Delta Airlines 2006 Annual Report Download - page 29

From an operational perspective, we reported operating income of $58 million in 2006, a $2.1 billion improvement in operating results compared to 2005
and our first annual operating profit since 2000. This improvement is due in large part to revenue increases and cost reductions we have achieved during our
Chapter 11 reorganization from revenue and network productivity improvements, in-court restructuring initiatives and labor cost reductions.
During 2006, we also strengthened our liquidity. Cash and cash equivalents and short-term investments totaled $2.6 billion at December 31, 2006,
compared to $2.0 billion at December 31, 2005.
Our Business Plan
Our reorganization in Chapter 11 has involved a fundamental transformation of our business. Shortly after the Petition Date, we outlined a business plan
intended to make Delta a simpler, more efficient and more customer focused airline with an improved financial condition.
Restructuring Business Plan
As part of the Chapter 11 reorganization process, we were seeking $3.0 billion in annual financial improvements by the end of 2007. As of December 31,
2006, we reached that goal and these improvements are reflected in our Consolidated Financial Statements for 2006. We expect we will achieve additional
financial improvements in 2007. The $3.0 billion in annual financial improvements under our restructuring business plan is a result of (1) revenue and
network productivity improvements, (2) in-court restructuring initiatives and (3) labor cost reductions. Some of our accomplishments in these areas are
described below.
Revenue and Network Productivity Improvements. Key initiatives accomplished by the end of 2006 in the area of revenue and network productivity
improvements include:
•simplifying our fleet, including retiring four aircraft types;
•right-sizing capacity to better meet customer demand, including utilizing smaller aircraft in domestic operations, which reduced domestic
mainline capacity by 16% in 2006 compared to 2005;
•growing our international presence by shifting wide-body aircraft from domestic to international operations, which increased international
capacity by 21% in 2006 compared to 2005; and
•increasing point-to-point flying and right-sizing and simplifying our domestic hubs to achieve a greater local traffic mix.
We strengthened our domestic hubs and are continuing to increase international service. For example, in 2006, we added more than 50 new daily flights
to 20 cities in 18 countries in Europe and other countries such as India and Israel, capitalizing on our international gateways at Hartsfield-Jackson Atlanta
International Airport, which is the world’s largest hub, and John F. Kennedy International Airport in New York. In addition, we offer more than 600 weekly
flights to 58 destinations in Latin America and the Caribbean.
In-Court Restructuring Initiatives. Our business plan includes annual cost reductions through in-court initiatives such as debt restructurings, lease and
facility restructurings, aircraft lease renegotiations and rejections, vendor contract renegotiations and retiree healthcare benefit modifications. Some of our
accomplishments through the end of 2006 include:
•restructuring our fleet by rejecting, returning or selling approximately 188 aircraft; and
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