DAL
$55.87
Delta Air Lines
$1.47
2.70%
Earnings Details
1st Quarter March 2018
Thursday, April 12, 2018 7:00:00 AM
Tweet Share Watch
Summary

Delta Air Lines Misses

Delta Air Lines (DAL) reported 1st Quarter March 2018 earnings of $0.74 per share on revenue of $10.0 billion. The consensus earnings estimate was $0.73 per share on revenue of $9.8 billion. The Earnings Whisper number was $0.77 per share. Revenue grew 9.0% on a year-over-year basis.

The company said it expects second quarter earnings of $1.80 to $2.00 per share. The current consensus earnings estimate is $1.92 per share for the quarter ending June 30, 2018.

Delta Air Lines Inc provides scheduled air transportation for passengers and cargo throughout the United States and around the world. The Company' business segments are airline and refinery.

Results
Reported Earnings
$0.74
Earnings Whisper
$0.77
Consensus Estimate
$0.73
Reported Revenue
$9.97 Bil
Revenue Estimate
$9.82 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Delta Air Lines Announces March Quarter Profit

ATLANTA, April 12, 2018 /PRNewswire/ -- Delta Air Lines (NYSE: DAL) today reported financial results for the March quarter 2018. Highlights of those results, including both GAAP and adjusted metrics, are below and incorporated here.

Delta Air Lines and the Delta Connection carriers offer service to nearly 370 destinations on six continents. For more information visit news.delta.com. (PRNewsFoto/Delta Air Lines)

Adjusted pre-tax income for the March 2018 quarter was $676 million, a $104 million decrease from the March 2017 quarter, as record revenues were offset by higher fuel prices and other increased costs including a $44 million impact from severe winter weather.

"The Delta people delivered a strong March quarter, and our record revenue was a direct result of the great service and operational reliability they provided for our customers. It's an honor to recognize their hard work with $183 million toward our 2018 profit sharing," said Ed Bastian, Delta's Chief Executive Officer. "We have confidence in our plan to grow earnings in 2018 through top-line growth, improving our cost trajectory, and leveraging our international partnerships."

Revenue Environment

Delta's adjusted operating revenue of $9.8 billion for the March quarter improved 8 percent, or $715  million versus the prior year. This revenue result marks a March quarter record for the company, and was driven by improvements across Delta's business, including a 23 percent increase in cargo revenue and a $78 million increase in total loyalty revenue. Delta's Branded Fares initiative drove $421 million in premium upsell revenue in the period, a 23 percent increase from the prior year.

Total unit revenues excluding refinery sales (TRASM) increased 5.0 percent during the period, with foreign currency contributing just over 0.5 points of benefit. This marks the fourth consecutive quarter of year-over-year growth, with all geographic regions delivering positive results.

"We are seeing Delta's best revenue momentum since 2014, with positive domestic unit revenues, improvements in all our international entities, strong demand for corporate travel and double-digit increases in our loyalty revenues," said Glen Hauenstein, Delta's President. "With our solid pipeline of commercial initiatives, delivered with industry-leading Delta service, we expect to maintain this momentum and deliver total revenue growth of 4 to 6 percent for the full year."

 

 

 

 

Revenue                                                     1Q18 ($M)

Increase (Decrease)
1Q18 versus 1Q17

          Change            Unit
             YoY           Revenue         Yield          Capacity

Domestic                                                           6,301                      6.9  %           2.6  %           3.2  %           4.2 %

Atlantic                                                              1,059                    14.7  %         11.5  %           8.6  %           2.9%

Latin America                                                       827                      4.3  %           5.7  %           5.9  %         (1.4)%

Pacific                                                                  578                      1.7  %           3.9  %           3.4  %         (2.0)%

Total Passenger                                                   8,765                      7.2  %           4.3  %           4.3  %           2.7%

Cargo Revenue                                                        202                    23.4  %

Other Revenue, adjusted*                                      788                    12.7  %

Total Revenue, adjusted*                                    9,755                      8.0  %           5.0  %

*Excludes Third Party Refinery Sales


See Note A for reconciliation of total unit revenue (TRASM) change

June 2018 Quarter Guidance

For the June quarter, Delta expects solid top-line growth and an improving cost trajectory will mitigate the impact of higher fuel prices. The company will also benefit from a reduction in its book tax rate.

