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DELTA AIR LINES INC /DE/ (DAL)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 03/02/2009
Filed Period 12/31/2008

Table of contents

  • Page 1
    DELTA AIR LINES INC /DE/ (DAL) 10-K Annual report pursuant to section 13 and 15(d) Filed on 03/02/2009 Filed Period 12/31/2008

  • Page 2
    ... 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2008 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-5424 DELTA AIR LINES, INC...

  • Page 3
    Part III of this Form 10-K incorporates by reference certain information from the registrant's definitive Proxy Statement for its Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission.

  • Page 4
    ...of Contents Index to Financial Statements TABLE OF CONTENTS Page Forward-Looking Information PART I ITEM 1. BUSINESS General Description Airline Operations Frequent Flyer Programs Cargo MRO Fuel Competition Regulatory Matters Employee Matters Executive Officers Additional Information ITEM 1A. RISK...

  • Page 5
    ... COMPENSATION SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES...

  • Page 6
    ... see the cautionary statements contained in "Risk Factors Relating to Delta" and "Risk Factors Relating to the Airline Industry" in "Item 1A. Risk Factors" of this Form 10-K. All forward-looking statements speak only as of the date made, and we undertake no obligation to publicly update or revise...

  • Page 7
    ... Financial Statements PART I ITEM 1. BUSINESS General Description We are the world's largest airline, providing scheduled air transportation for passengers and cargo throughout the United States and around the world. On October 29, 2008, a subsidiary of ours merged with and into Northwest Airlines...

  • Page 8
    ..., reciprocal frequent flyer and lounge programs and coordinated cargo operations. Continental has provided written notice of the termination of its membership in SkyTeam effective October 24, 2009. In 2002, Delta, Air France, Alitalia, CSA Czech Airlines and Korean Air received limited antitrust...

  • Page 9
    ... and route networks while increasing the number of domestic and international connecting passengers using the carriers' route networks. Continental has provided written notice to Delta and NWA of the termination of its participation in marketing alliances with Delta and NWA effective July 31, 2009...

  • Page 10
    ... program, miles are earned by flying on NWA or its alliance partners and by using the services of program participants for such things as credit card use, hotel stays, car rentals and other activities. NWA sells mileage credits to alliance and non-airline program participants. WorldPerks members...

  • Page 11
    ... 31, 2008. Includes the operations under contract carrier agreements with regional air carriers. Net of fuel hedge (losses) gains under our fuel hedging program of ($65) million, $51 million and ($108) million for 2008, 2007 and 2006, Total operating expense for 2008 reflects a $7.3 billion non-cash...

  • Page 12
    ... relating to air carrier flight operations, including airline operating certificates, control of navigable air space, flight personnel, aircraft certification and maintenance and other matters affecting air safety. Authority to operate international routes and international codesharing arrangements...

  • Page 13
    ..., are generally governed by the Railway Labor Act. Environmental matters are regulated by various federal, state, local and foreign governmental entities. Privacy of passenger and employee data is regulated by domestic and foreign laws and regulations. Fares and Rates Airlines set ticket prices in...

  • Page 14
    ... between one or more jurisdictions in which we operate flights, which could result in multiple taxation or permitting requirements from multiple jurisdictions. Certain credits may be available to reduce the costs of permits in order to mitigate the impact of such regulations on consumers. At this...

  • Page 15
    ...by the Railway Labor Act. Under the Railway Labor Act, a labor union seeking to represent an unrepresented craft or class of employees is required to file with the National Mediation Board (the "NMB") an application alleging a representation dispute, along with authorization cards signed by at least...

  • Page 16
    .... Approximate Number of Employees Represented Employee Group Union Date on which Collective Bargaining Agreement Becomes Amendable Delta Pilots (including pre-merger NWA pilots) Delta Flight Superintendents (Dispatchers) NWA Dispatchers NWA Fleet Service, Passenger Service, and Office/Clerical...

  • Page 17
    ...related Technical Operations employees have been resolved. Executive Officers Richard H. Anderson, Age 53: Chief Executive Officer of Delta since September 1, 2007. Executive Vice President of UnitedHealth Group and President of its Commercial Services Group (December 2006 to August 2007); Executive...

  • Page 18
    ... President-General Counsel of Northwest (1990 - 1994); Vice President-General Counsel and Secretary of Continental Airlines (1986 - 1990). Additional Information We make available free of charge on our website our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports...

  • Page 19
    ...and other intangible assets and $1.1 billion in primarily non-cash merger-related charges. Including these charges, fuel costs accounted for 28% of total operating expense. These increasing costs have had a significant negative effect on our results of operations and financial condition. Our ability...

  • Page 20
    ... lower investment asset returns and values, including in the defined benefit pension plans that we sponsor for eligible employees and retirees. Our funding obligations for these plans, which have been frozen for future benefit accruals, are governed by the Employee Retirement Income Security Act...

  • Page 21
    ...their collective bargaining agreements, those carriers may be subject to work interruptions or stoppages, subject to the requirements of the Railway Labor Act, which could have a negative impact on our operations. The ability to realize fully the anticipated benefits of our merger with Northwest may...

  • Page 22
    ... such holdbacks likely would have a material adverse effect on our liquidity. We sell a substantial number of tickets that are paid for by customers who use credit cards. Our credit card processing agreements provide that no future holdback of receivables or reserve is required except in certain 17

  • Page 23
    ...NOLs that are currently subject to limitation. The amount of the annual limitation generally is equal to the value of the stock of the corporation immediately prior to the ownership change multiplied by the adjusted federal tax-exempt rate, set by the Internal Revenue Service. Limitations imposed on...

  • Page 24
    ...and new regulations may increase our operating costs. Airlines are subject to extensive regulatory and legal compliance requirements that result in significant costs. For instance, the FAA from time to time issues directives and other regulations relating to the maintenance and operation of aircraft...

  • Page 25
    ... 2001, the U.S. government has been providing U.S. airlines with war-risk insurance to cover losses, including those resulting from terrorism, to passengers, third parties (ground damage) and the aircraft hull. The coverage currently extends through March 31, 2009 and the Secretary of Transportation...

  • Page 26
    Table of Contents Index to Financial Statements ITEM 2. PROPERTIES Flight Equipment Our active aircraft fleet at December 31, 2008 is summarized in the following table: Current Fleet Aircraft Type Owned Capital Lease Operating Lease Total Average Age Passenger Aircraft: B-737-700 B-737-800 B-747...

  • Page 27
    ... Index to Financial Statements Our purchase commitments (firm orders) for aircraft, as well as options to purchase additional aircraft, as of December 31, 2008 are shown in the following tables: Delivery in Calendar Years Ending Aircraft on Firm Order(3) 2009 2010 2011 2012 After 2012 Total B-737...

  • Page 28
    .../St. Paul International Airport and Seattle-Tacoma International Airport. Our aircraft maintenance facility leases generally require us to pay the cost of providing, operating and maintaining such facilities, including, in some cases, amounts necessary to pay debt service on special facility bonds...

