þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Or | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Large accelerated filer | þ | Accelerated filer | o | Non-accelerated filer | o | (Do not check if a smaller reporting company) |
Smaller reporting company | o | Emerging growth company | o |
Table of Contents | |
Page | |
/s/ Ernst & Young LLP | |
Atlanta, Georgia | |
October 11, 2018 |
(in millions, except share data) | September 30, 2018 | December 31, 2017 | |||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Short-term investments | |||||||
Accounts receivable, net of an allowance for uncollectible accounts of $12 at September 30, 2018 and December 31, 2017 | |||||||
Fuel inventory | |||||||
Expendable parts and supplies inventories, net of an allowance for obsolescence of $125 and $113 at September 30, 2018 and December 31, 2017, respectively | |||||||
Prepaid expenses and other | |||||||
Total current assets | |||||||
Property and Equipment, Net: | |||||||
Property and equipment, net of accumulated depreciation and amortization of $15,552 and $14,097 at September 30, 2018 and December 31, 2017, respectively | |||||||
Other Assets: | |||||||
Goodwill | |||||||
Identifiable intangibles, net of accumulated amortization of $857 and $845 at September 30, 2018 and December 31, 2017, respectively | |||||||
Cash restricted for airport construction | |||||||
Deferred income taxes, net | |||||||
Other noncurrent assets | |||||||
Total other assets | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current Liabilities: | |||||||
Current maturities of long-term debt and capital leases | $ | $ | |||||
Air traffic liability | |||||||
Accounts payable | |||||||
Accrued salaries and related benefits | |||||||
Frequent flyer deferred revenue | |||||||
Fuel card obligation | |||||||
Other accrued liabilities | |||||||
Total current liabilities | |||||||
Noncurrent Liabilities: | |||||||
Long-term debt and capital leases | |||||||
Pension, postretirement and related benefits | |||||||
Frequent flyer deferred revenue | |||||||
Other noncurrent liabilities | |||||||
Total noncurrent liabilities | |||||||
Commitments and Contingencies | |||||||
Stockholders' Equity: | |||||||
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 693,799,424 and 714,674,160 shares issued at September 30, 2018 and December 31, 2017, respectively | |||||||
Additional paid-in capital | |||||||
Retained earnings | |||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Treasury stock, at cost, 8,180,723 and 7,476,181 shares at September 30, 2018 and December 31, 2017, respectively | ( | ) | ( | ) | |||
Total stockholders' equity | |||||||
Total liabilities and stockholders' equity | $ | $ | |||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in millions, except per share data) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Operating Revenue: | |||||||||||||||
Passenger | $ | $ | $ | $ | |||||||||||
Cargo | |||||||||||||||
Other | |||||||||||||||
Total operating revenue | |||||||||||||||
Operating Expense: | |||||||||||||||
Salaries and related costs | |||||||||||||||
Aircraft fuel and related taxes | |||||||||||||||
Regional carriers expense, excluding fuel | |||||||||||||||
Depreciation and amortization | |||||||||||||||
Contracted services | |||||||||||||||
Passenger commissions and other selling expenses | |||||||||||||||
Ancillary businesses and refinery | |||||||||||||||
Aircraft maintenance materials and outside repairs | |||||||||||||||
Landing fees and other rents | |||||||||||||||
Profit sharing | |||||||||||||||
Passenger service | |||||||||||||||
Aircraft rent | |||||||||||||||
Other | |||||||||||||||
Total operating expense | |||||||||||||||