 

                                                                                                                            2Q18 Forecast     

Earnings per share

$1.80 - $2.00

Pre-tax margin

14% - 16%

Fuel price, including taxes and refinery impact

$2.07 - $2.12

Total unit revenue excluding refinery sales (year-over-year)

Up 3% - 5%

CASM-Excluding fuel and profit sharing (year-over-year)

Up 1% - 3%

System capacity (year-over-year)

Up 3% - 4%

See Note A for information about reconciliation of projected non-GAAP financial measures

Cost Performance

Total adjusted operating expenses for the March quarter increased $817 million, driven by higher fuel prices, investments in employee wages and profit sharing, and higher depreciation expense.

Adjusted fuel expense increased $317 million, or 20 percent relative to March quarter 2017, as the year- over-year increase in market fuel prices was tempered by the lapping of prior year hedge losses and improved fuel efficiency. Delta's adjusted fuel price per gallon for the March quarter was $2.01, which includes $0.05 of benefit from the refinery.

CASM-Ex increased 3.9 percent for the March 2018 quarter compared to the prior year period driven by April 2017 wage increases and accelerated depreciation due to aircraft retirements. Unit costs were further pressured by approximately 1 point from the impact of severe weather and foreign exchange. Delta expects this period will mark the highest non-fuel expense growth for the year.

"We expect unit cost growth of 1 to 3 percent in the June quarter, as we lap prior year investments in our people and our business," said Paul Jacobson, Delta's Chief Financial Officer. "As we move through depreciation pressure from our fleet retirements and gain benefits from our upgauging and One Delta initiatives later in the year, we are on track for our 0 to 2 percent full year unit cost target."

Adjusted non-operating expense was flat year-on-year for the March quarter as a $62 million improvement in pension expense was offset by higher interest costs and the seasonality of joint venture partner earnings. The company expects 2018 full-year adjusted non-operating expense to be $200-250 million lower than 2017, due to pension expense savings.

Tax expense declined $117 million for the March quarter, primarily due to the reduction in Delta's book tax rate from 34 percent to 23 percent.

Cash Flow and Shareholder Returns

Delta generated $1.3 billion of operating cash flow, as the seasonal build of cash was partially offset by the $1.1 billion profit sharing payment to employees and a $500 million voluntary pension contribution in the March quarter, completing funding for the full year. Delta generated $173 million of free cash flow during the quarter, after the investment of $1.2 billion into the business primarily for aircraft purchases and improvements.

For the March quarter, Delta returned $542 million to shareholders, comprised of $325 million of share repurchases and $217 million in dividends.

Strategic Highlights

In the March quarter, Delta achieved a number of milestones across its five key strategic pillars.

Culture and People

  • Named one of Fortune magazine's Most Admired Companies for the fifth consecutive year.
  • Named one of the 2018 Fortune "100 Best Companies to Work For" for a second straight year.

Operational Reliability

  • Delivered 52 days of zero mainline cancellations and 19 days of zero system cancellations, up nine days from the March quarter 2017.
  • Achieved mainline on-time performance (A0) of 74.2 percent for the March quarter, up from 73.5 percent in the prior year.

Network and Partnerships

  • Increased efficiency through upgauging strategy with domestic seat capacity increasing 3.4 percent on 0.9 percent higher departures in the March quarter. As part of its re-fleeting, Delta added 43 more Boeing 737-900s and Airbus A321s into service, contributing to the 105 additional AVOD equipped aircraft across the fleet year-over-year.
  • Received final approvals from regulatory authorities for new joint venture partnership with Korean Air, offering one of the most comprehensive route networks in the trans-Pacific market.

