Delta Airlines 2003 Annual Report Download - page 47

Table of Contents
Passenger commission expense declined 40%, primarily due to a change in our commission rate structure. On March 14, 2002, we eliminated travel agent
base commissions for tickets sold in the U.S. and Canada. Passenger service expense decreased 20%, primarily due to meal service reductions.
Restructuring, asset writedowns, pension settlements and related items, net totaled $439 million in 2002 compared to $1.1 billion in 2001. Our 2002 charge
is discussed above. Our 2001 charge consists of (1) $566 million related to our 2001 workforce reduction programs; (2) $363 million from a decrease in value
of certain aircraft and other fleet related charges; (3) $160 million related primarily to discontinued contracts, facilities and information technology projects;
and (4) $30 million for the temporary carrying cost of surplus pilots and grounded aircraft. For additional information on restructuring, asset writedowns,
pension settlements and related items, net, see Note 15 of the Notes to the Consolidated Financial Statements.
Stabilization Act compensation totaled $34 million in 2002 compared to $634 million in 2001, representing amounts we recognized as compensation in the
applicable period under the Stabilization Act. For additional information about the Stabilization Act, see Note 19 of the Notes to the Consolidated Financial
Statements.
Other operating expenses decreased 11%, primarily due to declines in miscellaneous expenses such as supplies, utilities, interrupted operations expenses
and professional fees, which were partially offset by a 19% increase in expenses due to a rise in war-risk insurance rates.
Operating Loss and Operating Margin. We incurred an operating loss of $1.3 billion in 2002, compared to an operating loss of $1.6 billion in 2001.
Operating margin was (10%) and (12%) for 2002 and 2001, respectively.
Other Income (Expense). Other expense totaled $693 million during 2002, compared to other expense of $262 million in 2001. Included in these results are
the following:
• A $147 million increase in interest expense in 2002 compared to 2001 primarily due to higher levels of outstanding debt in 2002.
• A $53 million decrease in interest income in 2002 compared to 2001 due to lower interest rates and a lower average cash balance in 2002.
• A $127 million net gain in 2001 on the sale of certain investments. This primarily relates to a $111 million gain on the sale of our equity interest in
SkyWest, Inc., the parent company of SkyWest Airlines, and an $11 million gain from the sale of our equity interest in Equant, N.V., an international
data network services company.
• A $39 million charge in 2002 compared to a $68 million gain in 2001 for fair value adjustments of financial instruments accounted for under SFAS
133. This relates to derivative instruments we use in our fuel hedging program and to our equity warrants and other similar rights in certain companies.
• A $42 million loss on extinguishment of debt in 2002, which resulted from our repurchase of a portion of outstanding ESOP Notes.
40