Delta Airlines 2002 Annual Report Download - page 115

Other operating expenses decreased 11% primarily due to declines in
miscellaneous expenses such as supplies, utilities, interrupted operation
expenses and professional fees, which were partially offset by a 19% increase in
expenses due to a rise in war and terrorism risk insurance rates.
OPERATING INCOME (LOSS) AND OPERATING MARGIN
We incurred an operating loss of $1.3 billion in 2002, compared to an operating
loss of $1.6 billion in 2001. Operating margin was (10%) and (12%) for 2002 and
2001, respectively. Excluding asset writedowns, restructuring and related items,
net, and Stabilization Act compensation discussed above, we incurred an
operating loss of $904 million in 2002, compared to an operating loss of $1.1
billion in 2001. Operating margin excluding these items was (7%) and (8%) for
2002 and 2001, respectively.
OTHER INCOME (EXPENSE)
Other expense totaled $693 million during 2002, compared to other expense of
$262 million in 2001. Included in these results are the following:
- A $127 million gain in 2001 on the sale of certain investments. This
primarily relates to a $111 million gain on the sale of our equity
interest in SkyWest, Inc., the parent company of SkyWest Airlines, and
an $11 million gain from the sale of our equity interest in Equant,
N.V., an international data network services company.
- A $39 million charge in 2002 compared to a $68 million gain in 2001 for
fair value adjustments of financial instruments accounted for under
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133). This relates to derivative instruments we use
in our fuel hedging program and to our equity warrants and other
similar rights in certain companies.
- A $42 million charge for the extinguishment of debt and a $13 million
loss for the reduction in value of certain investments in 2002.
The change in other income (expense) is also attributable to the following:
- Interest expense increased $147 million in 2002 compared to 2001,
primarily due to higher levels of outstanding debt.
- Interest income decreased $53 million in 2002 due to lower interest
rates and a lower average cash balance compared to 2001.
- Miscellaneous income, net was $1 million in 2002 compared to a $47
million expense in 2001, due primarily to increased earnings from our
equity investment in WORLDSPAN, L.P. (Worldspan), a computer
reservations system partnership.
2001 Compared to 2000
NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE
We recorded a consolidated net loss of $1.2 billion ($9.99 diluted EPS) in 2001
and consolidated net income of $828 million ($6.28 diluted EPS) in 2000.
OPERATING REVENUES
Operating revenues were $13.9 billion in 2001, decreasing 17% from $16.7 billion
in 2000. Passenger revenues fell 17% to $13.0 billion. RPMs declined 10% on a
capacity decrease of 5%, while passenger mile yield declined 8% to 12.74(cents).
These decreases were primarily the result of the effects of the terrorist
attacks on September 11, the slowing U.S. and world economies and pilot labor
issues at both Delta and Comair.
NORTH AMERICAN PASSENGER REVENUES
North American passenger revenues fell 19% to $10.6 billion. RPMs decreased 11%
on a capacity decrease of 6%, while passenger mile yield decreased 9%. These
decreases resulted from the September 11 terrorist attacks, the slowing economy
and pilot labor issues.
INTERNATIONAL PASSENGER REVENUES
International passenger revenues decreased 6% to $2.3 billion. RPMs fell 6%
mainly due to the terrorist attacks on September 11 and the slowing U.S. and
world economies. Passenger mile yield remained flat while capacity increased 2%,
reflecting our international expansion, particularly in Latin American markets.
CARGO AND OTHER REVENUES
Cargo revenues decreased 13% to $506 million. This reflects an 8% decline due to
lower mail revenues resulting from the implementation of new FAA restrictions on