million net profit excluding special items for 2009 and that's despite a $6 billion decline in revenue year-on-year. We are pleased to have the negative hedge effects from 2008 behind us, as we go into an improved economic environment.

Looking back on 2009, it was one of the most difficult years we faced in the airline industry, and we are really glad it's behind us. But, we want to thank our great employees and commend them for the quick action we together took early on to help Delta weather the storm. We think we are well positioned to capitalize on the economic recovery. In 2009, we continued to align capacity with demand and worked hard to right size our cost structure. We reduced capacity in 2009 by 6% with a reduction of 8% in the December quarter, more than double the industry average for the December quarter of 2009.

For the full year on a 6% capacity reduction, our ex-fuel unit costs were up 4%, with most of that driven by higher pension expense. We executed quite well on merger integration and delivered more than $700 million in merger synergies. And despite a very challenging economy, Delta's underlying business has been performing solidly given the environment as evidenced by viewing our performance, excluding the losses from the 2008 hedging decisions we took.

The Delta team has successfully merged the two airlines, while continuing to run a solid day-to-day operation. We are in the home stretch of merger integration and it's on track to be the smoothest airline merger in history.

In 2010, we have commercial initiatives in place to grow our unit revenues, while continuing to prudently manage our cost and capacity. We are investing strategically in the product and at the same time improving the balance sheet by paying down debt and reducing capital spending on new aircraft.

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