Delta Airlines 2005 Annual Report Download - page 32

Table of Contents
plan of reorganization will be confirmed by the Bankruptcy Court, or that any such plan will be implemented successfully.
The Debtors will file with the Bankruptcy Court schedules and statements of financial affairs setting forth, among other things, the
assets and liabilities of the Debtors, subject to the assumptions filed in connection therewith. All of the schedules will be subject to
further amendment or modification. Differences between amounts scheduled by the Debtors and claims by creditors will be
investigated and resolved in connection with the claims resolution process. In light of the expected number of creditors of the Debtors,
the claims resolution process may take considerable time to complete. Accordingly, the ultimate number and amount of allowed
claims is not presently known, nor can the ultimate recovery with respect to allowed claims be presently ascertained.
Our Business Plan
Our business plan is intended to make Delta a simpler, more efficient and customer focused airline with an improved financial
condition. As part of our Chapter 11 reorganization, we are seeking $3 billion in annual financial benefits (revenue enhancements and
cost reductions) by the end of 2007 from revenue and network improvements; savings to be achieved through the Chapter 11
restructuring process; and reduced Mainline employee cost. This amount is in addition to the $5 billion in annual financial benefits we
are on schedule to achieve by the end of 2006, as compared to 2002, under the transformation plan we announced in 2004.
Components of the $3 billion in annual financial benefits we are seeking by the end of 2007 include:
Revenue and Network Productivity Improvements. Our business plan targets $1.1 billion in benefits to be realized annually through
revenue and network productivity improvements. Key initiatives include:
• achieving financial benefits from the simplification of our aircraft fleet, including retiring four fleet types by the end of
2006, two of which we retired in January 2006;
• right-sizing capacity to better meet customer demand, including utilizing smaller aircraft in domestic operations,
resulting in a reduction of domestic Mainline capacity by 15-20% as compared to 2005 due to over-capacity in the
U.S. market;
• growing international presence by shifting wide-body aircraft from domestic to international operations, resulting in an
increase of approximately 20% in international capacity in 2006 as compared to 2005 to pursue routes with greater
profit potential; and
• increasing point-to-point flying and right-sizing and simplifying our domestic hubs to achieve a greater local traffic
mix.
We are strengthening our domestic hubs and growing our international operations. As of December 1, 2005, we reduced capacity
by approximately 25% at Cincinnati, with the intention of increasing the percentage of local Cincinnati traffic from approximately
35% to nearly 50%. To respond to increased demand for service to emerging business and leisure destinations, we are increasing
international capacity by approximately 25% by the summer of 2006 in comparison to our schedule in the summer of 2005, with a
focus on routes to Europe, Latin America and the Caribbean. For example, we and, with respect to certain routes, our contract carriers
have added or announced plans to add more than 50 new international routes in the last year, including over 20 since November 2005.
In 2006, service will be added to new destinations in countries such as Denmark, Ecuador, Germany, Honduras, Hungary, Israel,
Jamaica, Mexico, Ukraine, and United Kingdom, some of which service is subject to government approval.
As part of our revenue and network productivity improvements, we announced that Song's service will merge into Delta's in May
2006. We plan to add 26 First Class seats to each of the 48 B757-200 aircraft now operating in Song's service; convert an additional
50 or more Mainline aircraft to two-class service; and expand personal digital in-flight entertainment system to the converted aircraft.
Our plan is to grow this service, referred to as Song service, to all transcontinental Mainline routes beginning in the fall of 2006 and
all routes over 1,750 miles by the end of 2007.
In-Court Restructuring. Our business plan includes a target of $970 million of cost reductions to be realized annually through in-
court restructuring initiatives such as debt relief, lease and facility savings,
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