  • Page 29
    ...to Financial Statements Project), $397 million of which were then outstanding; and (2) the $19 million Kenton County Airport Board Special Facilities Revenue Bonds, 1992 Series B (Delta Air Lines, Inc. Project), $16 million of which were then outstanding. The Cincinnati Airport Settlement Agreement...

  • Page 30
    ... to Financial Statements PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the New York Stock Exchange and has traded under the ticker symbol "DAL" since May 3, 2007. Shares...

  • Page 31
    ... of Contents Index to Financial Statements Stock Performance Graph The following graph compares the cumulative total returns during the period from April 30, 2007 to December 31, 2008 of our common stock to the Standard & Poor's 500 Stock Index and the Amex Airline Index. The comparison assumes...

  • Page 32
    ...tax obligations. Neither specify a maximum number of shares that can be withheld for this purpose. See Note 11 and Note 12 of the Notes to the Consolidated Financial Statements elsewhere in this Form 10-K for more information about Delta's Plan of Reorganization and the 2007 Performance Compensation...

  • Page 33
    ...Bankruptcy Code (the "Bankruptcy Code"). On April 30, 2007 (the "Effective Date"), the Delta Debtors emerged from bankruptcy. Upon emergence from Chapter 11, we adopted fresh start reporting in accordance with American Institute of Certified Public Accountants' Statement of Position 90-7, "Financial...

  • Page 34
    ... Ended December 31, 2008(2) Revenue passenger Available seat miles (millions)(1) Passenger mile yield(1) Passenger revenue per available seat mile(1) Operating cost per available seat mile(1) Passenger load factor(1) Fuel gallons consumed (millions)(1) Average price per fuel gallon, net of hedging...

  • Page 35
    ...Merger") with Northwest, creating the world's largest airline. We now offer service to 378 worldwide destinations in 66 countries and expect to serve more than 170 million passengers each year. Combined with the reach of SkyTeam, our global airline alliance, and our codeshare partners, our customers...

  • Page 36
    ... prices remain at their current levels, we will realize significant savings in fuel costs compared to 2008. We expect higher pension expense in 2009 compared to 2008 from a decline in the value of our defined benefit plan assets driven by market conditions and increases in certain other operating...

  • Page 37
    ...Predecessor" refer to Delta prior to May 1, 2007. Upon emergence from Chapter 11, we adopted fresh start reporting in accordance with American Institute of Certified Public Accountants' Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90...

  • Page 38
    ...'s operations, (2) fare increases in response to increased fuel charges, (3) pricing and scheduling initiatives and (4) our increased service to international destinations. The increase in passenger revenue reflects a rise of 6% and 7% in passenger mile yield and passenger revenue per available seat...

  • Page 39
    ...and related taxes Salaries and related costs Contract carrier arrangements Depreciation and amortization Aircraft maintenance materials and outside repairs Contracted services Passenger commissions and other selling expenses Landing fees and other rents Passenger service Aircraft rent Profit sharing...

  • Page 40
    ... plan in 2007. We did not record any profit sharing expense in 2008. This plan provides that, for each year in which we have an annual pre-tax profit (as defined), we will pay at least 15% of that profit to eligible employees. Operating Income and Operating Margin We reported an operating loss...

  • Page 41
    ... Reserve Primary Fund and insured auction rate securities Mark-to-market adjustments on the ineffective portion of our fuel hedge contracts Northwest non-operating expense from October 30 to December 31, 2008 Other Total miscellaneous, net Reorganization Items, Net Reorganization items, net totaled...

  • Page 42
    ... Start Adjustments consist of the following: Increase (Decrease) to Pre-tax Income for 2007 (in millions) Operating revenue Operating expense Aircraft fuel expense and related taxes Depreciation Amortization Aircraft maintenance materials and outside repairs Other Total operating expense Operating...

  • Page 43
    ... expense as the underlying fuel hedge contracts were settled. However, as required by fresh start reporting, accumulated other comprehensive loss prior to emergence from Chapter 11 was reset to zero. Accordingly, Fresh Start Adjustments resulted in a non-cash increase to fuel expense of $46 million...

  • Page 44
    ... and baggage handling fees, (3) growth in aircraft maintenance and staffing services to third parties and (4) the negative impact of Accounting Adjustments recorded in 2006 as discussed above. Increase (Decrease) Combined Year Ended December 31, 2007 Passenger Revenue Year Ended December 31, 2007...

  • Page 45
    ... Contracted services Aircraft maintenance materials and outside repairs Passenger commissions and other selling expenses Landing fees and other rents Passenger service Aircraft rent Profit sharing Restructuring, asset writedowns, pension settlements and related items, net Other Total operating...

  • Page 46
    ...-tax profit (as defined), we will pay at least 15% of that profit to eligible employees. Based on our pre-tax earnings, we accrued $158 million under the profit sharing plan for 2007. Operating Income and Operating Margin We reported operating income of $1.1 billion and $58 million for 2007 and 2006...

  • Page 47
    ... non-pilot retired employees reducing their postretirement healthcare benefits. Income Tax (Provision) Benefit For 2007, we recorded an income tax provision totaling $207 million. For additional information about this provision, see "Results of Operations- 2008 Compared to 2007 Combined." For 2006...

  • Page 48
    ...in advance ticket sales due to the slowing economy and (5) the payment of $158 million in 2008 under our broad-based employee profit sharing plan related to 2007. Cash used in operating activities was partially offset by cash flows driven by a $3.5 billion increase in operating revenue, $2.0 billion...

  • Page 49
    ... following the footnotes. Contractual Obligations by Year (in millions) 2009 2010 2011 2012 2013 After 2013 Total Long-term debt(1) Contract carrier obligations(2) Operating lease payments(3) Aircraft order commitments(4) Capital lease obligations(5) Other purchase obligations(6) Other commitments...

  • Page 50
    ... bargaining agreements, fund pension plans (as discussed below) purchase capacity under contract carrier arrangements (as discussed below), settle tax contingency reserves (as discussed below) and pay credit card processing fees and fees for other goods and services, including those related to fuel...

  • Page 51
    ... regional air carriers operate some or all of their aircraft using our flight designator codes, and we control the scheduling, pricing, reservations, ticketing and seat inventories of those aircraft and retain the revenues associated with those flights. We pay those airlines an amount, as defined in...

  • Page 52
    ... with our frequent flyer programs was $5.1 billion. A hypothetical 1% change in our outstanding number of miles estimated to be redeemed would result in a $49 million impact on our deferred revenue liability. Purchase Accounting Measurements. On the Closing Date, Northwest revalued its assets and...

  • Page 53
    ... assets included significant unobservable inputs, which generally include a five-year business plan, 12-months of historical revenues and expenses by city pair, projections of available seat miles, revenue passenger miles, load factors, and operating costs per available seat mile and a discount rate...