Customer Experience and Loyalty

  • Experienced double-digit growth in co-brand spend, helping drive $85 million of incremental value from Delta's American Express agreement in the March quarter. New card acquisitions set a record for the March quarter, following a record 2017 with over 1 million new card acquisitions.
  • Introduced more seamless check-in experience at 32 Delta Sky Clubs with roll-out of ambassador handheld devices. Delta installed CLEAR check-in technology in 50 Delta Sky Clubs, further streamlining the check-in process for CLEAR members.

Investment Grade Balance Sheet

  • Made a $500 million voluntary contribution to the pension plan and ended the quarter with an unfunded liability of $6.3 billion, a $642 million reduction from the end of 2017.

Changes to Accounting Standards

On Jan. 1, Delta adopted several new accounting standards, including the new revenue recognition standard which drove 0.5 points of margin and $0.05 per share of pressure in the March quarter. This represents substantially all the margin and earnings impact related to new accounting standards for 2018.

The prior periods presented here have been recast to reflect adoption of these new standards. In addition, Delta made the following changes to its income statement:

  • Delta is no longer disaggregating passenger revenue by mainline and regional carriers.
  • Ancillary business expenses have been consolidated into a single operating expense line item.
  • Regional carriers fuel expense is now reported within aircraft fuel and related taxes instead of within regional carrier expense.

March Quarter Results

Special items for the quarter consist primarily of mark-to-market adjustments on refinery fuel hedges and unrealized gains/losses on investments.

 

($ in millions except per share and unit costs)

GAAP                                  Adjusted

1Q18               1Q17               1Q18               1Q17

Pre-tax income                                                                         718                 849                  676                  781

Net income                                                                               547                 561                  523                  518

Diluted earnings per share                                                      0.77                0.77                 0.74                 0.71

Operating revenue                                                                9,968              9,101               9,755               9,040

Operating expense                                                               9,128              8,102               8,942               8,125

Fuel expense                                                                        1,856              1,482               1,883               1,566

Average fuel price per gallon                                                  1.98                1.62                 2.01                 1.71

Consolidated unit cost (CASM/CASM-Ex)                            15.35              14.00               11.10               10.67

Non-operating expense                                                            122                 150                 137                  134

Total unit revenues (TRASM/TRASM-Ex)                             16.77              15.73               16.41               15.62

 

About Delta 
Delta Air Lines serves more than 180 million customers each year. In 2018, Delta was named to Fortune's top 50 Most Admired Companies in addition to being named the most admired airline for the seventh time in eight years. Additionally, Delta has ranked No.1 in the Business Travel News Annual Airline survey for an unprecedented seven consecutive years. With an industry-leading global network, Delta and the Delta Connection carriers offer service to 312 destinations in 55 countries on six continents. Headquartered in Atlanta, Delta employs more than 80,000 employees worldwide and operates a mainline fleet of more than 800 aircraft. The airline is a founding member of the SkyTeam global alliance and participates in the industry's leading transatlantic joint venture with Air France-KLM and Alitalia as well as a joint venture with Virgin Atlantic. Including its worldwide alliance partners, Delta offers customers more than 15,000 daily flights, with key hubs and markets including Amsterdam, Atlanta, Boston, Detroit, Los Angeles, Mexico City, Minneapolis/St. Paul, New York-JFK and LaGuardia, London-Heathrow, Paris-Charles de Gaulle, Salt Lake City, São Paulo, Seattle, Seoul, and Tokyo-Narita. Delta has invested billions of dollars in airport facilities, global products and services, and technology to enhance the customer experience in the air and on the ground. Additional information is available on the Delta News Hub, as well as delta.com, Twitter @DeltaNewsHub, Google.com/+Delta, and Facebook.com/delta.