Operating Income | |||||||||||||||
Non-Operating Income/(Expense): | |||||||||||||||
Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Unrealized gain/(loss) on investments, net | ( | ) | |||||||||||||
Miscellaneous, net | ( | ) | |||||||||||||
Total non-operating income/(expense), net | ( | ) | ( | ) | ( | ) | |||||||||
Income Before Income Taxes | |||||||||||||||
Income Tax Provision | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net Income | $ | $ | $ | $ | |||||||||||
Basic Earnings Per Share | $ | $ | $ | $ | |||||||||||
Diluted Earnings Per Share | $ | $ | $ | $ | |||||||||||
Cash Dividends Declared Per Share | $ | $ | $ | $ | |||||||||||
Comprehensive Income | $ | $ | $ | $ | |||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. |
Nine Months Ended September 30, | |||||||
(in millions) | 2018 | 2017 | |||||
Net Cash Provided by Operating Activities | $ | $ | |||||
Cash Flows from Investing Activities: | |||||||
Property and equipment additions: | |||||||
Flight equipment, including advance payments | ( | ) | ( | ) | |||
Ground property and equipment, including technology | ( | ) | ( | ) | |||
Purchase of equity investments | ( | ) | |||||
Purchase of short-term investments | ( | ) | ( | ) | |||
Redemption of short-term investments | |||||||
Other, net | |||||||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash Flows from Financing Activities: | |||||||
Payments on long-term debt and capital lease obligations | ( | ) | ( | ) | |||
Repurchase of common stock | ( | ) | ( | ) | |||
Cash dividends | ( | ) | ( | ) | |||
Fuel card obligation | ( | ) | |||||
Proceeds from long-term obligations | |||||||
Other, net | ( | ) | |||||
Net cash used in financing activities | ( | ) | ( | ) | |||
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | ( | ) | |||||
Cash, cash equivalents and restricted cash at beginning of period | |||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||
Non-Cash Transactions: | |||||||
Treasury stock contributed to our qualified defined benefit pension plans | $ | $ | |||||
Flight and ground equipment acquired under capital leases | |||||||
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: | |||||||
September 30, | |||||||
(in millions) | 2018 | 2017 | |||||
Current assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Restricted cash included in prepaid expenses and other | |||||||
Other assets: | |||||||
Cash restricted for airport construction | |||||||
Total cash, cash equivalents and restricted cash | $ | $ | |||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. |
Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | ||||||||||||||||||
(in millions, except per share data) | As Previously Reported | Adjustments | Current Presentation | As Previously Reported | Adjustments | Current Presentation | |||||||||||||
Income statement: | |||||||||||||||||||
Passenger revenue | $ | $ | $ | $ | $ | $ | |||||||||||||
Cargo revenue | |||||||||||||||||||
Other revenue | ( | ) | ( | ) | |||||||||||||||
Total operating revenue | ( | ) | |||||||||||||||||
Operating expense | |||||||||||||||||||
Non-operating expense | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Income tax provision | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Net income | ( | ) | ( | ) | |||||||||||||||
Diluted earnings per share | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ |
December 31, 2017 | |||||||||
(in millions) | As Previously Reported | Adjustments | Current Presentation | ||||||
Balance sheet: | |||||||||
Deferred income taxes, net | $ | $ | $ | ||||||
Air traffic liability | ( | ) | |||||||
Frequent flyer deferred revenue (current and noncurrent) | |||||||||
