Delta Airlines 2010 Annual Report Download - page 16

Table of Contents
Hank Halter, Age 45: Senior Vice President and Chief Financial Officer of Delta since October 2008; Senior Vice President—Finance and Controller of
Delta (May 2005—October 2008); Vice President—Controller of Delta (March 2005—May 2005); Vice President—Assistant Controller of Delta
(January 2002—March 2005); and Vice President—Finance—Operations of Delta (February 2000—December 2001); various finance leadership positions at
Delta and American Airlines, Inc. (June 1993—February 2000).
Richard B. Hirst, Age 66: Senior Vice President and General Counsel of Delta since October 2008; Senior Vice President—Corporate Affairs and General
Counsel of Northwest (March 2008— October 2008); Executive Vice President and Chief Legal Officer of KB Home (March 2004— November 2006);
Executive Vice President and General Counsel of Burger King Corporation (March 2001—June 2003); General Counsel of the Minnesota Twins (1999—
2000); Senior Vice President—Corporate Affairs of Northwest (1994—1999); Senior Vice 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 on Form 8-
K and amendments to those reports as soon as reasonably practicable after these reports are filed with or furnished to the Securities and Exchange
Commission. Information on our website is not incorporated into this Form 10-K or our other securities filings and is not a part of those filings.
ITEM 1A. RISK FACTORS
Risk Factors Relating to Delta
Our business and results of operations are dependent on the price and availability of aircraft fuel. High fuel costs or cost increases could have a
materially adverse effect on our operating results. Likewise, significant disruptions in the supply of aircraft fuel would materially adversely affect our
operations and operating results.
Our operating results are significantly impacted by changes in the price and availability of aircraft fuel. Fuel prices have increased substantially since the
middle part of the last decade and spiked at record high levels in 2008 before falling dramatically during the latter part of 2008. In 2010, our average fuel
price per gallon was $2.33, an 8% increase from an average fuel price of $2.15 in 2009. In 2008, our average fuel price per gallon was $3.16, a 41% increase
from an average price of $2.24 in 2007, which in turn was significantly higher than fuel prices just a few years earlier. Fuel costs represented 30%, 29%, and
38% of our operating expense in 2010, 2009 and 2008, respectively. Total operating expense for 2008 reflects a $7.3 billion non-cash charge from an
impairment of goodwill 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 in 2008. Volatility in fuel costs has 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 may be affected by the competitive nature of the airline industry. We often have not
been able to increase our fares to offset fully the effect of increased fuel costs in the past and we may not be able to do so in the future.
In addition, our aircraft fuel purchase contracts do not provide material protection against price increases or assure the availability of our fuel supplies. We
purchase most of our aircraft fuel under contracts that establish the price based on various market indices. We also purchase aircraft fuel on the spot market,
from offshore sources and under contracts that permit the refiners to set the price. In an effort to manage our exposure to changes in fuel prices, we use
derivative instruments, which generally consist of crude oil, heating oil and jet fuel swap, collar and call option contracts, though we may not be able to
successfully manage this exposure. Depending on the type of hedging instrument used, our ability to benefit from declines in fuel prices may be limited.
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