Forward Looking Statements

Statements in this press release that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections and strategies reflected in or suggested by the forward-looking statements.  These risks and uncertainties include, but are not limited to, the cost of aircraft fuel; the impact of fuel hedging activity including rebalancing our hedge portfolio, recording mark-to-market adjustments or posting collateral in connection with our fuel hedge contracts; the availability of aircraft fuel; the performance of our significant investments in airlines in other parts  of the world; the possible effects of accidents involving our aircraft; breaches or security lapses in our information technology systems or those of our vendors or service providers; disruptions in our information technology infrastructure; our dependence on technology in our operations; the restrictions that financial covenants in our financing agreements could have on our financial and business operations; labor issues; the effects of weather, natural disasters and seasonality on our business; the effects of an extended disruption in services provided by third party regional carriers; failure or inability of insurance to cover a significant liability at Monroe's Trainer refinery; the impact of environmental regulation on the Trainer refinery, including costs related to renewable fuel standard regulations; our ability to retain senior management and key employees; damage to our reputation and brand if we are exposed to significant adverse publicity through social media; the effects of terrorist attacks or geopolitical conflict; competitive conditions in the airline industry; interruptions or disruptions in service at major airports at which we operate; the effects of extensive government regulation on our business; the sensitivity of the airline industry to prolonged periods of stagnant or weak economic conditions; uncertainty in economic conditions and regulatory environment in the United Kingdom related to the likely exit of the United Kingdom from the European Union; and the effects of the rapid spread of contagious illnesses.

Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in our Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2017 and our Form 10-Q for the period ended Mar. 31, 2018. Caution should be taken not to place undue reliance on our forward-looking statements, which represent our views only as of Apr. 12, 2018, and which we have no current intention to update.

 

DELTA AIR LINES, INC.

Consolidated Statements of Operations

(Unaudited)







Three Months Ended
March 31,



(in millions, except per share data)

2018

2017

$ Change

% Change

Operating Revenue:
  
Passenger

$8,765

8,178

587

7%

Cargo

202

163

39

23%

Other

1,001

760

241

32%

Total operating revenue

9,968

9,101

867

10%






Operating Expense:
  
Salaries and related costs

2,584

2,386

198

8%

Aircraft fuel and related taxes

1,856

1,482

374

25%

Regional carriers expense, excluding fuel

856

864

(8)

(1)%

Depreciation and amortization

610

537

73

14%

Contracted services

544

505

39

8%

Ancillary businesses and refinery

493

292

201

69%

Aircraft maintenance materials and outside repairs

435

432

3

1%

Passenger commissions and other selling expenses

427

404

23

6%

Landing fees and other rents

373

361

12

3%

Passenger service

263

234

29

12%

Profit sharing

183

151

32

21%

Aircraft rent

94

84

10

12%

Other

410

370

40

11%

Total operating expense

9,128

8,102

1,026

13%






Operating Income

840

999

(159)

(16)%






Non-Operating Expense:
  
Interest expense, net

(102)

(94)

(8)

9%

Unrealized gain on investments

18

-

18

NM

Miscellaneous, net

(38)

(56)

18

(32)%

Total non-operating expense, net

(122)

(150)

28

(19)%






Income Before Income Taxes

718

849

(131)

(15)%






Income Tax Provision

(171)

(288)

117

(41)%






Net Income

$             547

$             561

(14)

(2)%






Basic Earnings Per Share

$            0.78

$            0.77



Diluted Earnings Per Share

$            0.77

$            0.77








Basic Weighted Average Shares Outstanding

704

728



Diluted Weighted Average Shares Outstanding

706

731



Note: The prior periods presented here have been recast to reflect adoption of new accounting standards described earlier in this release.

 

DELTA AIR LINES, INC.

