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DELTA AIR LINES INC /DE/ (DAL)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 02/24/2010
Filed Period 12/31/2009

Table of contents

  • Page 1
    DELTA AIR LINES INC /DE/ (DAL) 10-K Annual report pursuant to section 13 and 15(d) Filed on 02/24/2010 Filed Period 12/31/2009

  • Page 2
    ... file number 1-5424 DELTA AIR LINES, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) Post Office Box 20706 Atlanta, Georgia (Address of principal executive offices) 58-0218548 (I.R.S. Employer Identification...

  • 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
    ... Frequent Flyer Program Cargo MRO Fuel Competition Regulatory Matters Employee Matters Executive Officers Additional Information ITEM 1A. RISK FACTORS Risk Factors Relating to Delta Risk Factors Relating to the Airline Industry ITEM 1B. UNRESOLVED STAFF COMMENTS ITEM 2. PROPERTIES Flight Equipment...

  • Page 5
    ...12. 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 SIGNATURES...

  • Page 6
    ...Forward-Looking Information Statements in this Form 10-K (or otherwise made by us or on our behalf) that are not historical facts, including statements about our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in...

  • Page 7
    ... of our 2010 flight plan include (1) positioning Delta as the global airline of choice, (2) enhancing our customer service, (3) promoting positive employee relations, (4) building a diversified, profitable worldwide network and global alliance and (5) delivering industry-leading financial results. 2

  • Page 8
    ...arrangements can include codesharing, reciprocal frequent flyer program benefits, shared or reciprocal access to passenger lounges, joint promotions, common use of airport gates and ticket counters, ticket office co-location and other marketing agreements. These alliances often present opportunities...

  • Page 9
    ... medium-sized cities. These arrangements enable us to increase the number of flights we have available in certain locations, to better match capacity with demand and to preserve our presence in smaller markets. Approximately 22% of our passenger revenue in 2009 related to flying by regional air...

  • Page 10
    ... to customers to increase travel on Delta. The SkyMiles program allows program members to earn mileage for travel awards by flying on Delta, Delta's regional carriers and other participating airlines. Mileage credit may also be earned by using certain services offered by program participants...

  • Page 11
    ... Airlines, Lufthansa German Airlines, Air Canada and others) and the oneworld alliance (among American Airlines, British Airways, Qantas and others) have significantly increased competition in international markets. The adoption of liberalized Open Skies Aviation Agreements with an increasing number...

  • Page 12
    ..., 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 13
    ...emissions allowances or credits if the airline exceeds the number of free credits allocated to it under the ETS. We expect that such a system would impose significant costs on our operations in the European Union. Under the ETS, each airline is required to file emissions plans with a specific member...

  • Page 14
    ... Railway Labor Act Our relations with labor unions in the U.S. are governed 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...

  • Page 15
    ... Bargaining Agreement Becomes Amendable Employee Group Union Delta Pilots Delta Flight Superintendents (Dispatchers) Pre-merger NWA Fleet Service, Passenger Service, and Office/Clerical Pre-merger NWA Simulator Technicians Pre-merger NWA Stock Clerks Pre-merger NWA Flight Attendants Comair...

  • Page 16
    ... 2006); Chief Executive Officer of Northwest (2001-November 2004). Edward H. Bastian, Age 52: President of Delta since September 1, 2007; President of Delta and Chief Executive Officer NWA (October 2008- December 2009); President and Chief Financial Officer of Delta (September 2007-October 2008...

  • Page 17
    ..., Age 49: Executive Vice President-Network Planning and Revenue Management of Delta since April 2006; Executive Vice President and Chief of Network and Revenue Management of Delta (August 2005-April 2006); Vice General Director-Chief Commercial Officer and Chief Operating Officer of Alitalia (2003...

  • Page 18
    ... non-cash merger-related charges. Including these charges, fuel costs accounted for 28% of total operating expense in 2008. Fuel 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...

  • Page 19
    ...any loss position on the contracts. For example, at December 31, 2008, our counterparties required us to fund $1.2 billion of fuel hedge margin. However, at December 31, 2009, counterparties were required to fund us a net $10 million. If fuel prices fall significantly below the levels at the time we...

  • Page 20
    ... under other of our financing agreements. Employee strikes and other labor-related disruptions may adversely affect our operations. Our business is labor intensive, utilizing large numbers of pilots, flight attendants and other personnel. As of December 31, 2009, approximately 39% of our workforce...

  • Page 21
    ... the integration of certain workgroups (including flight attendants, airport employees and reservations employees) of the two pre-merger airlines will require the resolution of potentially difficult issues, including but not limited to the process and timing for determining whether the combined post...

  • Page 22
    .... Most of the tickets we sell are paid for by customers who use credit cards. Our credit card processing agreements provide that no holdback of receivables or reserve is required except in certain circumstances, including if we do not maintain a required level of unrestricted cash. If circumstances...