Other accrued and other noncurrent liabilities | |||||||||
Retained earnings | ( | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
(in millions) | 2018 | 2017 | 2018 | 2017 | |||||||||
Ticket | $ | $ | $ | $ | |||||||||
Loyalty travel awards | |||||||||||||
Travel-related services | |||||||||||||
Total passenger revenue | $ | $ | $ | $ |
(in millions) | 2018 | 2017 | ||||||
Balance at January 1 | $ | $ | ||||||
Mileage credits earned | ||||||||
Travel mileage credits redeemed | ( | ) | ( | ) | ||||
Non-travel mileage credits redeemed | ( | ) | ( | ) | ||||
Balance at September 30 | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
(in millions) | 2018 | 2017 | 2018 | 2017 | |||||||||
Domestic | $ | $ | $ | $ | |||||||||
Atlantic | |||||||||||||
Latin America | |||||||||||||
Pacific | |||||||||||||
Total passenger revenue | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
(in millions) | 2018 | 2017 | 2018 | 2017 | |||||||||
Ancillary businesses and refinery | $ | $ | $ | $ | |||||||||
Loyalty program | |||||||||||||
Miscellaneous | |||||||||||||
Total other revenue | $ | $ | $ | $ |
(in millions) | September 30, 2018 | Level 1 | Level 2 | ||||||
Cash equivalents | $ | $ | $ | ||||||
Short-term investments | |||||||||
U.S. government and agency securities | |||||||||
Asset- and mortgage-backed securities | |||||||||
Corporate obligations | |||||||||
Other fixed income securities | |||||||||
Restricted cash equivalents | |||||||||
Long-term investments | |||||||||
Hedge derivatives, net | |||||||||
Fuel hedge contracts | ( | ) | ( | ) | ( | ) | |||
Interest rate contracts | ( | ) | ( | ) | |||||
Foreign currency exchange contracts | ( | ) | ( | ) |
(in millions) | December 31, 2017 | Level 1 | Level 2 | ||||||
Cash equivalents | $ | $ | $ | ||||||
Short-term investments | |||||||||
U.S. government and agency securities | |||||||||
Asset- and mortgage-backed securities | |||||||||
Corporate obligations | |||||||||
Other fixed income securities | |||||||||
Restricted cash equivalents | |||||||||
Long-term investments | |||||||||
Hedge derivatives, net | |||||||||
Fuel hedge contracts | ( | ) | ( | ) | ( | ) | |||
Foreign currency exchange contracts | ( | ) | ( | ) |
• | Fuel Contracts. Our fuel hedge portfolio consists of options, swaps and futures. The hedge contracts include crude oil and refined products, as these commodities are highly correlated with the price of fuel that we consume. Option contracts are valued under an income approach using option pricing models based on data either readily observable in public markets, derived from public markets or provided by counterparties who regularly trade in public markets. Volatilities used in these valuations ranged from |
• | Interest Rate Contracts. Our interest rate derivatives are swap contracts and they are valued based on data readily observable in public markets. |
• |
(in millions) | Total | ||||
Due in one year or less | $ | ||||
Due after one year through three years | |||||
Due after three years through five years | |||||
Due after five years | |||||
Total | $ |
• | Aeroméxico. We have a non-controlling |
• | Virgin Atlantic. We have a non-controlling |
• | Air France-KLM. We own |
• | GOL. We own |
• | China Eastern. We own a |
(in millions) | Volume | Final Maturity Date | Prepaid Expenses and Other | Other Noncurrent Assets | Other Accrued Liabilities | Other Noncurrent Liabilities | Hedge Derivatives, net | ||||||||||||
Designated as hedges | |||||||||||||||||||
Interest rate contracts (fair value hedges) | U.S. dollars | April 2028 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Foreign currency exchange contracts | Japanese yen | November 2019 | |||||||||||||||||
