Delta Airlines 2003 Annual Report Download - page 22

Table of Contents
The airline industry is highly competitive, and if we cannot successfully compete in the marketplace, our business, financial condition and operating
results may be materially adversely affected.
We face significant competition with respect to routes, services and fares. Our domestic routes are subject to competition from both new and established
carriers, some of which have substantially lower costs than we do and provide service at lower fares to destinations served by us. Our revenues continue to be
adversely impacted by the growth of the low-cost carriers with which we compete in most of our markets. Significant expansion by low-cost carriers to our
hub airports could have an adverse impact on our business. We also face increasing competition in smaller to medium-sized markets from rapidly expanding
regional jet operators. In addition, we compete with foreign carriers, both on interior U.S. routes, due to marketing and codesharing arrangements, and in
international markets. If we are not able to realign our cost structure to compete with that of other carriers, or if fare reductions are not offset by higher yields,
our business, financial condition and operating results may be materially adversely affected.
If we continue to experience significant losses without successfully reducing our operating expenses, we may be unable to maintain sufficient liquidity
to provide for our operating needs.
We reported a net loss of $773 million for the year ended December 31, 2003, or $6.40 basic and diluted loss per common share, compared to a net loss of
$1.3 billion for the year ended December 31, 2002, or $10.44 basic and diluted loss per common share. We have recorded a substantial net loss for three
consecutive years. Our revenue and cost challenges are expected to continue for the immediate term, and we expect to report a net loss of approximately
$400 million for the March 2004 quarter. We do not expect significant improvement in the revenue environment in 2004 and expect significant cost pressures
related to aircraft fuel, pension and interest expenses to continue.
Although we are pursuing profit improvement initiatives aimed at lowering our costs and enhancing our revenues, these initiatives may not be sufficient.
Furthermore, our pilot labor costs are substantially higher than our competitors' pilot labor costs. Although we are currently in discussions with ALPA in an
attempt to reduce our pilot labor costs, we cannot predict the outcome of those discussions. To the extent that we deplete our cash reserves and are unable to
access the capital markets for long-term capital spending requirements or short-term liquidity needs, we will be unable to fund our obligations and sustain our
operations.
Our ability to access the capital markets is partially dependent on our credit ratings. A further decline in our ratings would increase our borrowing costs
and could hinder our ability to operate our business.
Our business is highly dependent on our ability to access the capital markets. Our access to, and our costs of borrowing in, these markets depend on our
credit ratings. Since September 11, 2001, our issuer credit ratings have been lowered to B3 by Moody's Investors Service, Inc. ("Moody's"), to B+ by Standard
& Poor's Rating Services ("S&P") and to B by Fitch Ratings ("Fitch"). Our senior unsecured long-term debt is rated Caa2 by Moody's, B- by S&P and B by
Fitch. S&P and Fitch have each stated that their ratings outlook for our senior unsecured debt is negative, while Moody's has stated that its ratings outlook is
stable. Our credit ratings may be lowered further or withdrawn. While we do not have debt obligations that accelerate as a result of
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