  • Page 23
    ..., New York-JFK, Salt Lake City, Paris-Charles de Gaulle, Amsterdam and Tokyo-Narita either directly at those airports or at the hubs of other airlines that are located in close proximity to our hubs. We also face competition in smaller to medium-sized markets from regional jet operators. Low-cost...

  • Page 24
    ... on passengers and a tax on airlines. The federal government has on several occasions proposed a significant increase in the per ticket tax. The proposed ticket tax increase, if implemented, could negatively impact our results of operations. Proposals to address congestion issues at certain airports...

  • Page 25
    Table of Contents ITEM 2. PROPERTIES Flight Equipment Our active aircraft fleet at December 31, 2009 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-747-400 B-757-200 B-757-300 B-767-...

  • Page 26
    ...Our largest aircraft maintenance base, various computer, cargo, flight kitchen and training facilities and most of our principal offices are located at or near the Atlanta airport, on land leased from the City of Atlanta generally under long-term leases. We own our Atlanta reservations center, other...

  • Page 27
    ... a 10 year capital improvement program (the "CIP") at the Atlanta airport. Implementation of the CIP should increase the number of flights that may operate at the airport and reduce flight delays. The CIP includes, among other things, a 9,000 foot fullservice runway that opened in May 2006, related...

  • Page 28
    ...a retired Delta employee filed an amended class action complaint in the U.S. District Court for the Northern District of Georgia against Delta, and certain current and former Delta officers and directors on behalf of himself and other participants in the Delta Family-Care Savings Plan ("Savings Plan...

  • Page 29
    ... EQUITY SECURITIES Market Information Our common stock is listed on the New York Stock Exchange. The following table sets forth for the periods indicated, the highest and lowest sales price for our common stock as reported on the NYSE. Common Stock High Low Fiscal 2008 First Quarter Second Quarter...

  • Page 30
    ...specifies 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 Plan, respectively. 25

  • Page 31
    ... share data) Operating revenue Operating expense Operating (loss) income Interest expense, net Miscellaneous, net (Loss) income before reorganization items, net Reorganization items, net (Loss) income before income taxes Income tax benefit (provision) Net (loss) income Preferred stock dividends Net...

  • Page 32
    ...loss per share, for reorganization costs. Other Financial and Statistical Data (Unaudited) Successor Year Ended December 31, 2009 2008 Eight Months Ended December 31, 2007 Four Months Ended April 30, 2007 Predecessor Year Ended December 31, 2006 2005 Revenue passenger miles (millions)(1) Available...

  • Page 33
    ...the year also includes a $407 million charge for merger-related items, a $321 million non-cash income tax benefit and an $83 million non-cash loss on the extinguishment of debt. Total operating revenue declined $6.2 billion, or 18%, in 2009 on a 6% decrease in system capacity, or available seat mile...

  • Page 34
    ...to make investments in our international operation at New York-JFK and explore long-term options to upgrade the facility. In addition, in August 2009, we announced our intention to make New York's LaGuardia Airport a domestic hub through a slot transaction with US Airways. The agreement calls for US...

  • Page 35
    ...29 2009 GAAP vs. 2008 Combined % Increase Increase (Decrease) (Decrease) (in millions) GAAP Year Ended December 31 Combined Year Ended December 31 Operating Revenue: Passenger: Domestic Atlantic Latin America Pacific Total Mainline Regional carriers Total passenger revenue Cargo Other, net Total...

  • Page 36
    ... due to new or increased baggage handling fees and higher SkyMiles program revenue, partially offset by decreased revenue from our alliance agreements and a reduction in our aircraft maintenance and repair service. Operating Expense GAAP Year Ended December 31, 2009 2008 Northwest January 1 to...

  • Page 37
    ... and related costs. Salaries and related costs increased $289 million due to (1) pay increases for pilot and non-pilot frontline employees, (2) higher pension expense from a decline in the value of our defined benefit plan assets as a result of market conditions and (3) Delta airline tickets awarded...

  • Page 38
    ... currency exchange rates Mark-to-market adjustments on the ineffective portion of fuel hedge contracts Loss on investments in The Reserve Primary Fund and insured auction rate securities in 2008 Other Total miscellaneous, net Income Taxes GAAP Year Ended December 31, 2009 2008 Northwest January 1 to...

  • Page 39
    ...in millions) GAAP Year Ended December 31, 2008 Predecessor + Successor Year Ended December 31, 2007 Increase Increase (Decrease) Excluding Northwest Operations Operating Revenue: Passenger: Mainline Regional carriers Total passenger revenue Cargo Other, net Total operating revenue $ $ 15,137...

  • Page 40
    ... passenger revenue increased in 2008 compared to the 2007 Predecessor plus Successor results primarily due to (1) the inclusion of Northwest's operations, (2) fare increases in response to increased fuel charges, (3) pricing and scheduling initiatives and (4) our increased service to international...

  • Page 41
    ...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 42
    ... exchange rates. Profit sharing. In 2007, we recorded a $158 million charge related to our broad-based employee profit sharing plan. 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...