Statistical Summary

(Unaudited)






Three Months Ended
March 31,



2018

2017

Change

Revenue passenger miles (millions)

49,276

47,952

2.8%

Available seat miles (millions)

59,453

57,871

2.7%

Passenger mile yield (cents)

17.79

17.05

4.3%

Passenger revenue per available seat mile (cents)

14.74

14.13

4.3%

Total revenue per available seat mile (cents)

16.77

15.73

6.6%

TRASM, adjusted- see Note A (cents)

16.41

15.62

5.0%

Operating cost per available seat mile (cents)

15.35

14.00

9.6%

CASM-Ex - see Note A (cents)

11.10

10.67

3.9%

Passenger load factor

82.9%

82.9%

0.0 pts

Fuel gallons consumed (millions)

936

918

2.0%

Average price per fuel gallon

$         1.98

$         1.62

22.2%

Average price per fuel gallon, adjusted - see Note A

$         2.01

$         1.71

18.0%

Number of aircraft in fleet, end of period

1,017

984

33

Note: except for number of aircraft in fleet, consolidated data presented includes operations under Delta's contract carrier arrangements.

 

DELTA AIR LINES, INC.

Passenger Revenue 

(Unaudited)







Three Months Ended

March 31,  

Increase

% Increase






(in millions)

2018

2017

(Decrease)

(Decrease)

Ticket

$           7,653

$        7,105

$           548

7.7%

Loyalty travel awards

618

582

36

6.2%

Travel-related services

494

491

3

0.6%

Total passenger revenue

$           8,765

$        8,178

$           587

7.2%

 

  DELTA AIR LINES, INC.  

  Other Revenue  

(Unaudited)








Three Months Ended 
March 31,

Increase 

% Increase






(in millions)   

2018

2017

(Decrease)

   (Decrease)






Ancillary businesses and refinery 

$       521

$    312

$    209

67.0%






Loyalty program           

347

305

42

13.8%

Miscellaneous         

133

143

(10)

(7.0)%

Total other revenue      

$   1,001

$    760

$    241

31.7%

Note: The prior periods presented here have been recast to reflect adoption of new accounting standards described earlier in this release.

 

DELTA AIR LINES, INC.
Consolidated Statements of Cash Flows 
(Unaudited)


Three Months Ended 
March 31,





(in millions)

2018


 

2017

Cash Flows From Operating Activities:




Net income

$                  547


 

$                 561

Depreciation and amortization

610


 

537

Deferred income taxes

165


 

276

Pension, postretirement and postemployment payments greater than expense

(551)


 

(2,676)

Changes in air traffic liability

 

1,869


 

1,818

Changes in profit sharing liability

 

(880)


 

(964)

Other working capital changes, net

 

(417)


 

(382)

Net cash provided by (used in) operating activities

 

1,343


 

(830)





Cash Flows From Investing Activities:
Property and equipment additions:




Flight equipment, including advance payments

(991)


(595)

Ground property and equipment, including technology

(274)


(207)

Purchase of equity investments

-


(622)

Net redemptions/(purchases) of short-term investments

300


(256)

Other, net

38


(28)

Net cash used in investing activities

(927)


(1,708)

Cash Flows From Financing Activities:
Payments on long-term debt and capital lease obligations

 

 

(244)


 

 

(288)

Repurchases of common stock

(325)


(200)

Cash dividends

(217)


(149)

Proceeds from long-term obligations

-


2,004

Other, net

(1)


313

Net cash (used in) provided by financing activities

(787)


1,680





Net Decrease in Cash, Cash Equivalents and Restricted Cash

 

(371)


 

(858)

Cash, cash equivalents and restricted cash at beginning of period

1,853


2,826

Cash, cash equivalents and restricted cash at end of period

$                  1,482


$                1,968


The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the total of the same such amounts shown above:

Current assets:




Cash and cash equivalents

$                 1,447


$                1,907





Restricted cash included in prepaid expenses and other                         

35


61

Total cash, cash equivalents and restricted cash

$                 1,482


$                1,968

Note: The prior periods presented here have been recast to reflect adoption of new accounting standards described earlier in this release.

