Delta Airlines 2010 Annual Report Download - page 9

Table of Contents
Delta TechOps, Delta Global Services, MLT Vacations and Delta Private Jets
We have several other businesses arising from our airline operations, including aircraft maintenance, repair and overhaul ("MRO"), staffing services for
third parties, vacation wholesale operations and our private jet operations. Our MRO operations, known as Delta TechOps, is the largest airline MRO in North
America. In addition to providing maintenance and engineering support for our fleet of approximately 750 aircraft, Delta TechOps serves more than 150
aviation and airline customers from around the world. Delta TechOps employs approximately 8,500 maintenance professionals and is one of the most
experienced MRO providers in the world. Our staffing services business, Delta Global Services, provides staffing services, professional security, training
services and aviation solutions to approximately 150 customers. Our vacation wholesale business, MLT Vacations, is one of the largest providers of vacation
packages in the United States. Our private jet operations, Delta Private Jets, provides aircraft charters, aircraft management and programs allowing members
to purchase flight time by the hour. In 2010, the total revenue from these businesses was approximately $700 million.
Fuel
Our results of operations are significantly impacted by changes in the price and availability of aircraft fuel. The following table shows our aircraft fuel
consumption and costs for 2008 through 2010.
Gallons Average Percentage of
Consumed(2) Cost(2)(3) Price Per Total Operating
Year (Millions) (Millions) Gallon(2)(3) Expense(2)
2010 3,823 $ 8,901 $ 2.33 30%
2009 3,853 $ 8,291 $ 2.15 29%
2008(1) 2,740 $ 8,686 $ 3.16 38%(4)
(1) Includes operations of Northwest Airlines, Inc. ("NWA") for the period from October 30 to December 31, 2008.
(2) Includes the operations of our contract carriers under capacity purchase agreements.
(3) Net of fuel hedge losses under our fuel hedging program of $89 million, $1.4 billion and $65 million for 2010, 2009 and 2008, respectively.
(4) 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.
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 off-
shore sources and under contracts that permit the refiners to set the price.
We use derivative instruments, which generally consist of crude oil, heating oil and jet fuel swap, collar and call option contracts, in an effort to manage
our exposure to changes in aircraft fuel prices.
We are currently able to obtain adequate supplies of aircraft fuel, but it is impossible to predict the future availability or price of aircraft fuel. Weather-
related events, natural disasters, political disruptions or wars involving oil-producing countries, changes in government policy concerning aircraft fuel
production, transportation or marketing, changes in aircraft fuel production capacity, environmental concerns and other unpredictable events may result in fuel
supply shortages and fuel price increases in the future.
Competition
We face significant competition with respect to routes, services and fares. Our domestic routes are subject to competition from both new and established
carriers, some of which have lower costs than we do and provide service at low fares to destinations served by us. In particular, we face significant
competition at our domestic hub airports in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK and Salt Lake City 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. Our ability to compete effectively depends, in part, on our ability to maintain a competitive cost structure. If we cannot maintain
our costs at a competitive level, then our business, financial condition and operating results could be materially adversely affected.
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