  • Page 43
    ... compensation. In accordance with Delta's Plan of Reorganization, we made $130 million in lump-sum cash payments to approximately 39,000 eligible non-contract, non-management employees. We also recorded an additional charge of $32 million related to our portion of payroll related taxes associated...

  • Page 44
    ... on Delta's cash flows for 2007 than if we did not present this information in this manner. Cash flows from operating activities Cash provided by operating activities totaled $1.4 billion for 2009, primarily reflecting (1) the return from counterparties of $1.1 billion of hedge margin primarily used...

  • Page 45
    ...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 46
    ... fixed obligations under our contract carrier agreements (excluding contract carrier aircraft lease payments accounted for as operating leases). Represents minimum funding requirements under government regulations for all of our qualified defined benefit pension plans based on actuarially determined...

  • Page 47
    ... 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 the applicable agreement, which is based on...

  • Page 48
    ...We also sell mileage credits to other airlines and to non-airline businesses. Mileage credits can be redeemed for free or upgraded air travel on Delta and participating airlines, for membership in our Sky Club and for other program awards. In the Merger, we assumed Northwest's frequent flyer program...

  • Page 49
    ... 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, operating costs per available seat mile and a discount rate...

  • Page 50
    ... 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 of inputs used to estimate the fair value of goodwill upon adoption of fresh start reporting...

  • Page 51
    .... 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 mile yield, fuel costs, labor costs and other relevant...

  • Page 52
    ... weighted average discount rate for net periodic benefit cost in each of the past three years has varied from the rate selected on our measurement date, ranging from 5.99% to 7.19% between 2007 and 2009, due to remeasurements throughout the year. The impact of a 0.50% change in our weighted average...

  • Page 53
    ...Benefit Plan Assets." It requires additional annual disclosures about assets held in an employer's defined benefit pension or other postretirement plan, primarily related to categories and fair value measurements of plan assets. We adopted this standard on January 1, 2009. For additional information...

  • Page 54
    ... provides useful information for comparing our financial performance in 2009 and 2008. GAAP Year Ended December 31, 2009 Combined Year Ended December 31, 2008 (in millions) Aircraft fuel and related taxes Northwest results for the period January 1 to October 29, 2008 Contract carrier aircraft fuel...

  • Page 55
    ... 2009 vs. Combined 2008 2009 passenger mile yield 2008 combined revenue passenger miles (in millions) 2008 combined passenger mile yield Change year-over-year in combined passenger mile yield 12.60¢ 202,726 14.65¢ (14)% We present CASM excluding fuel expense and related taxes because management...

  • Page 56
    ... Defined Terms ASM-Available Seat Mile. A measure of capacity. ASMs equal the total number of seats available for transporting passengers during a reporting period multiplied by the total number of miles flown during that period. CASM-(Operating) Cost per Available Seat Mile. The amount of operating...

  • Page 57
    ...) Weighted Average Contract Strike Price per Gallon Percentage of Projected Fuel Requirements Hedged 2010 Crude Oil Call options Collars-cap/floor Swaps Jet Fuel Swaps Total $ 1.78 1.90/1.66 1.87 2.08 12% 5 3 4 24% $ 81 1 (13) (13) 56 $ For 2009, aircraft fuel and related taxes, including...

  • Page 58
    ... changes in interest rates is primarily associated with our long-term debt obligations. Market risk associated with our fixed and variable rate long-term debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates...

  • Page 59
    ...8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (Ernst & Young LLP) Consolidated Balance Sheets-December 31, 2009 and 2008 Consolidated Statements of Operations for the years ended December 31, 2009 and...

  • Page 60
    ... of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the...

  • Page 61
    ... of Contents DELTA AIR LINES, INC. Consolidated Balance Sheets (in millions, except share data) December 31, 2009 2008 ASSETS Current Assets: Cash and cash equivalents Short-term investments Restricted cash and cash equivalents Accounts receivable, net of an allowance for uncollectible accounts of...

  • Page 62
    ... 31, April 30, 2009 2008 2007 2007 Successor (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 carrier...

  • Page 63
    ...) increase in frequent flyer deferred revenue Increase (decrease) in accounts payable and accrued liabilities Other, net Net cash provided by (used in) operating activities Cash Flows From Investing Activities: Property and equipment additions: Flight equipment, including advance payments Ground...

  • Page 64
    ... and compensation expense associated with 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...

  • Page 65
    ... 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 merged (the "Merger") with and into Northwest Airlines Corporation. On the Closing Date, (1) Northwest...

  • Page 66
    ... arrangements can include codesharing, reciprocal frequent flyer program benefits, shared or reciprocal access to passenger lounges, joint promotions, common use of airport gates and ticket counters, ticket office co-location and other marketing agreements. We have received antitrust immunity for...

  • Page 67
    ... fair value. At December 31, 2009 and 2008, our restricted cash and cash equivalents primarily related to cash held to meet certain projected self-insurance obligations. Accounts Receivable Accounts receivable primarily consist of amounts due from credit card companies, customers of our aircraft...