 


DELTA AIR LINES, INC.
Consolidated Balance Sheets
(Unaudited)


(in millions)


March 31,

2018


December 31,
2017

Current Assets:

ASSETS




Cash and cash equivalents


$                1,447


$                1,814

Short-term investments


523


825

Accounts receivable, net


2,568


2,377

Fuel inventory


723


916

Expendable parts and supplies inventories, net


423


413

Prepaid expenses and other


2,040


1,499

Total current assets


7,724


7,844






Property and Equipment, Net:
    Property and equipment, net


27,096


26,563






Other Assets:
  
Goodwill


9,794


9,794

Identifiable intangibles, net


4,843


4,847

Deferred income taxes, net


1,175


1,354

Other noncurrent assets


3,446


3,309

Total other assets


19,258


19,304

Total assets


$               54,078


$               53,711


LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:








Current maturities of long-term debt and capital leases                                          

$                2,289


$                2,242

Air traffic liability

6,233


4,364

Accounts payable

3,351


3,674

Accrued salaries and related benefits

1,915


3,022

Frequent flyer deferred revenue

2,758


2,762

Fuel card obligation

1,062


1,067

Other accrued liabilities

2,404


1,868

Total current liabilities

20,012


18,999


Noncurrent Liabilities:

Long-term debt and capital leases

6,360


6,592

Pension, postretirement and related benefits

9,193


9,810

Frequent flyer deferred revenue

3,636


3,559

Other noncurrent liabilities

2,320


2,221

Total noncurrent liabilities

21,509


22,182





Commitments and Contingencies








Stockholders' Equity

12,557


12,530

Total liabilities and stockholders' equity

$               54,078


$               53,711

Note: The prior periods presented here have been recast to reflect adoption of new accounting standards described earlier in this release.

Note A: The following tables show reconciliations of non-GAAP financial measures. The reasons Delta uses these measures are described below.

Delta sometimes uses information ("non-GAAP financial measures") that is derived from the Consolidated Financial Statements, but that is not presented in accordance with accounting principles generally accepted in the U.S. ("GAAP"). Under the U.S. Securities and Exchange Commission rules, non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. The tables below show reconciliations of non- GAAP financial measures used in this release to the most directly comparable GAAP financial measures. The prior periods presented here have been recast to reflect the adoption of new accounting standards.

Forward Looking Projections. The company is not able to reconcile certain forward looking non-GAAP financial measures because the adjusting items such as those used in the reconciliations below will not be known until the end of the period and could be significant.

Pre-tax Income and Net Income, adjusted. We adjust pre-tax income and net income for mark-to-market ("MTM") adjustments and settlements on fuel hedge contracts, the MTM adjustments recorded by our equity method investees, Virgin Atlantic and Aeroméxico, and unrealized gains/losses on our investments in GOL, China Eastern and Air France-KLM, to determine pre-tax income and net income, adjusted:

MTM adjustments are defined as fair value changes recorded in periods other than the settlement period. Such fair value changes  are not necessarily indicative of the actual settlement value of the underlying hedge in the contract settlement period. Settlements represent cash received or paid on hedge contracts settled during the period. We also record our proportionate share of   earnings/loss from our equity investments in Virgin Atlantic and Aeroméxico and the unrealized gain/loss on our investments in GOL, China Eastern and Air France-KLM in non-operating expense. We included the income tax effect of adjustments when presenting net income, adjusted. Adjusting for these items allows investors to better understand and analyze our core operational performance in the periods shown.

 


  Three Months Ended
      March 31, 2018
     

Three Months Ended
March 31, 2018







Pre-Tax

   Income    

Net

Net Income

(in millions, except per share data) 

Income

Tax

 Income

Per Diluted Share

GAAP  

$                     718

$           (171)

$          547

$                0.77

Adjusted for: 










     MTM adjustments and settlements   

(27)

12

(15)


     Equity Investment MTM adjustments          

3

(1)

2


     Unrealized gain on investments  

(18)

7

(11)


Total adjustments      

(42)

18

(24)

(0.03)

Non-GAAP          

$                     676

$          (153)