  • Page 54
    ... cash flows, supported with a market-based valuation. We determined that goodwill was impaired and recorded a non-cash charge of $6.9 billion for the year ended December 31, 2008. In estimating fair value, we based our estimates and assumptions on the same valuation techniques employed and levels...

  • Page 55
    ... as required by SFAS 144, we group assets at the fleet type level (the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of passenger yield, fuel costs, labor costs and other relevant factors. We estimate aircraft fair values using...

  • Page 56
    ...'s financial position, financial performance and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning on January 1, 2009. We currently provide significant information about our hedging activities and use of derivatives in our quarterly and annual filings. Accordingly...

  • Page 57
    ...tax provision. SFAS 141R is effective for fiscal years beginning on January 1, 2009. For additional information regarding SFAS 141R, see Note 9 of the Notes to the Consolidated Financial Statements. Glossary of Defined Terms ASM-Available Seat Mile. A measure of capacity. ASMs equal the total number...

  • Page 58
    ... Index to Financial Statements For 2008, aircraft fuel and related taxes, including our Contract Carriers, accounted for 28% of our total operating expense. Aircraft fuel and related taxes increased 53% in 2008 compared to 2007 primarily due to higher average fuel prices. Fuel prices averaged $3.16...

  • Page 59
    ... Financial Statements As of January 31, 2009, our open fuel hedging position, excluding contracts we terminated early for the years ending December 31, 2009 and 2010 is as follows: Weighted Average Contract Strike Price per Gallon Percentage of Projected Fuel Requirements Hedged Contract Fair Value...

  • Page 60
    ... our Merger with Northwest. As permitted by the Securities and Exchange Commission, management has elected to exclude Northwest from management's assessment of the effectiveness of our internal control over financial reporting for the year ended December 31, 2008. Management's Annual Report on...

  • Page 61
    ... reporting as of December 31, 2008. Assets and revenues of Northwest represent 45% and 9%, respectively, of our total assets and total revenues as reported in our consolidated financial statements as of and for the year ended December 31, 2008. Management conducted an evaluation of the effectiveness...

  • Page 62
    ... the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Delta Air Lines, Inc. as of December 31, 2008 (Successor) and 2007 (Successor), and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the year ended...

  • Page 63
    ... delivery of shares (including shares surrendered or withheld for payment of the exercise price of an award or taxes related to an award), then such shares will again be available for issuance under the 2007 Performance Plan. In addition to the 16,285,675 options outstanding, 17,650,363 shares...

  • Page 64
    ... and Mr. Anderson," and "Proposal 1-Election of Directors" and "Agreements Between Northwest and its Board Members and Officers" in our Proxy Statement and is incorporated by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information required by this item is set forth under the heading...

  • Page 65
    ... Statements. All other financial statement schedules are not required or are inapplicable and therefore have been omitted. (3). The exhibits required by this item are listed in the Exhibit Index to this Form 10-K. The management contracts and compensatory plans or arrangements required to be filed...

  • Page 66
    ..., on the 2nd day of March, 2009. DELTA AIR LINES, INC By: /S/ RICHARD H. ANDERSON Richard H. Anderson Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on the 2nd day of March, 2009 by the following persons on behalf of...

  • Page 67
    ... Capital, as syndication agent and as joint bookrunner, and Credit Suisse Securities (USA) LLC and C.I.T. Leasing Corporation, as codocumentation agents (Filed as Exhibit 10.1(b) to Delta's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007).* Transaction Framework Agreement among...

  • Page 68
    ... 2, 2009. Description of Certain Benefits of Members of the Board of Directors and Executive Officers. The Delta Air Lines, Inc. 2008 Long Term Incentive Program (Filed as Exhibit 99.1 to Delta's Current Report on Form 8-K filed on February 8, 2008).* Model Award Agreement for the Delta Air Lines...

  • Page 69
    ... Non-Qualified Stock Options Granted to Directors under the Northwest Airlines Corporation 2007 Stock Incentive Plan (Filed as Exhibit 10.6 to Northwest's Quarterly Report on Form 10-Q for the quarter ended March 31, 2008).* Form of Offer of Employment dated October 31, 2008 between Delta Air Lines...

  • Page 70
    ... Contents Index to Financial Statements INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (Ernst & Young LLP) Consolidated Balance Sheets-December 31, 2008 and 2007 Consolidated Statements of Operations for the year ended December 31, 2008, the eight...

  • Page 71
    ... Index to Financial Statements REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Delta Air Lines, Inc. We have audited the accompanying consolidated balance sheets of Delta Air Lines, Inc. (the Company) as of December 31, 2008 (Successor) and 2007...

  • Page 72
    ... assets Total other assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt and capital leases Air traffic liability Frequent flyer deferred revenue Accounts payable Hedge derivatives liability Accrued salaries and related benefits Taxes...

  • Page 73
    ... Ended Year Ended April 30, December 31, 2007 2006 (in millions, except per share data) Operating Revenue: Passenger: Mainline Regional carriers Total passenger revenue Cargo Other, net Total operating revenue Operating Expense: Aircraft fuel and related taxes Salaries and related costs Contract...

  • Page 74
    ... of cash due to Chapter 11 filing Non-cash transactions: Shares of Delta common stock issued or issuable in connection with the Merger Flight equipment Flight equipment under capital leases Debt extinguishment from aircraft renegotiation Debt discount on American Express Agreement (1,281...

  • Page 75
    The accompanying notes are an integral part of these Consolidated Financial Statements. F-5

  • Page 76
    ... equity awards (Treasury shares withheld for payment of taxes, $20.56 per share)(1) Balance at December 31, 2007 (Successor) Comprehensive loss: Net loss Other comprehensive loss Total comprehensive loss Shares of common stock issued pursuant to Delta's Plan of Reorganization Shares of common stock...

  • Page 77
    ... the world's largest airline, providing scheduled air transportation for passengers and cargo throughout the United States ("U.S.") and around the world. On October 29, 2008 (the "Closing Date"), a wholly-owned subsidiary of Delta ("Merger Sub") merged (the "Merger") with and into Northwest Airlines...

  • Page 78
    ...'s financial position, financial performance and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning on January 1, 2009. We currently provide significant information about our hedging activities and use of derivatives in our quarterly and annual filings. Accordingly...

  • Page 79
    ... rate securities, see "Investments in Debt and Equity Securities" in this Note. Restricted Cash and Cash Equivalents Restricted cash and cash equivalents included in current assets on our Consolidated Balance Sheets totaled $429 million and $520 million at December 31, 2008 and 2007, respectively...

  • Page 80
    ...of change in fair value of hedge is recorded in aircraft fuel expense and related taxes In the Merger, we assumed Northwest's outstanding hedge contracts, which include fuel, interest rate and foreign currency cash flow hedges. On the Closing Date, we designated certain of these contracts as hedges...

  • Page 81
    ... Consolidated Balance Sheets. All cash flows associated with purchasing and settling fuel hedge contracts are classified as operating cash flows on our Consolidated Statements of Cash Flows. In accordance with our interest rate swap and cap agreements, which we assumed from Northwest in the Merger...

