Delta Airlines 2003 Annual Report Download - page 40

Table of Contents
competitive pilot cost structure, but we cannot predict the outcome of these discussions. Our collective bargaining agreement with ALPA becomes amendable
on May 1, 2005.
The U.S. government is providing U.S. airlines with war-risk insurance. This coverage extends through August 2004, with a possible extension to
December 31, 2004, at the discretion of the Secretary of Transportation. If the U.S. government fails to renew this insurance, there can be no assurance that
commercially provided war-risk insurance coverage will be adequate to protect our risk of loss from future acts of terrorism or will be provided on terms that
will not have a material adverse impact on our business, financial condition and results of operations.
Initiatives. We implemented a profit improvement initiative program aimed at lowering our costs and increasing our revenues to compete in the current
business environment and over the long term. Our actions under this program have included, among other things, (1) the transformation of the passenger
check-in process to utilize more self-service options such as automated ticketing kiosks, DeltaDirect phones and check-in via delta.com; (2) selling food on
flights and changing catering processes; (3) new crew scheduling technology for pilots and flight attendants; (4) the restructuring of operations at our Salt
Lake City and Dallas/Fort Worth hubs; and (5) our marketing alliance with Continental Airlines and Northwest Airlines. While we believe we have made
progress under this program, we must continue to reduce our costs to compete in the existing business environment.
At the end of 2003, we began a reassessment of our operating and business strategy. The purposes of this review include assessing our competitive
effectiveness, determining the best use of our available resources and identifying strategic initiatives that we might pursue to improve our performance. We
expect to complete this review by July 2004.
Liquidity. Due to the depressed revenue environment and significant cost pressures, we borrowed $2.2 billion of debt in 2003. The net proceeds of these
transactions were primarily used to finance aircraft, repay certain debt obligations and increase our liquidity. All of these borrowings were secured by aircraft
or other assets, except for our issuance of $350 million principal amount of 8.00% Convertible Senior Notes. In 2002 and 2001, we borrowed $2.6 billion and
$2.3 billion, respectively, of debt, all of which was secured by aircraft.
At December 31, 2003, we had cash and cash equivalents totaling $2.7 billion. On February 6, 2004, we issued $325 million principal amount of 2-7/8%
Convertible Senior Notes. We do not have any undrawn lines of credit. However, we have available to us long-term secured financing commitments that we
may use only to finance a substantial portion of regional jet aircraft delivered to us through 2004 ("RJ Commitments"). Most of our owned aircraft are
encumbered and those that are not are less attractive to lenders because they are not eligible for mortgage financing under Section 1110 of the U.S.
Bankruptcy Code, are older aircraft types and/or are aircraft types which are no longer manufactured. Substantially all of our spare mainline aircraft engines,
and a substantial portion of our mainline aircraft spare parts, are also encumbered.
Absent factors outside our control, we believe that our annual 2004 cash flows from operations will be sufficient to fund our daily operations, including
(1) approximately
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