Not designated as hedges | |||||||||||||||||||
Foreign currency exchange contract | Euros | December 2020 | ( | ) | ( | ) | |||||||||||||
Fuel hedge contracts | gallons - crude oil and refined products | December 2019 | ( | ) | ( | ) | ( | ) | |||||||||||
Total derivative contracts | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(in millions) | Volume | Final Maturity Date | Prepaid Expenses and Other | Other Noncurrent Assets | Other Accrued Liabilities | Other Noncurrent Liabilities | Hedge Derivatives, net | ||||||||||||
Designated as hedges | |||||||||||||||||||
Foreign currency exchange contracts | Japanese yen | November 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Canadian dollars | May 2020 | ||||||||||||||||||
Not designated as hedges | |||||||||||||||||||
Fuel hedge contracts | gallons - crude oil and refined products | May 2019 | ( | ) | ( | ) | ( | ) | |||||||||||
Total derivative contracts | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(in millions) | Prepaid Expenses and Other | Other Noncurrent Assets | Other Accrued Liabilities | Other Noncurrent Liabilities | Hedge Derivatives, net | ||||||||||
September 30, 2018 | |||||||||||||||
Net derivative contracts | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
December 31, 2017 | |||||||||||||||
Net derivative contracts | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Effective Portion Reclassified from AOCI to Earnings | Effective Portion Recognized in Other Comprehensive Income | ||||||||||||
(in millions) | 2018 | 2017 | 2018 | 2017 | |||||||||
Three Months Ended September 30, | |||||||||||||
Foreign currency exchange contracts | $ | ( | ) | $ | $ | $ | ( | ) | |||||
Nine Months Ended September 30, | |||||||||||||
Foreign currency exchange contracts | $ | ( | ) | $ | $ | $ | ( | ) |
Maturity | Interest Rate(s)(5) Per Annum at | September 30, | December 31, | |||||||||
(in millions) | Dates | September 30, 2018 | 2018 | 2017 | ||||||||
Pacific Facilities: | ||||||||||||
Pacific Term Loan B-1 | n/a | n/a | n/a | $ | $ | |||||||
Pacific Revolving Credit Facility | n/a | n/a | n/a | |||||||||
2015 Credit Facilities: | ||||||||||||
Term Loan Facility | n/a | n/a | n/a | |||||||||
Revolving Credit Facility | n/a | n/a | n/a | |||||||||
Financing arrangements secured by aircraft: | ||||||||||||
Certificates(1) | 2018 | to | 2027 | to | ||||||||
Notes(1) | 2018 | to | 2026 | to | ||||||||
2018 Unsecured Notes | 2021 | to | 2028 | to | ||||||||
2018 Unsecured Revolving Credit Facility | 2021 | to | 2023 | undrawn | variable(4) | |||||||
NYTDC Special Facilities Revenue Bonds, Series 2018(1) | 2022 | to | 2036 | to | ||||||||
Other unsecured notes | 2020 | to | 2022 | to | ||||||||
Other financings(1)(2) | 2019 | to | 2030 | to | ||||||||
Other revolving credit facilities(3) | 2019 | to | 2021 | undrawn | variable(4) | |||||||
Total secured and unsecured debt | ||||||||||||
Unamortized premium (discount) and debt issue cost, net | ( | ) | ||||||||||
Total debt | ||||||||||||
Less: current maturities | ( | ) | ( | ) | ||||||||
Total long-term debt | $ | $ |
(1) | Due in installments. |
(2) | Primarily includes unsecured bonds and debt secured by certain accounts receivable and real estate. |
(3) | As of September 30, 2018, we have $ |
(4) | Interest rate equal to LIBOR (generally subject to a floor) or another index rate, in each case plus a specified margin. |
(5) |
(in millions) | September 30, 2018 | December 31, 2017 | ||||
Total debt at par value | $ | $ | ||||
Unamortized premium (discount) and debt issue cost, net | ( | ) | ||||
Net carrying amount | $ | $ | ||||
Fair value | $ | $ |
Pension Benefits | Other Postretirement and Postemployment Benefits | |||||||||||