  • Page 82
    ... of the fair value of mileage credits expected to be redeemed could have a material impact on our revenue in the year in which the change occurs and in future years. Prior to the adoption of fresh start reporting, we accounted for frequent flyer miles earned on Delta flights on an incremental...

  • Page 83
    ... Statements of Operations when we provide the transportation. Other, net Revenue Other, net revenue includes revenue from (1) the Marketing Premium component of the sale of mileage credits in the SkyMiles and WorldPerks Programs discussed above, (2) our sale of seats on other airlines' flights...

  • Page 84
    .... To determine impairments for aircraft used in operations, we group assets at the fleet-type level (the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of capacity, passenger yield, fuel costs, labor costs and other relevant factors...

  • Page 85
    ... Chapter 11 proceedings or (2) it was probable interest would be an allowed priority, secured or unsecured claim. Interest expense recorded on our Consolidated Statements of Operations totaled $705 million for the year ended December 31, 2008, $390 million for the eight months ended December 31 2007...

  • Page 86
    ... reclassified our auction rate securities to long-term within other noncurrent assets on our Consolidated Balance Sheet at December 31, 2008. Because auction rate securities are not actively traded, fair values were estimated by discounting the cash flows expected to be received over the remaining...

  • Page 87
    ... the related revenue is recognized. Stock-Based Compensation Effective January 1, 2006, we adopted the fair value provisions of SFAS No. 123 (revised 2004), "Share Based Payment" ("SFAS 123R"). SFAS 123R requires companies to measure the cost of employee services in exchange for an award of equity...

  • Page 88
    ... public announcement of the Merger Agreement on April 14, 2008, and capitalized Merger-related transaction costs. The purchase price also includes the fair value of Delta stock options and other equity awards issued on the Closing Date in exchange for similar securities of Northwest. Northwest stock...

  • Page 89
    ... and equipment Goodwill Identifiable intangible assets Other noncurrent assets Long-term debt and capital leases Pension and postretirement related benefits Air traffic liability and frequent flyer deferred revenue Other liabilities assumed Total purchase price $ $ 2,441 2,756 8,552 4,572 2,702...

  • Page 90
    ... the impact of fresh start reporting as if both companies had emerged from bankruptcy on January 1, 2007 and (2) changes in accounting principles as if adoption had occurred on January 1, 2007. Year Ended December 31, (in millions, except per share data) 2008(1)(2) 2007 Operating revenue Net (loss...

  • Page 91
    ... of these securities, changed from Level 1 to Level 3 within SFAS 157's three-tier fair value hierarchy since initial valuation upon acquisition earlier in 2008. Our fuel hedge option derivative contracts are valued under the income approach using option-pricing models. During 2008, we reevaluated...

  • Page 92
    ... from Northwest Transfers to Level 3 Change in fair value included in earnings Change in fair value included in other comprehensive income Purchases and settlements, net Balance at December 31, 2008 Losses included in earnings attributable to the change in unrealized losses relating to assets still...

  • Page 93
    ... assets included significant unobservable inputs which generally include a five-year business plan, 12-months of historical revenues and expenses by city pair, projections of available seat miles, revenue passenger miles, load factors, and operating costs per available seat mile and a discount rate...

  • Page 94
    ... value using a rate of return that considers the relative risk of not realizing the estimated annual cash flows and time value of money. Intangible assets are identified by asset type in Note 5. The fair value of our SkyMiles frequent flyer award liability was determined based on the estimated price...

  • Page 95
    ... estimated fair value loss of $1.2 billion, which includes $481 million related to Northwest, as discussed below, and is recorded in hedge derivatives liability on our Consolidated Balance Sheet. In the Merger, we assumed all of Northwest's outstanding fuel hedge contracts. On the Closing Date, we...

  • Page 96
    ... Statement of Operations for the year ended December 31, 2008. As of December 31, 2008, our open fuel hedge (loss) gain position, excluding contracts we terminated early with Lehman Brothers, for the years ending December 31, 2009 and 2010 is as follows: Percentage of Projected Fuel Requirements...

  • Page 97
    ... our Consolidated Balance Sheet. In accordance with fair value hedge accounting, the carrying value of our long-term debt at December 31, 2008 included $74 million of fair value adjustments. In the Merger, we assumed Northwest's outstanding interest rate swap and cap agreements. On the Closing Date...

  • Page 98
    ... fair value loss of $48 million, which is recorded in hedge derivatives liability on our Consolidated Balance Sheet. We did not have any foreign currency hedge contracts at December 31, 2007. Credit Risk To manage credit risk associated with our aircraft fuel price and interest rate hedging programs...

  • Page 99
    ...increasing the number of domestic and international connecting passengers using the carriers' route networks. In connection with the impairment analysis performed during the June 2008 quarter, we recorded a non-cash charge of $199 million related to our SkyTeam alliance to reduce the carrying values...

  • Page 100
    ..., we extended the useful life of the American Express Agreement intangible asset to the date the contract expires. Gross Carrying WeightedAmount Average Life in December 31, Accumulated Years 2007 Amortization Marketing agreements Contracts Customer relationships Other Total 4 34 4 1 10 $ $ 710...

  • Page 101
    ... our debt at December 31, 2008 and 2007: December 31, (in millions) 2008 2007 Senior Secured Exit Financing Facility due from 2012 to 2014, 3.9%% to 5.1%(1)(2) $ 2,448 $1,463 Bank Credit Facility due 2010, 2.6% to 3.4%(1)(3) 904 - General Electric Capital Corporation ("GECC") Agreements due...

  • Page 102
    ... NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (9) This item includes a reduction in the carrying value of (1) Northwest's debt as a result of purchase accounting related to the Merger and (2) the debt recorded in connection with the American Express Agreement. This item also includes...

  • Page 103
    ... and an operating airline, including when it is merged with and into Delta Air Lines, Inc. or (2) December 31, 2010. The Bank Credit Facility is secured by a first lien on Northwest's Pacific route authorities. The Bank Credit Facility contains financial covenants that require Northwest to maintain...

  • Page 104
    ... when it is merged with and into Delta Air Lines, Inc. The merger of Northwest Airlines, Inc. into Delta Air Lines, Inc. is dependent on several factors, including but not limited to receiving a single operating certificate as granted by the FAA. Receiving such a certificate generally takes 12 to...

  • Page 105
    ..., net Less: current obligations under capital leases Long-term capital lease obligations Operating Leases Years Ending December 31, Delta Lease Payments Contract Carrier Aircraft Lease Payments(1) $ $ 135 134 129 98 64 264 824 (323) 501 64 (92) 473 (in millions) Total 2009 2010 2011 2012 2013...

  • Page 106
    ... table shows the timing of these commitments: Years Ending December 31, (in millions) 2009 2010 2011 2012 2013 After 2013 Total $1,520 990 60 110 90 130 $2,900 Our aircraft order commitments as of December 31, 2008 consist of firm orders to purchase eight B-777-200LR aircraft, five B-737-700...

