Delta Airlines 2006 Annual Report Download - page 35

Aircraft rent.The decline in aircraft rent expense is primarily due to a 29% decrease from the renegotiation and rejection of certain leases in connection
with our restructuring efforts and an 8% decrease from the change in how we classify ASA’s expenses as a result of its sale to SkyWest.
Restructuring, asset writedowns, pension settlements and related items, net.For 2006, restructuring, asset writedowns, pension settlements and related
items, net totaled a $13 million charge, primarily due to the following:
•Workforce Reduction.A $29 million charge related to our decision in 2005 to reduce staffing by approximately 7,000 to 9,000 jobs by
December2007, which has been substantially completed. This charge was partially offset by a $21 million reduction in accruals associated with
prior year workforce reduction programs.
For 2005, restructuring, asset writedowns, pension settlements and related items, net totaled an $888 million charge consisting of the following:
•Pension curtailment charge.A $447 million curtailmentcharge related to the Pilot and Non-pilot Plans. This charge relates to the freeze of
service accruals under the Pilot Plan effective December 31, 2004, and the impact of the planned reduction of 6,000 to 7,000 jobs announced in
November 2004 on the Non-pilot Plan (see Note 10 of the Notes to the Consolidated Financial Statements).
•Pension settlements.$388 million in settlement charges primarilyrelated to the Pilot Plan due to a significant increase in pilot retirements and
lump sum distributions from plan assets (see Note 10 of the Notes to the Consolidated Financial Statements).
•Workforce reduction.A $46 million charge related to our decision in 2005 to reduce staffing by approximately 7,000 to 9,000 jobs by December
2007, which has been substantially completed. This charge was offset by a net $3 million reduction in accruals associated with prior year
workforce reduction programs.
•Asset charges.A $10 million charge related tothe removal from service of six B-737-200 aircraft prior to their lease expiration dates.
Other.The decrease in other operating expense primarily reflects (1) a 12% decrease due to an adjustment related to certain nonincome tax reserves, (2) a
10% decrease from certain Accounting Adjustments discussed above and (3) an 8% decrease related to the change in how we classify ASA’s expenses as a
result of its sale to SkyWest.
Operating Income (Loss) and Operating Margin
We reported operating income of $58 million for the year ended December 31, 2006, compared to an operating loss of $2.0 billion for the year ended
December 31, 2005. Operating margin, which is the ratio of operating income (loss) to operating revenues, was less than 1% and (12%) for 2006 and 2005,
respectively.
Other (Expense) Income
Other expense, net for 2006 was $820 million, compared to $974 million for 2005. This change is substantially attributable to a 16%, or $162 million,
decrease in interest expense which was partially offset by a $19 million increase in miscellaneous, net expense primarily associated with our fuel hedge
positions.
The reduction in interest expense is primarily attributable to a $206 million decrease due to the accounting treatment of certain interest charges under our
Chapter 11 proceedings in accordance with SOP 90-7 (see Note 2 of the Notes to the Consolidated Financial Statements). The decrease in interest expense
was partially offset by a $97 million increase from a higher level of debt outstanding and higher interest rates.
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