(in millions) | 2018 | 2017 | 2018 | 2017 | ||||||||
Three Months Ended September 30, | ||||||||||||
Service cost | $ | $ | $ | $ | ||||||||
Interest cost | ||||||||||||
Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Amortization of prior service credit | ( | ) | ( | ) | ||||||||
Recognized net actuarial loss | ||||||||||||
Settlements | ||||||||||||
Net (benefit) cost | $ | ( | ) | $ | ( | ) | $ | $ | ||||
Nine Months Ended September 30, | ||||||||||||
Service cost | $ | $ | $ | $ | ||||||||
Interest cost | ||||||||||||
Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Amortization of prior service credit | ( | ) | ( | ) | ||||||||
Recognized net actuarial loss | ||||||||||||
Settlements | ||||||||||||
Net (benefit) cost | $ | ( | ) | $ | ( | ) | $ | $ |
(in millions) | Total | ||
Three months ending December 31, 2018 | $ | ||
2019 | |||
2020 | |||
2021 | |||
2022 | |||
Thereafter | |||
Total | $ |
Aircraft Type | Purchase Commitments | |
A220-100 (formerly called CS100) | ||
A321-200 | ||
A321-200neo | ||
A330-900neo | ||
A350-900 | ||
B-737-900ER | ||
CRJ-900 | ||
Total |
(in millions) | Pension and Other Benefits Liabilities(3) | Derivative Contracts and Other | Available-for-Sale Investments | Total | ||||||||
Balance at January 1, 2018 (net of tax effect of $1,400) | $ | ( | ) | $ | $ | $ | ( | ) | ||||
Changes in value (net of tax effect of $6) | ||||||||||||
Reclassifications into retained earnings (net of tax effect of $61)(1) | ( | ) | ( | ) | ||||||||
Reclassifications into earnings (net of tax effect of $51)(2) | ||||||||||||
Balance at September 30, 2018 (net of tax effect of $1,404) | $ | ( | ) | $ | $ | $ | ( | ) |
Balance at January 1, 2017 (net of tax effect of $1,458) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||
Changes in value (net of tax effect of $4) | ( | ) | ||||||||||
Reclassifications into earnings (net of tax effect of $63)(2) | ( | ) | ( | ) | ||||||||
Balance at September 30, 2017 (net of tax effect of $1,391) | $ | ( | ) | $ | $ | $ | ( | ) |
(1) | The reclassification into retained earnings relates to our investments in GOL, China Eastern and other available-for-sale investments, and the related conversion to accounting for changes in fair value of these investments from AOCI to the income statement. See Note 1, "Summary of Significant Accounting Policies," for more information. |
(2) | Amounts reclassified from AOCI for pension and other benefits liabilities and for derivative contracts designated as foreign currency cash flow hedges are recorded in miscellaneous and in passenger revenue, respectively, in the income statement. The reclassification into earnings for investments relates to our investment in Grupo Aeroméxico and the related conversion to accounting under the equity method. The reclassification of the unrealized gain was recorded to non-operating income/(expense) in our income statement. |
(3) |
(in millions) | Airline | Refinery | Intersegment Sales/Other | Consolidated | ||||||||||
Three Months Ended September 30, 2018 | ||||||||||||||
Operating revenue: | $ | $ | $ | |||||||||||
Sales to airline segment | $ | ( | ) | (1) | ||||||||||
Exchanged products | ( | ) | (2) | |||||||||||
Sales of refined products | ( | ) | (3) | |||||||||||
Operating income | — | |||||||||||||
Interest expense (income), net | ( | ) | — | |||||||||||
Depreciation and amortization | — | |||||||||||||
Total assets, end of period | — | |||||||||||||
Capital expenditures | — | |||||||||||||
Three Months Ended September 30, 2017 | ||||||||||||||
Operating revenue: | $ | $ | $ | |||||||||||
Sales to airline segment | $ | ( | ) | (1) | ||||||||||