  • Page 107
    ... the scheduling, pricing, reservations, ticketing and seat inventories of those aircraft and retain the revenues associated with those flights. We pay those airlines an amount, as defined in the applicable agreement, which is based on a determination of their cost of operating those flights and...

  • Page 108
    ...The following table shows the available seat miles ("ASMs") and revenue passenger miles ("RPMs") operated for us under capacity purchase agreements with the following seven Contract Carriers for the years ended December 31, 2008, 2007 and 2006 ASA, SkyWest Airlines, Chautauqua, Freedom and Shuttle...

  • Page 109
    ... Kenton County Airport Board Special Facilities Revenue Bonds, 1992 Series B (Delta Air Lines, Inc. Project), $16 million of which were then outstanding. The Cincinnati Airport Settlement Agreement, among other things provides for agreements under which we will continue to use certain facilities...

  • Page 110
    ...tickets purchased with Visa or MasterCard that had not yet been used for travel. There was no Reserve as of December 31, 2008 and 2007. American Express In December 2008, we amended our American Express credit card processing agreement (the "Amended Card Service Agreement"). The Amended Card Service...

  • Page 111
    ...) 2008 2007 Deferred tax assets: Net operating loss carryforwards Pension, postretirement and other benefits AMT credit carryforward Deferred revenue Rent expense Reorganization items, net Fuel hedge derivatives Other temporary differences Valuation allowance Total deferred tax assets Deferred tax...

  • Page 112
    ...FINANCIAL STATEMENTS-(Continued) The following table shows the current and noncurrent deferred tax assets (liabilities), recorded on our Consolidated Balance Sheets at December 31, 2008 and 2007: (in millions) 2008 2007 Current deferred tax assets, net Noncurrent deferred tax liabilities, net Total...

  • Page 113
    ... of: Successor Year Ended December 31, 2008 Eight Months Ended December 31, 2007 Predecessor Four Months Ended April 30, 2007 Year Ended December 31, 2006 (in millions) Current tax benefit Deferred tax benefit (provision) exclusive of the other components listed below) (Increase) decrease in...

  • Page 114
    ... retirees (the "Delta Non-Pilot Plan") and defined benefit pension plans for eligible Northwest employees and retirees (the "Northwest Pension Plans"). These plans have been closed to new entrants and frozen for future benefit accruals. The Pension Protection Act of 2006 allows commercial airlines...

  • Page 115
    ...survivorship plans provide benefits to substantially all Delta employees and Northwest pilots as a result of a participant's death or disability. SFAS 158. On December 31, 2006, we adopted the recognition and disclosure provisions of SFAS No. 158 "Employers Accounting for Defined Benefit Pension and...

  • Page 116
    ... Benefits paid, including lump sums and annuities Fair value of plan assets at end of period $ Funded status at end of period $ Benefit obligation at end of period Eight Months Four Months Year Ended Ended Ended Year Ended December 31, December 31, April 30, December 31, 2008 2007 2007 2008...

  • Page 117
    ... 31, 2008 Year Ended December 31, 2006 Service cost Interest cost Expected return on plan assets Amortization of prior service cost Recognized net actuarial loss Settlement (gain) charge, net Revaluation of liability Net periodic cost (benefit) Defined contribution plan costs Total cost (benefit...

  • Page 118
    ... Year Ended December 31, 2008 Eight Months Ended December 31, 2007 Four Months Ended April 30, 2007 Predecessor Year Ended December 31, 2006 (in millions) Service cost Interest cost Expected return on plan assets Amortization of prior service benefit Recognized net actuarial loss Revaluation...

  • Page 119
    ... projected to 2013 and 2010, respectively. Not applicable to frozen defined benefit pension plans or other postretirement benefit plans. The assumed healthcare cost trend rate at December 31, 2008 is assumed to decline gradually to 5.00% by 2015 and remain level thereafter. Our 2008, 2007 and 2006...

  • Page 120
    ...market value movements of a portion of the pension plan assets to the related pension plan liabilities. Benefit Payments Benefit payments in the table below are based on the same assumptions used to measure the related benefit obligations and are paid from both funded benefit plan trusts and current...

  • Page 121
    ... pay 20% of the amount that exceeds $2.5 billion. Based on our pre-tax earnings, we accrued $158 million under the profit sharing program in 2007. We did not record an accrual under the profit sharing program in 2008. NOTE 11. CHAPTER 11 PROCEEDINGS Bankruptcy Claims Resolution Under Delta's Plan...

  • Page 122
    ... pilot labor costs; (b) the Pension Benefit Guaranty Corporation's (the "PBGC") claim relating to the termination of the Delta Pilot Plan; (c) claims relating to changes in postretirement healthcare benefits and the rejection of our non-qualified retirement plans; (d) claims associated with debt...

  • Page 123
    ...common stock to these employees. (7) Allowed general, unsecured claims of $83 million for the four months ended April 30, 2007 and $2.1 billion for the year ended December 31, 2006 in connection with the comprehensive agreements of Comair and Delta, respectively, with ALPA reducing pilot labor costs...

  • Page 124
    ... various liabilities, securities issuances, incurrence of new indebtedness and cash payments. The effects of Delta's Plan of Reorganization and fresh start reporting on our Consolidated Balance Sheet at April 30, 2007 are as follows: Fresh Start Consolidated Balance Sheet Predecessor Debt Discharge...

  • Page 125
    ...the Delta Pilot Plan (which is reflected on the Consolidated Balance Sheet net of a $3 million discount) and (2) $339 million to reinstate or accrue certain liabilities related to the current portion of our pension and postretirement benefit plans and for certain administrative claims and cure costs...

  • Page 126
    ...general, unsecured claims and up to 14 million shares to approximately 39,000 non-contract, non-management employees under the Delta Air Lines, Inc. 2007 Performance Compensation Plan (the "2007 Plan"). Delta's Plan of Reorganization also contemplates the issuance of common stock under the 2007 Plan...

  • Page 127
    ... Merger. As of December 31, 2008, 36 million shares remain available for future grants under the 2007 Plan. Under SFAS 123R, non-cash compensation expense for equity awards is recognized over the employee's requisite service period (generally, the vesting period of the award). We use straight-line...

  • Page 128
    ... an exercise price equal to the closing price of Delta common stock on the date of grant. Generally, outstanding employee options vest over several years and have a 10-year term, subject to the employee's continued employment. The fair value of stock options is determined at the grant date using an...

  • Page 129
    .... The total intrinsic value of options exercised during the year ended December 31, 2008 was $0.1 million and Delta received $0.4 million in cash from the exercise of those options. No options were exercised during the eight months ended December 31, 2007. Performance Shares. Performance shares are...

  • Page 130
    ... Pension Liability Marketable Equity Securities (in millions) Derivative Instruments Valuation Allowance Total Balance at January 1, 2006 (Predecessor) Termination of Pilot Plan Additional minimum pension liability adjustments Changes in fair value Reclassification to earnings Tax effect Net...

