Delta Airlines 2002 Annual Report Download - page 13

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Fuel
Delta's results of operations can be significantly impacted by changes
in the price and availability of aircraft fuel. The following table shows
Delta's aircraft fuel consumption and costs for 2000-2002.
Percent of Total
Gallons Consumed Cost (1) Average Price Operating
Year (Millions) (Millions) Per Gallon(1) Expenses
---------------- ---------- -------------- ----------------
2000 2,922 $ 1,969 67.38(cent) 13%
2001 2,649 1,817 68.60 12
2002 2,514 1,683 66.94 12
-------------
(1) Net of fuel hedge gains under Delta's fuel hedging program.
Aircraft fuel expense decreased 7% in 2002 compared to 2001. Total
gallons consumed decreased 5% mainly due to capacity reductions. The average
fuel price per gallon fell 2% to 66.94(cent). Delta's fuel cost is shown net of
fuel hedge gains of $136 million for 2002 and $299 million for 2001.
Approximately 56% and 58% of Delta's aircraft fuel requirements were hedged
during 2002 and 2001, respectively.
Delta's aircraft fuel purchase contracts do not provide material
protection against price increases or for assured availability of supplies. The
Company purchases most of its aircraft fuel from petroleum refiners under
contracts which establish the price based on various market indices. Delta also
purchases aircraft fuel on the spot market, from off-shore sources and 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.
Delta periodically enters into heating and crude oil derivative
contracts to manage the risk associated with changes in aircraft fuel prices.
Information regarding Delta's fuel hedging program is set forth under "Aircraft
Fuel Price Risk" on pages 23-24, and in Notes 3 and 4 of the Notes to the
Consolidated Financial Statements on pages 39-41, of Delta's 2002 Annual Report
to Shareowners, and is incorporated by reference.
Although Delta is currently able to obtain adequate supplies of jet
fuel, it is not possible to predict the future availability or price of aircraft
fuel. Political disruptions in 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.
Employee Matters
Railway Labor Act. Delta's relations with labor unions in the United
States are governed by the Railway Labor Act. Under the Railway Labor Act, a
labor union seeking to represent an unrepresented craft or class of employees is
required to file with the National Mediation Board ("NMB") an application
alleging a representation dispute, along with authorization cards signed by at
least 35% of the employees in that craft or class. The NMB then investigates the
dispute
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