  • Page 68
    ... of change in fair value of hedge is recorded in aircraft fuel expense and related taxes (2) In the Merger, we assumed Northwest's outstanding hedge contracts, which included fuel, interest rate and foreign currency cash flow hedges. On the Closing Date, we designated certain of these contracts as...

  • Page 69
    ...We also sell mileage credits to other airlines and to non-airline businesses. Mileage credits can be redeemed for free or upgraded air travel on Delta and participating airlines, for membership in our Sky Club and for other program awards. In the Merger, we assumed Northwest's frequent flyer program...

  • Page 70
    ...other airlines' sale of seats on our flights under our alliance agreements is recorded in passenger revenue on our Consolidated Statements of Operations. Long-Lived Assets The following table shows our property and equipment at December 31, 2009 and 2008: December 31, (in millions) 2009 2008 Flight...

  • Page 71
    .... 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 mile yield, fuel costs, labor costs and other relevant...

  • Page 72
    ... the asset's fair value to its carrying value. Fair value is estimated based on (1) recent market transactions, where available, (2) the lease savings method for airport slots (which reflects potential lease savings from owning the slots rather than leasing them from another airline at market rates...

  • Page 73
    ... Statements of Operations when the related revenue is recognized. Stock-Based Compensation We measure the cost of employee services in exchange for an award of equity instruments based on the grant-date fair value of the award. The fair value of our stock options is estimated using an option pricing...

  • Page 74
    ... public announcement on April 14, 2008 of the then planned Merger and (2) capitalized Merger-related transaction costs. The purchase price also included the fair value of Delta stock options and other equity awards issued on the Closing Date in exchange for similar securities of Northwest. Northwest...

  • Page 75
    ... Life in Years Gross Carrying Amount (in millions) Indefinite-lived intangible assets: International routes and slots SkyTeam alliance Domestic routes and slots Other Total indefinite-lived intangible assets Definite-lived intangible assets: Northwest tradename Marketing agreements Domestic routes...

  • Page 76
    ... data) 2008(1)(2) 2007 Operating revenue $34,288 $ 31,781 Net (loss) income (14,706) 601 Basic and diluted (loss) earnings per share (18.13) 0.74 (1) Includes a $1.1 billion one-time primarily non-cash charge related to the issuance or vesting of employee equity awards in connection with the Merger...

  • Page 77
    ... auction rate securities as available-for-sale securities at fair value. At December 31, 2009 and 2008, the fair value of our student loan backed auction rate securities was $45 million and $38 million, respectively. The cost of these investments was $45 million. We record our investments in insured...

  • Page 78
    ...availability of data. In these cases, we solicit preliminary valuation updates at year-end from the investment managers and use that information and corroborating data from public markets to determine any needed adjustments to fair value. Fixed Income. Investments include corporate bonds, government...

  • Page 79
    ... the asset's fair value to its carrying value. Fair value is estimated based on (1) recent market transactions, where available, (2) the lease savings method for airport slots (which reflects potential lease savings from owning slots rather than leasing them from another airline at market rates...

  • Page 80
    ...travel on Northwest, Delta or a participating airline. The weighted-average equivalent ticket value contemplates differing classes of service, domestic and international itineraries and the carrier providing the award travel. Fair Value of Debt Market risk associated with our fixed and variable rate...

  • Page 81
    ...in accrued interest receivables related to these interest rate swaps. 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. Represents derivative contracts assumed from Northwest in the Merger. 76

  • Page 82
    ... recorded in passenger and cargo revenue. We recorded a mark-to-market adjustment of $91 million related to Northwest derivative contracts settling in 2009 that were not designated as hedges for the year ended December 31, 2008. Ineffectiveness gains (losses) recognized on our fuel hedge contracts...

  • Page 83
    ... of our debt portfolio from a floating rate to a fixed rate. The floating rates are based on three month LIBOR plus a margin. These interest rate swap and call option agreements had a net fair value loss of $45 million at December 31, 2009. Fair Value Hedges. During the June 2008 quarter, we entered...

  • Page 84
    ... We also have receivables from the sale of mileage credits under our SkyMiles Program to participating airlines and non-airline businesses such as credit card companies, hotels and car rental agencies. We believe the credit risk associated with these receivables is minimal and that the allowance for...

  • Page 85
    ...314 December 31, 2009 (in millions) Estimated Life in Year(s) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount December 31, 2008 Accumulated Amortization Marketing agreements Contracts Northwest tradename Customer relationships Domestic routes and slots Other Total 1 to 18 17...

  • Page 86
    ... 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 a multi-year extension of our co-brand credit card relationship with American Express (the "American Express Agreement"). This item also...

  • Page 87
    ..., make investments, sell or otherwise dispose of assets if not in compliance with the collateral coverage ratio tests, pay dividends or repurchase stock. These covenants may have a material adverse impact on our operations. The Senior Secured Exit Financing Facilities contain financial covenants...