  • Page 131
    ... STATEMENTS-(Continued) We are managed as a single business unit that provides air transportation for passengers and cargo. This allows us to benefit from an integrated revenue pricing and route network. Our flight equipment forms one fleet, which is deployed through a single route scheduling system...

  • Page 132
    ...of basic loss per share for the year ended December 31, 2008 includes, in connection with the Merger, (1) 50 million shares of Delta common stock we agreed to issue on behalf of Delta and Northwest pilots and (2) nine million shares of Delta common stock reserved for issuance, after giving effect to...

  • Page 133
    ...under Delta's Plan of Reorganization Shares reserved for future issuance relating to Northwest's Plan of Reorganization, after giving effect to the 1.25 exchange ratio Shares issuable to Delta and Northwest pilots in connection with the Merger Common stock considered outstanding for purposes of loss...

  • Page 134
    ... convertible debt. These common stock equivalents totaled 37 million shares for the year ended December 31, 2006. Note 17. Valuation and Qualifying Accounts The following table shows our valuation and qualifying accounts for the year ended December 31, 2008, the eight months ended December 31, 2007...

  • Page 135
    ... to Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Note 18. Quarterly Financial Data (Unaudited) The following table summarizes our unaudited results of operations for the 2008 and 2007 quarterly periods ended presented below. The quarterly (loss) earnings per share...

  • Page 136
    ... Airlines Corporation. Delta and Northwest entered into a binding merger agreement April 14, 2008. Thus, my voluntary waiver described above covers any compensation arrangement in effect for me at that time. Sincerely, /s/ Richard H. Anderson Delta Air Lines, Inc., Post Office Box 20706, Atlanta...

  • Page 137
    ...the number of Shares equal to 15% of the outstanding equity capitalization of the Company, determined on a "fully-diluted basis" (as defined below) at the Effective Time (as defined in the Agreement and Plan of Merger by and among the Company, Nautilus Merger Corporation ("Merger Sub") and Northwest...

  • Page 138
    ... in the Northwest Airlines, Inc. Non-Officer Change of Control Severance Plan, and (ii) became an Officer or Director of Delta on or after October 29, 2008, shall not participate in the 2009 Plan until October 29, 2010 unless such person was a Senior Vice President or higher of Delta on October...

  • Page 139
    ... or Director employed by Delta as an officer or director on October 28, 2008 who was not advised by Delta that his or her employment would be terminated on or before January 1, 2009 (a "Pre Merger Officer or Director") shall be eligible to receive benefits under the Prior Plan until October 29, 2010...

  • Page 140
    ... earnings under any qualified or non qualified plan or program sponsored by Delta or any Affiliate. Each Participant will be eligible for Severance Pay in an amount equal to: (i) 6 months Base Salary for Directors, plus 50% of any applicable MIP Target Amount; (ii) 9 months Base Salary for Managing...

  • Page 141
    ... of the Delta AccountBased Healthcare Plan (or corresponding pilot or Affiliate plan, if applicable). Payment of Retiree Medical Premiums. To the extent applicable, if a Participant is eligible for special early, early or normal retirement under the Company's retirement plan or policy at the time of...

  • Page 142
    ... benefits will be based on the Company travel policy for retired officers at the level at which the Participant was employed immediately prior to the Change in Control Date. (B) All Travel Privileges shall be governed by all applicable rules and procedures which are generally applicable at the time...

  • Page 143
    ... below, if any portion of any payment under this 2009 Plan, when taken together with any payment under any other agreement with or plan of Delta (in the aggregate "Total Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the...

  • Page 144
    ... of all Payments actually made to the Participant, determined by the Accounting Firm (as defined below) as of the date of the Change in Control using the discount rate required by Section 280G(d)(4) of the Code. The amounts payable under this Section 4(e)(i) shall be paid by the Company within ten...

  • Page 145
    ... "Plan Administrator" is the Executive Vice President - Human Resources & Labor Relations (or any other Officer of the Company designated by the Personnel & Compensation Committee of the Board). The "Plan Year" is January 1 to December 31. Benefits from the 2009 Plan are paid from the general assets...

  • Page 146
    ...who upon the termination of his employment does not receive the benefits under the 2009 Plan to which he believes he is entitled may file a claim for such benefits in writing to the Vice President - Compensation, Benefits and Services of the Company (or such other officer as may be designated by the...

  • Page 147
    ... extent any payment or benefit provided to a Participant under the 2009 Plan constitutes non excepted deferred compensation under Section 409A and the Participant is at the time of his termination of employment considered to be a "specified employee" pursuant to the Company's policy for determining...

  • Page 148
    ... the time of separation, excluding expense reimbursements and supplemental salary payments, and any items not considered by the Plan Administrator to be a component of regular monthly base earnings; provided, however, that, as of a Change in Control Date, in the event of a termination of employment...

  • Page 149
    ...the Voting Stock or the total fair market value of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions) of assets of...

  • Page 150
    ...) or Northwest Airlines Corporation (or any subsidiary) either on or before January 1, 2009, and (iii) any equity-based awards, incentive compensation, retention payment, , special travel or other benefits provided to a Participant solely as a result of his or her initial employment with Delta or...

  • Page 151
    ... constituted Good Reason. (h) "MIP Target Amount" means as to any Participant, such Participant's target award amount under the Company's Management Incentive Plan (or any similar plan) in effect at the time such Participant has a termination of employment that entitles the Participant to benefits...

  • Page 152
    ... for "cause"), a vested right to Retired Officer Flight Benefits, regardless of the officer's age and years of service at his termination of employment. Executive Life Insurance: Delta provides life insurance coverage of two times base salary to executive officers through an endorsement split dollar...

  • Page 153
    ...adopted under the Delta Air Lines, Inc. 2007 Performance Compensation Plan ("2007 Performance Plan"). It is subject to the terms of the 2007 Performance Plan and an individual's 2009 LTIP Award Agreement ("Award Agreement"). Capitalized terms that are used but not defined in the 2009 LTIP shall have...

  • Page 154
    ... forfeited. "Pro Rata RS Portion" means, with respect to any portion of Restricted Stock that is subject to the Restrictions at the time of a Participant's Termination of Employment, the number of Shares with respect to which the Restrictions would have lapsed on each future Installment Date...

  • Page 155
    ... the members of the Airline Peer Group. The payout, if any, of a Performance Award will be made (A) in Shares, calculated based on the Conversion Formula (as defined below), to each Participant who is employed by the Company as an executive vice president or more senior officer or holds the position...

  • Page 156
    ...B ), where: A = Pre-Tax Income for 2009 and 2010; and B = Total Operating Revenue for 2009 and 2010. (C) The "Conversion Formula" will apply to convert from cash to Shares the payout, if any, of a Performance Award to a person who is an Executive Officer Participant at the time of such payout. First...

  • Page 157
    ... to any annual profit sharing plan, program or arrangement. (H) "Total Operating Revenue" means, subject to Section 3(c)(v)(B) below, the subject company's total operating revenue for the applicable periods based on its regularly prepared and publicly available statements of operations prepared in...