$          523

$               0.74

Year-over-year change                                   

                ~ $(104)




 


Three Months Ended
March 31, 2017 

Three Months Ended
March 31, 2017





Pre-Tax

Income

Net

Net Income

(in millions, except per share data)    

Income

Tax

Income

Per Diluted Share

GAAP  

$                  849

$               (288)

$                     561

$                     0.77

Adjusted for: 










MTM adjustments and settlements   

(84)

29

(55)


Equity Investment MTM adjustments      

16

(4)

12


Total adjustments       

(68)

25

(43)

(0.06)

Non-GAAP         

$                 781

$               (263)

$                     518

$                     0.71

 

Operating Revenue, adjusted and Total Revenue Per Available Seat Mile "TRASM", adjusted. We adjust Operating Revenue and TRASM for refinery sales to third parties to determine Operating revenue, adjusted and TRASM, adjusted because these revenues are not related to our airline segment.  Operating Revenue, adjusted and TRASM, adjusted therefore provide a more meaningful comparison of revenue from our airline operations to the rest of the airline industry.

 


Three Months Ended


(in millions) 

   March 31, 2018      

March 31, 2017         

Change

Operating revenue   

$                   9,968

$                   9,101

9.5%

Adjusted for:




     Third-party refinery sales   

(213)

(61)


Operating revenue, adjusted     

$                   9,755

$                   9,040

8.0%





Year-over-year change  

$                      715



 


Three Months Ended



March 31, 2018

March 31, 2017 

Change

TRASM (cents)    

16.77

15.73

6.6%

Adjusted for: 




     Third-party refinery sales     

(0.36)

(0.11)


TRASM, excluding refinery         

16.41

15.62

5.0%

 

Other Revenue, adjusted. We adjust other revenue for refinery sales to third parties to determine other revenue, adjusted because these revenues are not related to our airline segment. Other revenue, adjusted therefore provides a more meaningful comparison of revenue from our airline operations to the rest of the airline industry.

 


Three Months Ended 


(in millions)  

   March 31, 2018      

       March 31, 2017        

Change

Other revenue     

$                   1,001

$                      760


Adjusted for: 




   Third-party refinery sales    

(213)

(61)


Other revenue, adjusted    

$                     788

$                     699

12.7%

 

Operating Expense, adjusted. We adjust operating expense for MTM adjustments and settlements and third-party refinery sales for the same reasons described above under the headings Pre-tax Income and Net Income, adjusted and Operating Revenue and TRASM, adjusted to determine operating expense, adjusted.

 


Three Months Ended


  March 31,

 (in millions)       

2018

2017

Operating expense  

$         9,128

$   8,102

Adjusted for:  






     MTM adjustments and settlements                     

27

84




     Third-party refinery sales      

(213)

(61)

Operating expense, adjusted  

$ 8,942

$ 8,125

Year-over-year change  

$ 817


 

Fuel expense, adjusted and Average fuel price per gallon, adjusted. The tables below show the components of fuel expense, including the impact of the refinery segment and airline segment hedging on fuel expense and average price per gallon. We then adjust for MTM adjustments and settlements for the reason described below:

MTM adjustments and settlements. MTM adjustments are defined as fair value changes recorded in periods other than the settlement period. Such fair value changes are not necessarily indicative of the actual settlement value of the underlying hedge in the contract settlement period. Settlements represent cash received or paid on hedge contracts settled during the period. These items adjust fuel expense to show the economic impact of hedging, including cash received or paid on hedge contracts during the period. Adjusting for these items allows investors to understand and analyze our core operational performance in the periods shown.

