Delta Airlines 2002 Annual Report Download - page 167

During the December 2002 quarter, we decided to accelerate the
retirement of 37 owned EMB-120 aircraft to achieve costs savings and
operating efficiencies. We plan to remove these aircraft from service
beginning in 2003. The accelerated retirement of these aircraft as well
as a reduction in their estimated future cash flows and fair values
resulted in an impairment charge.
During 2002, we recorded the following impairment charges for our owned
B-727, MD-11 and EMB-120 aircraft:
Used in Operations Held for Sale
-------------------------- -----------------------
No. of No. of Spare
(dollars in millions) Writedown(1) Aircraft Writedown Aircraft Subtotal Parts(2) Total
--------------------- ------------ -------- --------- -------- -------- -------- -----
B-727 $ 24 23 $ 37 36 $ 61 $ -- $ 61
MD-11 141 8 -- -- 141 18 159
EMB-120 27 37 -- -- 27 4 31
----- ---- ----- ---- -----
Total $ 192 $ 37 $ 229 $ 22 $ 251
===== ==== ===== ==== =====
(1) The fair value of aircraft used in operations was determined using
third-party appraisals.
(2) Charges related to the writedown of the related spare parts inventory
to their net realizable value.
- WORKFORCE REDUCTIONS
We recorded a $127 million charge related to our decision in October
2002 to reduce staffing by up to approximately 8,000 jobs across all
work groups, excluding pilots, to further reduce operating costs. We
offered eligible non-pilot employees several programs, including
voluntary severance, leaves of absence and early retirement.
Approximately 3,900 employees elected to participate in one of these
programs. Involuntary reductions will affect up to approximately 4,000
employees and are expected to be completed by May 2003.
The total charge includes (1) $51 million for costs associated with the
voluntary programs that were recorded as special termination benefits
under our pension and postretirement medical benefit obligations (see
Note 11) and (2) $76 million for severance and related costs.
- SURPLUS PILOTS AND GROUNDED AIRCRAFT
We recorded $93 million in expenses for the temporary carrying cost of
surplus pilots and grounded aircraft related to our capacity reductions
which became effective on November 1, 2001. This cost also includes
related requalification training and relocation costs for certain
pilots.
- OTHER
We also recorded (1) a $23 million gain related to the adjustment of
certain prior year restructuring reserves based on revised estimates of
remaining costs; (2) a $14 million charge associated with our decision
to close certain leased facilities; and (3) a $3 million charge related
to other items.
2001
In 2001, we recorded charges totaling $1.1 billion ($695 million net of tax,
or $5.63 diluted earnings per share) in asset write-downs, restructuring and
related items, net on our Consolidated Statements of Operations, as follows:
- WORKFORCE REDUCTIONS
We recorded a $566 million charge relating to our decision in 2001 to
reduce staffing across all workgroups due to the capacity reductions we
implemented as a result of the September 11 terrorist attacks. We
offered eligible employees several programs, including voluntary
severance, leaves of absence and early retirement. Approximately 10,000
employees elected to participate in one of the voluntary programs.
Involuntary reductions were expected to affect up to approximately
1,700 employees - up to 1,400 pilots and 300 employees from other
workgroups.
The total charge includes $475 million for costs associated with the
early retirement and certain voluntary leave of absence programs which
are recorded as special termination benefits under our pension and
postretirement medical benefit obligations (see Note 11). The remaining