  • Page 158
    ... void. Examples: 1. Assume a Participant who is a not an Executive Officer Participant receives a Performance Award of $25,000 at the target level and that, as of the end of the Performance Period, Delta ranks number four (4) in Cumulative Revenue Growth (resulting in a payout at 75% of the weighted...

  • Page 159
    ... = the Participant's target Performance Award as of the Grant Date; and T = the number of calendar months from January 1, 2009 to the date of such Termination of Employment (rounded up for any partial month). Thereafter, the Participant will be eligible to receive a payment, if any, in cash based on...

  • Page 160
    ...the time the Company sells or otherwise divests itself of such Affiliate) on or after a Change in Control but prior to the second anniversary of such Change in Control, the Participant's outstanding Performance Award shall immediately become vested at the target level and such amount will be paid in...

  • Page 161
    ... a payment is required under Section 4(a) above, and the assumptions to be used in determining the Gross-Up Payment, shall be made by the nationally recognized accounting firm generally used by the Company as its financial auditor (the "Accounting Firm") which shall provide detailed supporting...

  • Page 162
    ... under the 2009 LTIP, (ii) any other equity-based awards or other incentive compensation awards made to a Participant by any of Delta (or any Affiliate) or Northwest (or any subsidiary) at or prior to the closing of the Merger and (iii) any retention payment or special travel benefits provided to...

  • Page 163
    ... of Georgia, including, without limitation, information regarding Delta's present and future operations, its financial operations, marketing plans and strategies, alliance agreements and relationships, its compensation and incentive programs for employees, and the business methods used by Delta and...

  • Page 164
    ... and sales plans and strategies; all pricing information; all financial, advertising and product development plans and strategies; all compensation and incentive programs for employees; all alliance agreements, plans and processes; all plans, strategies, and agreements related to the sale of assets...

  • Page 165
    ..., reports, personnel information (including benefit files, training records, customer lists, operating procedure manuals, safety manuals, financial statements, price lists and the like), relating to the business of Delta, with which you come in contact in the course of your employment (hereinafter...

  • Page 166
    ... restraining order, preliminary injunction or other equitable relief brought against you by Delta in aid of arbitration. (c) Consequences of Breach. Furthermore, you acknowledge that, in partial consideration for the Award described in the 2009 LTIP and this Agreement, Delta is requiring that...

  • Page 167
    ... below and return an original signed version of this Agreement to Mary Steele, either by hand or by mail to Department 936, P.O. Box 20706, Atlanta, Georgia 30320, as set forth on page 1 of this Agreement. If you have any questions regarding how to accept your Award, please contact Ms. Steele...

  • Page 168
    ... of, the Delta Air Lines, Inc. 2007 Performance Compensation Plan (the "2007 Plan"). Capitalized terms that are used but not defined in the MIP shall have the meaning ascribed to them in the 2007 Plan. 2. Plan Administration. (a) The Personnel & Compensation Committee of the Board of Directors (the...

  • Page 169
    ... Base Salary" means the Participant's 2009 annual base salary as in effect on December 31, 2009. 5. Weighting of Performance Measures. Subject to Section 8 below, a percentage of each Participant's Target MIP Award is allocated to one or more of Financial Performance, Operational Performance, Merger...

  • Page 170
    ... Operational, Merger Integration, Leadership Effectiveness, and Individual Performance, are based on the achievement of the target performance level with respect to each applicable performance measure (except that Financial Performance also requires a payout under the Profit Sharing Program for 2009...

  • Page 171
    .... 2 The Profit Sharing Program for 2009 defines "Pre-Tax Income" as follows: for any calendar year, the Company's consolidated pre-tax income calculated in accordance with Generally Accepted Accounting Principles in the United States and as reported in the Company's public securities filings but...

  • Page 172
    ... seat mile or increased revenue from a new or amended affinity card agreement); and productivity and process improvement. Company management will periodically report to the Company's Board of Directors regarding Merger synergies. The following table describes the performance ranges and award...

  • Page 173
    ... and conditions: (i) Payment in Restricted Stock. If there is no payout under the Profit Sharing Program for 2009, any payout under the MIP to an Executive Officer Participant will be made in shares of Restricted Stock rather than in cash, with the number of shares of Restricted Stock being equal to...

  • Page 174
    ... after the MIP Payment Date. 8. Change in Employment Status. (a) Termination of Employment. (i) A Termination Event in 2009-General. Except as expressly set forth in this Section 8 or the Delta Air Lines, Inc. 2007 or 2009 Officer and Director Severance Plan (the "Severance Plan"), in the event...

  • Page 175
    ... have received such MIP Award if such Participant's employment had continued through December 31, 2009. The most recent LPM prior to the Termination of Employment will generally apply to the Individual Performance measure, if any, applicable to the Participant. The Participant's Annual Base Salary...

  • Page 176
    ... who becomes employed by Delta as a grade 8 or any more senior MIP-eligible position during 2009 but after January 1, 2009, such individual will be a Participant in the MIP and will be eligible to receive an award under the MIP for 2009; provided, that such Participant's Annual Base Salary will be...

  • Page 177
    ...terms of the specific plan or program; provided, however, that any MIP payment made to an Executive Officer Participant in MIP Restricted Stock will be considered as earnings only for purposes of the Company's restoration payment program, as in effect from time to time. If such payments are included...

  • Page 178
    ... with a Termination of Employment constitutes deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (together, "Section 409A") and is paid to a "specified employee" as defined in Section 409A, the payment of such amount...

  • Page 179
    ... factor. Add all Delta Connection completed system operations for the month. Add all Delta Connection system on time operations for the month. On time operations are defined as the number of flights that arrive at the scheduled destination within 15 minutes of the scheduled arrival time. Divide the...

  • Page 180
    ... employees and stakeholders. The MAP is being adopted under the Delta Air Lines, Inc. 2007 Performance Compensation Plan (the "2007 Performance Plan"). It is subject to the terms of the 2007 Performance Plan and a Participant's MAP Award Agreement ("Award Agreement"). Capitalized terms that are used...

  • Page 181
    ... Rata RS Portion" means, with respect to any portion of the Restricted Stock that is subject to the Restrictions at the time of a Participant's Termination of Employment by reason of Retirement, the number of Shares with respect to which the Restrictions would have lapsed on each respective future...

  • Page 182
    ... as a retiree for purposes of any other program, plan or policy of the Company, for purposes of the MAP, the Participant's employment shall be considered to have been terminated by the Company for Cause. (vi) Dividends. In the event a cash dividend shall be paid in respect of Shares at a time the...

  • Page 183
    ...) Exercise Price. The exercise price of the Option is the closing price of a Share on the New York Stock Exchange on the Grant Date. (iv) Exercise Period. Subject to the terms of the 2007 Performance Plan and the MAP, the Option (a) shall become exercisable with respect to 20% of the Shares on each...