  • Page 88
    ... gains and losses arising under fuel hedging arrangements incurred prior to the closing date of the Senior Secured Credit Facilities) to (2) the sum of cash interest expense plus cash aircraft rent expense plus the interest portion of Delta's capitalized lease obligations) in each case for the...

  • Page 89
    ...and aircraft and (2) real estate loans. The financings had annual interest rates ranging from 1.5% to 8.5% at December 31, 2009. American Express Agreement. In December 2008, we announced a multi-year extension of the American Express Agreement. As part of the American Express Agreement, we received...

  • Page 90
    ... (1,403) 16,665 We lease aircraft, airport terminals and maintenance facilities, ticket offices and other property and equipment from third parties. Rental expense for operating leases, which is recorded on a straight-line basis over the life of the lease term, totaled $1.3 billion and $798 million...

  • Page 91
    ...unamortized premium, net Less: current obligations under capital leases Long-term capital lease obligations Operating Leases Contract Carrier Aircraft Lease Payments(1) $148 146 119 87 67 337 904 (396) 508 25 (88) $445 Years Ending December 31, (in millions) Delta Lease Payments Total 2010 2011...

  • Page 92
    ... 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 the applicable agreement, which is based on...

  • Page 93
    ...available seat miles ("ASMs") and revenue passenger miles ("RPMs") operated for us under capacity purchase agreements with our regional air carriers (excluding Comair, Compass and Mesaba) for the years ended December 31, 2009, 2008 and 2007: (in millions, except for number of aircraft operated) 2009...

  • Page 94
    ... yet been used for travel. There was no Reserve as of December 31, 2009 and 2008. American Express Our American Express credit card processing agreement provides that no withholding of our receivables will occur except in certain circumstances, including when we do not maintain a required level of...

  • Page 95
    ... Agreement Becomes Amendable Delta Pilots Delta Flight Superintendents (Dispatchers) Pre-merger NWA Fleet Service, Passenger Service, and Office/Clerical Pre-merger NWA Simulator Technicians Pre-merger NWA Stock Clerks Pre-merger NWA Flight Attendants Comair Pilots Comair Maintenance Employees...

  • Page 96
    ... Months Year Ended Ended December 31, December 31, 2009 2008 2007 Predecessor Four Months Ended April 30, 2007 (in millions) Current tax benefit Deferred tax benefit (provision) exclusive of the other components listed below (Increase) decrease in valuation allowance Income tax benefit (provision...

  • Page 97
    ...) 2009 2008 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 98
    ...non-pilot Delta employees and 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...

  • Page 99
    ...65. During bankruptcy, we generally eliminated company-paid post age 65 healthcare coverage, except for (1) subsidies available to a limited group of retirees and their dependents and (2) a group of retirees who retired prior to 1987. Benefits under these plans are funded from current assets and are...

  • Page 100
    ...Other Postemployment Benefits Successor Eight Months Year Ended Ended December 31, December 31, 2009 2008 2007 Service cost Interest cost Expected return on plan assets Amortization of prior service cost (benefit) Recognized net actuarial loss Revaluation of liability Net periodic cost (benefit) 95...

  • Page 101
    ...Year Eight Months Ended Ended December 31, December 31, 2009 2008 2007 6.49% 8.00% Predecessor Four Months Ended April 30, 2007 Net Periodic Benefit Cost(2)(4) Weighted average discount rate-pension benefit Weighted average discount rate-other postretirement benefit Weighted average discount rate...

  • Page 102
    ... information regarding the fair value of pension assets, see Note 3. 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 assets. Actual benefit payments...

  • Page 103
    ...We did not record an accrual under the profit sharing program in 2009 or 2008. NOTE 11. CHAPTER 11 PROCEEDINGS Bankruptcy Claims Resolution Under Delta's Plan of Reorganization, most holders of allowed general, unsecured claims against the Delta Debtors received or will receive Delta common stock in...

  • Page 104
    ...reduced the rates we pay that carrier, we recorded a $35 million allowed general, unsecured claim. In accordance with Delta's Plan of Reorganization, we made $130 million in lump-sum cash payments to approximately 39,000 eligible non-contract, non-management employees. We also recorded an additional...

  • Page 105
    ... assets, net of liabilities, was reflected as goodwill in the Fresh Start Consolidated Balance Sheet. The financial projections and estimates of reorganization value are not incorporated in this Form 10-K. The methodologies used to calculate reorganization value primarily include (1) a 60% weighting...

  • Page 106
    ...Reorganized Balance Sheet May 1, 2007 (in millions) Predecessor April 30, 2007 Revaluation of Assets and Liabilities CURRENT ASSETS Cash, cash equivalents and short-term investments Restricted cash Accounts receivable, net Expendable parts and supplies inventories, net Deferred income taxes, net...

  • Page 107
    ...require us to pay for them to assume the obligation for miles expected to be redeemed under the SkyMiles Program. This estimated price was determined based on the weightedaverage equivalent ticket value of a SkyMiles award redeemed for travel on Delta or a participating airline. The weighted-average...

