tarajim

Watch for more fees, higher prices, less service, and cutbacks.

Can you fit 2 to a seat?

Straps for Standees?

Bleacher Benchs?

Watch out!!

HeathrowGuy

Delta Air Lines Reports June 2008 Quarter Financial Results
Wednesday July 16, 7:30 am ET




Company reports $137 million profit excluding special charges

Unprecedented fuel prices increase costs by more than $1 billion

ATLANTA, July 16, 2008 (PRIME NEWSWIRE) -- Delta Air Lines (NYSEAL) today reported results for the quarter ended June 30, 2008. Key points include:



* Delta's net income for the June 2008 quarter excluding special
charges was $137 million, or $0.35 per diluted share, despite
a more than $1 billion year-over-year increase in fuel input
costs related to higher prices.(1,2,3)
* Including special charges of $1.2 billion, Delta's reported
net loss for the June 2008 quarter was $1.0 billion, or $2.64
per diluted share.
* Delta's merger with Northwest Airlines is targeted to close
during the fourth quarter of 2008. The company expects
approximately $2 billion in annual merger-related synergies by
2012 with cash integration costs of approximately $600 million
over three years.
* As of June 30, 2008, Delta had $4.3 billion in unrestricted
liquidity, including $1 billion available under its revolving
credit facility.

http://biz.yahoo.com/pz/080716/146454.html

tarajim

What are the details of the special charges? Are they cash outs? or write downs?

Right now, cash is king for DL. If they can keep their fists around the cash, they can survive.

Reading the statement, it appears the loss is all on paper, and that cash is being conserved, fuel hedged well, and the operations was really a profit. Lot of money coming in from Cargo, doing maintenance work for others, and Skymiles selling.

Good for you DL, you are the airline to beat.

SNAGuy

The $1.2 billion of most of the this is a write down of "Goodwill" which was a non-cash item that was created at the exit of bankruptcy. DL Actually announced this amount a few weeks ago so the markets should be very aware of this write down. Most of all of this is a non-cash item so has no effect on DL's cash position at the end of the quarter.

Here is a link to an AP article and an excerpt from it:

http://biz.yahoo.com/ap/080716/earns_delta.html?.v=5

Delta recorded special charges totaling $1.2 billion in the second quarter, including a $1.1 billion non-cash charge, net of a $119 million tax benefit, related to the decline in Delta's market value due to sustained record fuel prices. Additional special charges included a $96 million severance charge for previously announced voluntary work force reduction programs and a $6 million charge related to facilities restructuring.

So, $1.1 of the $1.2 billion is non-cash and related to Goodwill. UA just announced a few days ago they were going to write off their Goodwill and I'm sure NW has been doing the same.

Beckles

I'm not going to get in the usual argument about perceived short-comings of one airline compared to another, but there is clearly one airline to beat in terms of financial performance in the United States, and it sure is not Delta.

timstravel

From Marketwatch:

One-time charges in the recent quarter included $1.1 billion related to the completion of impairment testing.

What is "impairment testing"?

El Boocho

In a nutshell, as I understand it:
At the time of an acquisition goodwill is recorded for the difference between purchase price and the fair value of what was purchased. At certain points a company is required to evaluate and test whether the fair value of the company (including goodwill) is less than the carrying value aka book value. If it has been determined that the book value is more than the fair value there is an imparement and the company may be required to reduce goodwill. The flip side to that (intangible) asset reduction is an increase in expenses. Thus it is a one-time (hopefully) non cash expense.

GoHogsAR

Sobriety tests?

gauravp123

for the pilots or the passengers?

rcherskov

I'd be drinking too if I just lost $1,200,000,000.

mtparadis

Accounting fun.

Pharaoh

Just had to Google it:

http://www.absolutebrand.com/FASB142...impairment.htm

No way I understand any of that!

GoHogsAR

Well, it IS a two-step process. That much I understand.

DaDaDan

Accounting statements don't state the full market value of a company because they don't include future earning capacity. But, if one company buys another, the money paid for future value has to "go somewhere" on the accounting statements. This amount is carried as an asset on the balance sheet called "Goodwill."

Example: Delta buys XYZ Company for $100, but the book value of XYZ is only $20. After the purchase, Delta will have an asset on its balance sheet called Goodwill of $80. If it later becomes apparent that the value of what was bought is less than that $80 differential, Delta must decrease the value of that asset to reflect its fair value. This generates an expense on the income statement for the amount of the write down.

Delta "lost" a lot of money, but that loss wasn't a cash loss. Delta's future earnings capacity (as reflected in the market value) has decreased. Because the goodwill is a relic of Delta's prior estimation of the future earnings capacity of XYZ company (which is now a part of Delta), a large stock price decrease or the revelation other economic information may call into question that prior valuation. Delta must then perform the two steps referred to above: 1. test to see if there has been an "impairment" and then 2. measure the impairment.

In this case, the goodwill (I think) is a relic of Delta's exit from bankruptcy, but the principles are the same.

Basically, Delta made money. Combine this with the decrease in oil prices, I expect to see many of these new fees recinded "due to the decreasing cost of oil".

FOH

From their SEC filing...

http://edgar.sec.gov/Archives/edgar/..._8k-ex9901.htm

$96 million for severance certainly is cash-impacting. I have no idea what $6 million for facilities restructuring means.