  • Page 184
    ... program, plan or policy of the Company, for purposes of the MAP, the Participant's employment shall be considered to have been terminated by the Company for Cause. 6 For example, assume a Participant received an Option exercisable for 1,000 Shares on December 1, 2008 and retires on April 15, 2009...

  • Page 185
    ... a payment is required under Section 4(a) above, and the assumptions to be used in determining the Gross-Up Payment, shall be made by the nationally recognized accounting firm generally used by the Company as its financial auditor (the "Accounting Firm") which shall provide detailed supporting...

  • Page 186
    ... compensation awards made to a Participant by any of Delta (or any Affiliate) or Northwest (or any subsidiary) at or prior to the closing of the Merger and (iii) any retention payment or special travel benefits provided to a Participant as a result of his or her initial employment with Delta...

  • Page 187
    ... purposes of the MAP, "Retirement" means a Termination of Employment (other than for Cause or death) either: (i) on or after a Participant's 62nd birthday provided that such Participant has completed at least 5 years service with the Company (or an Affiliate) or Northwest (or a subsidiary); or (ii...

  • Page 188
    ... of Georgia, including, without limitation, information regarding Delta's present and future operations, its financial operations, marketing plans and strategies, alliance agreements and relationships, its compensation and incentive programs for employees, and the business methods used by Delta and...

  • Page 189
    ... and sales plans and strategies; all pricing information; all financial, advertising and product development plans and strategies; all compensation and incentive programs for employees; all alliance agreements, plans and processes; all plans, strategies, and agreements related to the sale of assets...

  • Page 190
    ..., reports, personnel information (including benefit files, training records, customer lists, operating procedure manuals, safety manuals, financial statements, price lists and the like), relating to the business of Delta, with which you come in contact in the course of your employment (hereinafter...

  • Page 191
    ...temporary restraining order, preliminary injunction or other equitable relief brought against you by Delta in aid of arbitration. (c) Consequences of Breach. Furthermore, you acknowledge that, in partial consideration for the Award described in the MAP and this Agreement, Delta is requiring that you...

  • Page 192
    ... below and return an original signed version of this Agreement to Mary Steele, either by hand or by mail to Department 936, P.O. Box 20706, Atlanta, Georgia 30320, as set forth on page 1 of this Agreement. If you have any questions regarding how to accept your Award, please contact Ms. Steele...

  • Page 193
    ... "Debtors") in these cases prior to May 31, 2007, the Effective Date of the Debtors' Plan (as defined herein). On the Effective Date, Northwest Airlines Holdings Corporation merged into NWA Inc. and thereafter, NWA Inc. merged into Northwest Airlines and went out of existence. Bruce R. Zirinsky Tel...

  • Page 194
    ... August 16, 2006, Mr. Foret timely filed proof of claim number 10987 ("Claim 10987") asserting an unsecured nonpriority claim against Northwest Airlines in the amount of $5,850,104.44 for amounts allegedly due and owing to Mr. Foret under that certain Management Compensation Agreement, dated October...

  • Page 195
    ... salaried employees of Northwest Airlines and shall have no contribution requirements to be eligible for such coverage. Northwest Airlines reserves the right to make changes in coverage offered under the medical or dental plans as necessary. Mr. Foret agrees that the coverage provided by Northwest...

  • Page 196
    ...all prior understandings or agreements, if any, are merged into this letter agreement. Please execute where indicated below and return this correspondence to me via email at your earliest convenience. This letter agreement will become effective upon approval by the Bankruptcy Court. Very truly yours...

  • Page 197
    ... to your continued employment with Delta and the terms and conditions set forth in the award agreement, the Merger Equity Award will generally vest as follows: 20% May 1, 2009; 20% November 1, 2009; 20% May 1, 2010; and 40% November 1, 2011. Delta Air Lines, Inc., Post Office Box 20706, Atlanta, GA...

  • Page 198
    ... to such benefits as are provided to officers of the Company employed on or after the Delta Transfer Date, including free and reduced rate travel, financial planning assistance, an annual executive physical and similar programs as such benefits exist from time to time. If applicable, you will...

  • Page 199
    ... (a) and Exhibit E notwithstanding, if following the Merger, your office is relocated by more than 50 miles, and you voluntarily terminate your employment rather than relocate, you will not owe any Repayment Amount. Delta Air Lines, Inc., Post Office Box 20706, Atlanta, GA 30320-6001, U.S.A 3

  • Page 200
    ... contribution to making us the world's premier airline. Mary Steele, our director of compensation programs, is available to assist you on questions regarding your compensation package. Mary's direct line is 404-715-6333. Delta Air Lines, Inc., Post Office Box 20706, Atlanta, GA 30320-6001, U.S.A 4

  • Page 201
    Sincerely, [NAME] Date Delta Air Lines, Inc., Post Office Box 20706, Atlanta, GA 30320-6001, U.S.A 5

  • Page 202
    ... form attached to Agreement to be signed in future) Exhibit D - Form of Waiver and Release for Retention Payment (to be signed when letter signed) Exhibit E - Definition of Good Reason Exhibit F - Additional Payment (Excise Tax protection) Delta Air Lines, Inc., Post Office Box 20706, Atlanta...

  • Page 203
    ..., 2008 Eight Months Ended December 31, 2007 Four Months Ended April 30, 2007 Predecessor Year Ended December 31, (in millions, except for ratio data) 2006 2005 2004 (Loss) earnings: (Loss) earnings before income taxes Add (deduct): Fixed charges from below Capitalized interest (Loss) earnings...

  • Page 204
    ...Air Lines Private Limited Delta Benefits Management, Inc. Delta Connection Academy, Inc. Delta Loyalty Management Services, LLC Epsilon Trading, LLC Kappa Capital Management, LLC MCH, Inc. Mesaba Aviation, Inc. MLT Inc. Montana Enterprises, Inc. New Sky, Ltd. Northwest Aerospace Training Corporation...

  • Page 205
    ...the Delta Air Lines, Inc. 2007 Performance Compensation Plan; and Registration Statement No. 333-151060 on Form S-8 pertaining to Northwest Airlines Corporation 2007 Stock Incentive Plan of our report dated March 1, 2009, with respect to the consolidated financial statements of Delta Air Lines, Inc...

  • Page 206
    ... 31.1 I, Richard Anderson, certify that: 1. I have reviewed this annual report on Form 10-K of Delta Air Lines, Inc. ("Delta") for the fiscal year ended December 31, 2008; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact...

  • Page 207
    ... 31.2 I, Hank Halter, certify that: 1. I have reviewed this annual report on Form 10-K of Delta Air Lines, Inc. ("Delta") for the fiscal year ended December 31, 2008; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact...

  • Page 208
    ...with the filing on the date hereof with the Securities and Exchange Commission of the Annual Report on Form 10-K of Delta Air Lines, Inc. ("Delta") for the fiscal year ended December 31, 2008 (the "Report"). Each of the undersigned, the Chief Executive Officer and the Senior Vice President and Chief...