  • Page 108
    ...million shares of common stock, consisting of 386 million shares to holders of allowed general, unsecured claims and up to 14 million shares to approximately 39,000 noncontract, non-management employees under the Delta Air Lines, Inc. 2007 Performance Compensation Plan (the "2007 Plan"). Our Plan of...

  • Page 109
    ... 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 Plan. In connection with the Merger, we amended the 2007 Plan with stockholder approval to increase the number of shares of Delta common stock issuable...

  • Page 110
    ...The closing of the Merger caused the vesting at target of substantially all previously unvested performance shares. Other. There was no corresponding tax benefit in 2009, 2008 or 2007 related to the stock-based compensation, as we record a full valuation allowance against our deferred tax assets due...

  • Page 111
    ... operating decision maker and are used in resource allocation and performance assessments. 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...

  • Page 112
    ...reduction programs. Contract Carrier restructuring costs relate primarily to the early termination of certain capacity purchase agreements with our Contract Carriers. Facilities and other costs primarily relate to the closing operations in airports. In 2008, the costs primarily relate to the closing...

  • Page 113
    ... issuance 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 Common stock considered outstanding for purposes of loss per share calculation (1) These shares have not been weighted to...

  • Page 114
    ... per share data) 2009 2008 Eight Months Ended December 31, 2007 Predecessor Four Months Ended April 30, 2007 Basic: Net (loss) income Basic weighted average shares outstanding Basic (loss) earnings per share Diluted: Net (loss) income Gain recognized on the forgiveness of convertible debt Net (loss...

  • Page 115
    ... 2009, and the associated activity for the years then ended: Allowance for: Obsolescence of Expendable Uncollectible Parts & Accounts Supplies Receivable(2) Inventory (in millions) Restructuring and Other Charges(1) Balance at January 1, 2007 (Predecessor) Additional costs and expenses Payments...

  • Page 116
    ...recorded a one-time primarily non-cash charge of $969 million relating to the issuance or vesting of employee equity awards in connection with the Merger. During the December 2009 quarter, as a result of the Income Tax Allocation, we recorded a non-cash income tax benefit of $321 million on the loss...

  • Page 117
    ... into Northwest. On December 31, 2009, NWA merged with and into Delta, ending NWA's separate existence. We are currently integrating policies, processes, people, technology and operations for the combined company. Management will continue to evaluate our internal control over financial reporting as...

  • Page 118
    ...material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Delta Air Lines, Inc...

  • Page 119
    ...provides information about the number of shares of common stock that may be issued under the 2007 Performance Plan, Delta's only equity compensation plan, as of December 31, 2009. (b) WeightedAverage Exercise Price of Outstanding Options, Warrants and Rights (c) No. of Securities Remaining Available...

  • Page 120
    ...-Director Independence-Independence of Audit, Corporate Governance and Personnel & Compensation Committee Members," "Executive Compensation-PostEmployment Compensation-Potential Post-Employment Benefits Upon Termination or Change in Control-Pre-Existing Medical Benefits Agreement Between Northwest...

  • Page 121
    ... thereunto duly authorized, on the 24th day of February, 2010. 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 24th day of February, 2010 by the...

  • Page 122
    ..., and Credit Suisse Securities (USA) LLC and C.I.T. Leasing Corporation, as co-documentation agents (Filed as Exhibit 10.1(b) to Delta's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009).* Transaction Framework Agreement among Delta, Delta Master Executive Council, Northwest Master...

  • Page 123
    ... 20, 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 124
    .... 1 to Form of Award Agreement for 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...

  • Page 125
    ...-14(a) Certification of Chief Financial Officer. Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 2002. Incorporated by reference. Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission...

  • Page 126
    ... of the Board of Directors Delta Air Lines, Inc. World Headquarters Atlanta, Georgia 30320 Dear David: Today we decided to eliminate from all future awards clauses providing for payment of excise tax and related gross-up provisions imposed by Section 4999 of the Internal Revenue Code. As you...

  • Page 127
    ..." or "Delta") adopted the 2007 Officer and Director Severance Plan (the "Prior Plan") for eligible Officer and Director level employees of the Company. Delta hereby amends and restates the Prior Plan as the 2009 Delta Air Lines, Inc. Officer and Director Severance Plan (the "2009 Plan") effective as...

  • Page 128
    ... 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. During such time, a Pre Merger Officer or Director shall also be eligible for benefits under the 2009 Plan, but...

  • Page 129
    ... 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 Directors, plus 75...

  • Page 130
    ... the Delta Account-Based Healthcare Plan (or corresponding pilot or Affiliate plan, if applicable). (B) 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...

  • Page 131
    ...an Officer or Director after June 8, 2009 shall not receive any Tax Allowance (as that term is defined in the Delta Air Lines, Inc. UATP Travel Program) during the Severance Period or following his or her termination of active employment. (B) All Travel Privileges shall be governed by all applicable...

