Delta Airlines 2006 Annual Report Download - page 14

ITEM 1A. RISK FACTORS
Risk Factors Relating to Delta
We filed for reorganization under Chapter 11 of the Bankruptcy Code on September 14, 2005 and are subject to the risks and uncertainties associated
with Chapter 11 proceedings.
For the duration of our Chapter 11 proceedings, our operations, including our ability to execute our business plan, are subject to the risks and
uncertainties associated with bankruptcy. Risks and uncertainties associated with our Chapter 11 proceedings include the following:
•our ability to prosecute, confirm and consummate our proposed Plan;
•the actions and decisions of our creditors and other third parties who have interests in our Chapter 11 proceedings that may be inconsistent with
our plans;
•our ability to obtain court approval with respect to motions in the Chapter 11 proceedings prosecuted from time to time;
•our ability to obtain and maintain normal terms with vendors and service providers;
•our ability to maintain contracts that are critical to our operations; and
•risks associated with third parties seeking and obtaining court approval to terminate or shorten the exclusivity period for us to confirm our
proposed Plan, to appoint a Chapter 11 trustee or to convert the cases to Chapter 7 cases.
These risks and uncertainties could affect our business and operations in various ways. For example, negative events or publicity associated with our
Chapter 11 proceedings could adversely affect our sales of tickets and the relationship with our customers, as well as with vendors and employees, which in
turn could adversely affect our operations and financial condition, particularly if the Chapter 11 proceedings are unexpectedly protracted. Also, transactions
outside the ordinary course of business are subject to the prior approval of the Bankruptcy Court, which may limit our ability to respond timely to certain
events or take advantage of certain opportunities.
Because of the risks and uncertainties associated with our Chapter 11 proceedings, the ultimate impact that events that occur during these proceedings
will have on our business, financial condition and results of operations cannot be accurately predicted or quantified.
Our business is dependent on the price and availability of aircraft fuel. Continued periods of historically high fuel costs will continue to materially
adversely affect our operating results. Likewise, significant disruptions in the supply of aircraft fuel would materially adversely affect our operations
and operating results.
Our operating results are significantly impacted by changes in the price and availability of aircraft fuel. Fuel prices increased substantially in 2004, 2005
and 2006. In 2006, our average fuel price per gallon rose 19% to $2.04 as compared to an average price of $1.71 in 2005, which was 47% higher than our
average price of $1.16 in 2004. In 2003, our average fuel price per gallon was 81.78¢. The fuel costs represented 25%, 23%, and 16% of our operating
expenses in 2006, 2005 and 2004, respectively. These increasing costs have had a significant negative effect on our results of operations and financial
condition.
Our ability to pass along the increased costs of fuel to our customers is limited by the competitive nature of the airline industry. We often have not been
able to increase our fares to fully offset the effect of increased fuel costs in the past and we may not be able to do so in the future.
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