Delta Airlines 2003 Annual Report Download - page 46

Table of Contents
adopted after the September 11 terrorist attacks, that prohibit passenger airlines from transporting mail weighing more than 16 ounces; such mail had
represented approximately 50% of our mail business. The decline in cargo revenues also reflects a 2% decrease due to lower domestic freight volumes and
yields. Cargo ton miles decreased 6% and cargo ton mile yield decreased 4%. Other revenues increased 29% to $526 million, primarily reflecting a 12%
increase due to higher administrative service fees and a 12% increase due to higher codeshare revenues.
Operating Expenses. Operating expenses totaled $14.6 billion for 2002, decreasing 6% from 2001. Operating capacity decreased 4% to 142 billion ASMs.
CASM fell 2% to 10.31¢. Operating expenses and CASM reflect in 2002 and 2001 (1) restructuring, asset writedowns, pension settlements and related items,
net and (2) Stabilization Act compensation. These items are discussed below.
Salaries and related costs totaled $6.2 billion in 2002, a 1% increase from 2001. This reflects a 6% increase from higher pension expense and a 5%
increase due to salary and benefit rate increases for pilots and mechanics in the June 2002 quarter. These increases were largely offset by decreases due to
workforce reductions implemented after we reduced capacity following September 11, 2001.
Aircraft fuel expense totaled $1.7 billion during 2002, a 7% decrease from 2001. Total gallons consumed decreased 5% mainly due to capacity reductions.
The average fuel price per gallon fell 2% to 66.94¢. Our fuel cost is shown net of fuel hedge gains of $136 million for 2002 and $299 million for 2001.
Approximately 56% and 58% of our aircraft fuel requirements were hedged during 2002 and 2001, respectively. For additional information about our fuel
hedge contracts, see Note 4 of the Notes to the Consolidated Financial Statements.
Depreciation and amortization expense fell 11% in 2002, reflecting a 6% decrease due to a change in our asset base and a 5% decrease due to our adoption
on January 1, 2002, of SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 requires that goodwill and certain other intangible
assets no longer be amortized (see Note 5 of the Notes to the Consolidated Financial Statements).
Contracted services expense declined 1% primarily due to a 4% decrease from fewer contract workers, partially offset by a 3% increase due to higher
security costs. Landing fees and other rents rose 7%, of which 3% was related to an increase in landing fee rates and 2% was due to lower costs in 2001
resulting from reduced operations by Comair. Due to a strike by its pilots, Comair suspended operations between March 26, 2001 and July 1, 2001, and
gradually returned to service after the strike.
Aircraft maintenance materials and outside repairs expense fell 11%, primarily reflecting a reduction in maintenance volume and materials consumption
due to the timing of maintenance events. Aircraft rent expense decreased 4%, primarily due to a reduction in the number of leased aircraft during 2002 from
our fleet simplification efforts. Other selling expenses fell 13%, of which 6% was due to lower costs associated with our mileage partnership programs and
4% was due to reduced advertising and promotion spending.
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