  • Page 132
    ... in the nature of value or compensation to or for Participant's benefit under any other agreement with, or plan of, Delta that the Accounting Firm determines should be included as a parachute payment (as defined in Section 280G of the Code) (in the aggregate, "Total Payments") would (after taking...

  • Page 133
    ...'s employment. The reduction of the Total Payments to the Reduced Amount, if applicable, shall be made by reducing the Total Payments under the following types of compensation or value in the following order: (i) Stock Options, (ii) Restricted Stock, (iii) Performance Shares, and (iv) Cash. All fees...

  • Page 134
    ...excise tax under Section 4999 of the Code if the Accounting Firm determines to reduce Total Payments pursuant this Section. (C) "Accounting Firm" shall mean the nationally recognized accounting firm generally used by Delta as its financial auditor. In the event that the Accounting Firm is serving as...

  • Page 135
    ... "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 136
    ... 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 such employees, the payment of any such...

  • Page 137
    ...an Executive Vice President or more senior executive of the Company, a termination for Cause must be approved by a 2/3 vote of the entire Board. (e) "Change in Control" means the occurrence after January 2, 2009 of any of the following: (i) any "person" (as defined in Section 13(d) of the Securities...

  • Page 138
    ...) more than 65% of the voting power of 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...

  • Page 139
    ..., Inc. 2007 Performance Compensation Plan, or any failure of a successor to the Company to assume and agree to perform such obligation. Notwithstanding the foregoing: (A) (i) any award made to a Participant under the Delta Air Lines, Inc. Merger Award Program, (ii) any other equity-based awards or...

  • Page 140
    ...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 hereunder (except as provided in Section 4(a)). (ij...

  • Page 141
    ...-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 any Affiliate and (iv) the elimination of postretirement coverage under Delta's executive life insurance program...

  • Page 142
    ... of the Board of Directors and Executive Officers Delta provides certain flight benefits to members of its Board of Directors and provides certain benefits to its executive officers. Delta reserves the right to change, amend or terminate these programs, consistent with their terms, at any time for...

  • Page 143
    ... 8, 2009, will not receive reimbursement for taxes for Retired Director Flight Benefits or Retired Officer Flight Benefits, respectively. Life Insurance: Delta provides life insurance coverage of two times base salary to executive officers during employment. Financial Planning Services: The CEO, the...

  • Page 144
    ...management employees with the Company's other employees and stakeholders. The 2010 LTIP is being 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 2010 LTIP Award Agreement...

  • Page 145
    ... may receive Restricted Stock as specified in the Participant's Award Agreement (the "Restricted Stock"). (ii) Grant Date. The Grant Date of the Restricted Stock will be determined by the Committee in accordance with the Company's Equity Award Grant Policy, as in effect from time to time, and...

  • Page 146
    ... the Participant is considered as a retiree for purposes of any other program, plan or policy of the Company, for purposes of the 2010 LTIP, the Participant's employment shall be considered to have been terminated by the Company for Cause. (vi) Change in Control. Notwithstanding the forgoing and...

  • Page 147
    ... 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 of general counsel or chief financial officer of the...

  • Page 148
    ... 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 accordance with GAAP. (v) Vesting. (A) General. Subject to the terms of the 2007 Performance Plan and all other conditions...

  • Page 149
    ... 2009 and Average Annual Pre-Tax Income Margin for such company will be calculated on a combined basis as if the Airline Merger had occurred on January 1, 2010. (E) Vesting/Ranking. The payment, if any, a Participant will receive in connection with the vesting of the Performance Award will be based...

  • Page 150
    ... 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 target under that measure) and number three (3) in Average Annual Pre-Tax Income Margin...

  • Page 151
    ... is employed by an Affiliate at 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...

  • Page 152
    ... without Cause or by the Participant for Good Reason (including the Termination of Employment of the Participant if he is employed by an Affiliate at the time the Company sells or otherwise divests itself of such Affiliate), a number of RSUs equal to the Pro Rata RSU Portion will become immediately...

  • Page 153
    ... value or compensation to or for the Participant's benefit under any other agreement with or plan of Delta, shall be subject to reduction as set forth in Section 4(e) of the 2009 Delta Air Lines, Inc. Officer and Director Severance Plan, which relates to the excise tax under Section 4999 of the Code...

  • Page 154
    ... president or more senior officer level Participant has engaged in fraud or misconduct that caused, in whole or in part, the need for a required restatement of Delta's financial statements filed with the Securities and Exchange Commission, the Committee will review all incentive compensation awarded...

  • Page 155
    ... 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 156
    ... 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 157
    ... the arbitration. However, Delta will pay all fees associated with the American Arbitration Association and the arbitrator. All parties must initial here for this Section 3 to be effective: [NAME] Robert L. Kight-Vice President-Compensation, Benefits and Services Delta Air Lines, Inc. (b) Injunctive...