Exchanged products | ( | ) | (2) | |||||||||||
Sales of refined products | ( | ) | (3) | |||||||||||
Operating income | — | |||||||||||||
Interest expense, net | — | |||||||||||||
Depreciation and amortization | — | |||||||||||||
Total assets, end of period | — | |||||||||||||
Capital expenditures | — |
(1) | Represents transfers, valued on a market price basis, from the refinery to the airline segment for use in airline operations. We determine market price by reference to the market index for the primary delivery location, which is New York Harbor, for jet fuel from the refinery. |
(2) | Represents value of products delivered under our exchange agreements, as discussed above, determined on a market price basis. |
(3) | These sales were at or near cost; accordingly, the margin on these sales is de minimis. |
(in millions) | Airline | Refinery | Intersegment Sales/Other | Consolidated | ||||||||||
Nine Months Ended September 30, 2018 | ||||||||||||||
Operating revenue: | $ | $ | $ | |||||||||||
Sales to airline segment | $ | ( | ) | (1) | ||||||||||
Exchanged products | ( | ) | (2) | |||||||||||
Sales of refined products | ( | ) | (3) | |||||||||||
Operating income | — | |||||||||||||
Interest expense (income), net | ( | ) | — | |||||||||||
Depreciation and amortization | — | |||||||||||||
Capital expenditures | — | |||||||||||||
Nine Months Ended September 30, 2017 | ||||||||||||||
Operating revenue: | $ | $ | $ | |||||||||||
Sales to airline segment | $ | ( | ) | (1) | ||||||||||
Exchanged products | ( | ) | (2) | |||||||||||
Sales of refined products | ( | ) | (3) | |||||||||||
Operating income | — | |||||||||||||
Interest expense, net | — | |||||||||||||
Depreciation and amortization | — | |||||||||||||
Capital expenditures | — |
(1) | Represents transfers, valued on a market price basis, from the refinery to the airline segment for use in airline operations. We determine market price by reference to the market index for the primary delivery location, which is New York Harbor, for jet fuel from the refinery. |
(2) | Represents value of products delivered under our exchange agreements, as discussed above, determined on a market price basis. |
(3) |
(in millions) | Lease Restructuring | ||
Liability as of January 1, 2018 | $ | ||
Payments | ( | ) | |
Additional expenses and other | |||
Liability as of September 30, 2018 | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
(in millions, except per share data) | 2018 | 2017 | 2018 | 2017 | |||||||||
Net income | $ | $ | $ | $ | |||||||||
Basic weighted average shares outstanding | |||||||||||||
Dilutive effect of share-based awards | |||||||||||||
Diluted weighted average shares outstanding | |||||||||||||
Basic earnings per share | $ | $ | $ | $ | |||||||||
Diluted earnings per share | $ | $ | $ | $ |
Three Months Ended September 30, | Increase (Decrease) | % Increase (Decrease) | |||||||||
(in millions) | 2018 | 2017 | |||||||||
Ticket - Main cabin | $ | 5,873 | $ | 5,724 | $ | 149 | 2.6 | % | |||
Ticket - Business cabin and premium products | 3,680 | 3,088 | 592 | 19.2 | % | ||||||
Loyalty travel awards | 678 | 622 | 56 | 9.0 | % | ||||||
Travel-related services | 565 | 545 | 20 | 3.7 | % | ||||||
Total passenger revenue | $ | 10,796 | $ | 9,979 | $ | 817 | 8.2 | % | |||
Cargo | 226 | 191 | 35 | 18.5 | % | ||||||
Other | 931 | 891 | 40 | 4.4 | % | ||||||
Total operating revenue | $ | 11,953 | $ | 11,061 | $ | 892 | 8.1 | % | |||
TRASM (cents) | 16.40 | ¢ | 15.77 | ¢ | 0.63 | ¢ | 4.0 | % | |||
Third-party refinery sales(1) | (0.15 | ) | (0.18 | ) | 0.03 | NM | |||||
TRASM, adjusted (cents) | 16.25 | ¢ | 15.58 | ¢ | 0.67 | ¢ | 4.3 | % |