 




Average Price Per Gallon


Three Months Ended 
March 31,

Three Months Ended
March 31,

(in millions, except per gallon data) 

2018

2017

2018

2017






Fuel purchase cost 

$             1,927

$        1,531

$              2.06

$  1.68






Airline segment fuel hedge impact 

(27)

(5)

(0.03)

(0.01)

Refinery segment impact 

(44)

(44)

(0.05)

(0.05)






Total fuel expense  

$             1,856

$        1,482

$              1.98

$ 1.62






MTM adjustments and settlements  

27

84

0.03

0.09






Total fuel expense, adjusted  

$             1,883

$        1,566

$              2.01

$ 1.71

Year-over-year change  

$                317




Year-over-year % change  

20%




 

Non-Fuel Unit Cost or Cost per Available Seat Mile ("CASM-Ex"). We adjust CASM for the following items to determine CASM- Ex for the reasons described below:

 

Aircraft fuel and related taxes. The volatility in fuel prices impacts the comparability of year-over-year financial performance. The adjustment for aircraft fuel and related taxes allows investors to understand and analyze our non-fuel costs and year-over-year financial performance.

Ancillary businesses and refinery. These expenses include aircraft maintenance and staffing services we provide to third parties, our vacation wholesale operations and refinery cost of sales to third parties. Because these businesses are not related to the generation of a seat mile, we adjust for the costs related to these sales to provide a more meaningful comparison of the costs of our airline operations to the rest of the airline industry.

Profit sharing. We adjust for profit sharing because this adjustment allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.

                                                                                                   


Three Months Ended



March 31, 2018 

March 31, 2017

Change

CASM (cents)

15.35

14.00


Adjusted for:





Aircraft fuel and related taxes

(3.12)

(2.56)



Ancillary businesses and refinery

(0.83)

(0.51)



Profit sharing

(0.30)

(0.26)



CASM-Ex

11.10

10.67


3.9%

 

Non-operating Expense, adjusted. We adjust for equity investment MTM adjustments and unrealized gain/loss on investments to determine non-operating expense, adjusted for the same reason described above in the heading Pre-tax income and Net Income, adjusted.

 


Three Months Ended
March 31,

(in millions)

2018

2017

Non-operating expense
Adjusted for:
   
Equity Investment MTM adjustments          


   

$          122

          (3)


$        150

       (16)

Unrealized gain on investments


18


-

Non-operating expense, adjusted


 

$          137


 

$          134

Year-over-year change


        ~ flat



Free Cash Flow. We present free cash flow because management believes this metric is helpful to investors to evaluate the company's ability to generate cash that is available for use for debt service or general corporate initiatives. Adjustments include:

Hedge deferrals. During the March 2016 quarter, we deferred settlement of a portion of our hedge portfolio until 2017 by entering into transactions that, excluding market movements from the date of inception, would provide approximately $300 million in cash receipts during the second half of 2016 and require approximately $300 million in cash payments in 2017. Free cash flow is adjusted to include the impact of these deferral transactions in order to allow investors to understand the net impact of hedging activities in the period shown.

Reimbursements related to build-to-suit facilities and other. Management believes investors should be informed that these reimbursements for build-to-suit leased facilities effectively reduce net cash provided by operating activities and related capital expenditures.

Net purchases (redemptions) of short-term investments. Net purchases (redemptions) of short-term investments represent the net purchase and sale activity of investments and marketable securities in the period, including gains and losses. We adjust free cash flow for this activity, net, to provide investors a better understanding of the company's free cash flow position core to operations.

(in millions)   

Three Months Ended
March 31, 2018

Net cash provided by operating activities 

$                               1,343



Net cash used in investing activities      

(927)

Adjustments: 


     Hedge deferrals 

(19)

     Reimbursements related to build-to-suit facilities and other              

76

     Net redemptions of short-term investments  

(300)

Total free cash flow  

$                                  173

 

Capital Expenditures, net. We present net capital expenditures because management believes investors should be informed that a portion of these capital expenditures are reimbursed by a third party.

 

(in millions)  

Three Months Ended
March 31, 2018

Flight equipment, including advance payments  

$                             991



Ground property and equipment, including technology                         

274

Reimbursements related to build-to suit-facilities and other              

(83)

Capital expenditures, net  

$                          1,182

 

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SOURCE Delta Air Lines