  • Page 158
    ... Breach. Furthermore, you acknowledge that, in partial consideration for the Award described in the 2009 MIP and this Agreement, Delta is requiring that you agree to and comply with the terms of Section 2 and you hereby agree that without limiting any of the foregoing, should you violate any of the...

  • Page 159
    ... below and, if you do not accept this Award electronically, 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...

  • Page 160
    You and Delta, each intending to be bound legally, agree to the matters set forth above by signing this Agreement, all as of the date set forth below. DELTA AIR LINES, INC. By: Name: Title: PARTICIPANT [NAME] Date: 6 Robert L. Kight Vice President Compensation, Benefits and Services

  • Page 161
    ... Management Incentive Plan (the "MIP") is an annual incentive program sponsored by Delta Air Lines, Inc. ("Delta" or the "Company") that is intended to: (a) closely link pay and performance by providing management employees with a compensation opportunity based on Delta's achieving key business plan...

  • Page 162
    ... receives, if any, will be based on: (i) the Participant's Target MIP Award, as defined below; (ii) the level of achievement within each applicable performance measure; and (iii) the occurrence of a payout for 2010 under the Company's broadbased employee profit sharing program (the "Profit Sharing...

  • Page 163
    ..., 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...

  • Page 164
    ... performance accounting for 25% of the measure. Delta's Operational Performance is based on the number of times during 2010 that Delta meets or exceeds its monthly goals under the broad-based employee shared rewards program (the "Shared Rewards Program"). Delta Connection's Operational Performance...

  • Page 165
    ... revenue or revenue growth (including an increase in revenue per available seat mile); 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 166
    ...; and B = the closing price of a Share on the New York Stock Exchange on the later of (1) the date that the Committee approves the payouts, if any, to the Executive Officer Participants under the MIP following the Committee's certification of the achievement of the required performance measures as...

  • Page 167
    ... at the time the Company sells or otherwise divests itself of such Affiliate); or (2) Retirement, the Restrictions shall lapse and be of no further force or effect on the date there is a payout under the Profit Sharing Program as if such Executive Officer Participant's employment had continued...

  • Page 168
    ... 2007 Plan. In the event any Executive Officer Participant's MIP Award is converted to MIP Restricted Stock, such Participant will receive a written notice of such conversion with the details thereof as soon as practicable after the MIP Payment Date. 8. Change in Employment Status. (a) Termination...

  • Page 169
    ... to either (I) a Termination of Employment by the Company without Cause, or (II) for any other reason that entitles such Participant to benefits under the Delta Air Lines, Inc. 2007 or 2009 Officer and Director Severance Plan (the "Severance Plan"). Subject to the Participant's execution of a waiver...

  • Page 170
    ... during 2010 will have their Target MIP Award calculated based on their annual base salary at each MIP-eligible job level (measured as of the date immediately prior to the date the promotion is considered effective for purposes of the MIP, if applicable, as described in the first paragraph...

  • Page 171
    ... the MIP any employee who would otherwise have participated in the MIP is informed that his or her employment will be terminated by the Company without Cause, any severance such employee is entitled to receive will be calculated based on the 2009 Management Incentive Plan as in effect as of December...

  • Page 172
    ... president or more senior officer level Participant has engaged in fraud or misconduct that caused, in whole or in part, the need for a required restatement of Delta's financial statements filed with the Securities and Exchange Commission, the Committee will review all incentive compensation awarded...

  • Page 173
    ... 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 result of D.2 by the result of D.1 for a combined Delta Connection system on-time performance measure...

  • Page 174
    ... associated with (i) integrating the operations of Northwest into Delta, including costs related to information technology, employee relocation and training, and re-branding of aircraft and stations and (ii) employee workforce reduction programs and (b) an $83 million non-cash loss for the write-off...

  • Page 175
    ... Airlines, Inc. Crown Rooms, Inc. DAL Global Services, LLC DAL Moscow, Inc. Delta AirElite Business Jets, Inc. Delta Air Lines, Inc. and Pan American World Airways,Inc.-Unterstutzungskasse GMBH Delta Air Lines Dublin Limited Delta Air Lines Private Limited Delta Benefits Management, Inc. Delta...

  • Page 176
    ... Compensation Plan, and Registration Statement No. 333-151060 on Form S-8 pertaining to Northwest Airlines Corporation 2007 Stock Incentive Plan; of our reports dated February 24, 2010, with respect to the consolidated financial statements of Delta Air Lines, Inc., and the effectiveness of internal...

  • Page 177
    ..., Delta's internal control over financial reporting; and 5. Delta's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Delta's auditors and the Audit Committee of Delta's Board of Directors (or persons performing the...

  • Page 178
    ..., Delta's internal control over financial reporting; and 5. Delta's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Delta's auditors and the Audit Committee of Delta's Board of Directors (or persons performing the...

  • Page 179
    ... 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, 2009 (the "Report"). Each of the undersigned, the Chief Executive Officer and the Senior Vice President and Chief Financial Officer, respectively, of Delta...