(1) | For additional information on adjusting for third-party refinery sales, see "Supplemental Information" below. |
Increase (Decrease) vs. Three Months Ended September 30, 2017 | ||||||||||||||||
(in millions) | Three Months Ended September 30, 2018 | Passenger Revenue | RPMs (Traffic) | ASMs (Capacity) | Passenger Mile Yield | PRASM | Load Factor | |||||||||
Domestic | $ | 7,395 | 9.2 | % | 5.7 | % | 5.6 | % | 3.2 | % | 3.3 | % | 0.1 | pts | ||
Atlantic | 1,996 | 10.7 | % | 3.5 | % | 2.7 | % | 7.0 | % | 7.8 | % | 0.7 | pts | |||
Latin America | 675 | (2.6 | )% | (1.8 | )% | 0.3 | % | (0.8 | )% | (2.9 | )% | (1.9 | ) | pts | ||
Pacific | 730 | 3.0 | % | (3.1 | )% | (1.7 | )% | 6.3 | % | 4.8 | % | (1.3 | ) | pts | ||
Total | $ | 10,796 | 8.2 | % | 3.8 | % | 3.9 | % | 4.2 | % | 4.2 | % | — | pts |
Three Months Ended September 30, | Increase (Decrease) | % Increase (Decrease) | |||||||||
(in millions) | 2018 | 2017 | |||||||||
Ancillary businesses and refinery | $ | 433 | $ | 419 | $ | 14 | 3.3 | % | |||
Loyalty program | 369 | 317 | 52 | 16.4 | % | ||||||
Miscellaneous | 129 | 155 | (26 | ) | (16.8 | )% | |||||
Total other revenue | $ | 931 | $ | 891 | $ | 40 | 4.4 | % |
Three Months Ended September 30, | Increase (Decrease) | % Increase (Decrease) | |||||||||
(in millions) | 2018 | 2017 | |||||||||
Salaries and related costs | $ | 2,753 | $ | 2,619 | $ | 134 | 5.1 | % | |||
Aircraft fuel and related taxes | 2,498 | 1,785 | 713 | 39.9 | % | ||||||
Regional carriers expense, excluding fuel | 903 | 887 | 16 | 1.8 | % | ||||||
Depreciation and amortization | 580 | 571 | 9 | 1.6 | % | ||||||
Contracted services | 562 | 543 | 19 | 3.5 | % | ||||||
Passenger commissions and other selling expenses | 535 | 499 | 36 | 7.2 | % | ||||||
Ancillary businesses and refinery | 410 | 387 | 23 | 5.9 | % | ||||||
Aircraft maintenance materials and outside repairs | 371 | 390 | (19 | ) | (4.9 | )% | |||||
Landing fees and other rents | 421 | 392 | 29 | 7.4 | % | ||||||
Profit sharing | 395 | 314 | 81 | 25.8 | % | ||||||
Passenger service | 329 | 331 | (2 | ) | (0.6 | )% | |||||
Aircraft rent | 99 | 89 | 10 | 11.2 | % | ||||||
Other | 455 | 431 | 24 | 5.6 | % | ||||||
Total operating expense | $ | 10,311 | $ | 9,238 | $ | 1,073 | 11.6 | % |
Average Price Per Gallon | ||||||||||||||||||
Three Months Ended September 30, | Change | Three Months Ended September 30, | Change | |||||||||||||||
(in millions, except per gallon data) | 2018 | 2017 | 2018 | 2017 | ||||||||||||||
Fuel purchase cost(1) | $ | 2,526 | $ | 1,822 | $ | 704 | $ | 2.23 | $ | 1.64 | $ | 0.59 | ||||||
Airline segment fuel hedge impact | (16 | ) | — | (16 | ) | (0.01 | ) | — | (0.01 | ) | ||||||||
Refinery segment impact | (12 | ) | (37 | ) | 25 | (0.01 | ) | (0.03 | ) | 0.02 | ||||||||
Total fuel expense | $ | 2,498 | $ | 1,785 | $ | 713 | $ | 2.21 | $ | 1.61 | $ | 0.60 | ||||||
MTM adjustments and settlements(2) | 16 | 74 | (58 | ) | 0.01 | 0.07 | (0.06 | ) | ||||||||||
Total fuel expense, adjusted | $ | 2,514 | $ | 1,859 | $ | 655 | $ | 2.22 | $ | 1.68 | $ | 0.54 |
(1) | Market price for jet fuel at airport locations, including related taxes and transportation costs. |
(2) | Mark-to-market ("MTM") adjustments and settlements include the effects of the derivative transactions disclosed in Note 5 of the Notes to the Condensed Consolidated Financial Statements. For additional information and the reason for adjusting fuel expense, see "Supplemental Information" below. |
Nine Months Ended September 30, | Increase (Decrease) | % Increase (Decrease) | |||||||||
(in millions) | 2018 | 2017 | |||||||||
Ticket - Main cabin | $ | 16,158 | $ | 15,914 | $ | 244 | 1.5 | % | |||
Ticket - Business cabin and premium products | 10,356 | 8,609 | 1,747 | 20.3 | % | ||||||
Loyalty travel awards | 1,976 | 1,826 | 150 | 8.2 | % | ||||||
Travel-related services | 1,617 | 1,576 | 41 | 2.6 | % | ||||||
Total passenger revenue | $ | 30,107 | $ | 27,925 | $ | 2,182 | 7.8 | % | |||
Cargo | 651 | 542 | 109 | 20.0 | % | ||||||
Other | 2,938 | 2,443 | 495 | 20.3 | % | ||||||
Total operating revenue | $ | 33,696 | $ | 30,910 | $ | 2,786 | 9.0 | % | |||
TRASM (cents) | 16.78 | ¢ | 15.91 | ¢ | 0.87 | ¢ | 5.5 | % | |||
Third-party refinery sales(1) | (0.27 | ) | (0.13 | ) | (0.14 | ) | NM | ||||
TRASM, adjusted (cents) | 16.51 | ¢ | 15.78 | ¢ | 0.73 | ¢ | 4.6 | % |
(1) | For additional information on adjusting for third-party refinery sales, see "Supplemental Information" below. |
Increase (Decrease) vs. Nine Months Ended September 30, 2017 | ||||||||||||||||
(in millions) | Nine Months Ended September 30, 2018 | Passenger Revenue | RPMs (Traffic) | ASMs (Capacity) | Passenger Mile Yield | PRASM | Load Factor | |||||||||
Domestic | $ | 21,093 | 8.1 | % | 4.9 | % | 5.2 | % | 3.0 | % | 2.7 | % | (0.3 | ) | pts | |
Atlantic | 4,837 | 12.5 | % | 3.6 | % | 2.6 | % | 8.7 | % | 9.6 | % | 0.8 | pts | |||
Latin America | 2,228 | 0.1 | % | (2.6 | )% | (1.4 | )% | 2.8 | % | 1.5 | % | (1.1 | ) | pts | ||
Pacific | 1,949 | 3.7 | % | (2.0 | )% | (2.3 | )% | 5.7 | % | 6.1 | % | 0.3 | pts | |||
Total | $ | 30,107 | 7.8 | % | 3.3 | % | 3.4 | % | 4.4 | % | 4.3 | % | (0.1 | ) | pts |
Nine Months Ended September 30, | Increase (Decrease) | % Increase (Decrease) | |||||||||
(in millions) | 2018 | 2017 | |||||||||
Ancillary businesses and refinery | $ | 1,475 | $ | 1,050 | $ | 425 | 40.5 | % | |||
Loyalty program | 1,075 | 939 | 136 | 14.5 | % | ||||||
Miscellaneous | 388 | 454 | (66 | ) | (14.5 | )% | |||||
Total other revenue | $ | 2,938 | $ | 2,443 | $ | 495 | 20.3 | % |
Nine Months Ended September 30, | Increase (Decrease) | % Increase (Decrease) | |||||||||
(in millions) | 2018 | 2017 | |||||||||
Salaries and related costs | $ | 8,004 | $ | 7,525 | $ | 479 | 6.4 | % | |||
Aircraft fuel and related taxes | 6,693 | 4,954 | 1,739 | 35.1 | % | ||||||
Regional carriers expense, excluding fuel | 2,643 | 2,589 | 54 | 2.1 | % | ||||||
Depreciation and amortization | 1,780 | 1,639 | 141 | 8.6 | % | ||||||
Contracted services | 1,646 | 1,572 | 74 | 4.7 | % | ||||||
Passenger commissions and other selling expenses | 1,473 | 1,371 | 102 | 7.4 | % | ||||||
Ancillary businesses and refinery | 1,396 | 975 | 421 | 43.2 | % | ||||||
Aircraft maintenance materials and outside repairs | 1,233 | 1,214 | 19 | 1.6 | % | ||||||
Landing fees and other rents | 1,201 | 1,126 | 75 | 6.7 | % | ||||||
Profit sharing | 978 | 803 | 175 | 21.8 | % | ||||||
Passenger service | 892 | 849 | 43 | 5.1 | % | ||||||
Aircraft rent | 291 | 258 | 33 | 12.8 | % | ||||||
Other | 1,305 | 1,230 | 75 | 6.1 | % | ||||||
Total operating expense | $ | 29,535 | $ | 26,105 | $ | 3,430 | 13.1 | % |
Average Price Per Gallon | ||||||||||||||||||
Nine Months Ended September 30, | Change | Nine Months Ended September 30, | Change | |||||||||||||||
(in millions, except per gallon data) | 2018 | 2017 | 2018 | 2017 | ||||||||||||||
Fuel purchase cost(1) | $ | 6,814 | $ | 5,029 | $ | 1,785 | $ | 2.17 | $ | 1.64 | $ | 0.53 | ||||||
Airline segment fuel hedge impact | (20 | ) | 12 | (32 | ) | (0.01 | ) | — | (0.01 | ) | ||||||||
Refinery segment impact | (101 | ) | (87 | ) | (14 | ) | (0.03 | ) | (0.03 | ) | — | |||||||
Total fuel expense | $ | 6,693 | $ | 4,954 | $ | 1,739 | $ | 2.13 | $ | 1.61 | $ | 0.52 | ||||||
MTM adjustments and settlements(2) | 20 | 210 | (190 | ) | 0.01 | 0.07 | (0.06 | ) | ||||||||||
Total fuel expense, adjusted | $ | 6,713 | $ | 5,164 | $ | 1,549 | $ | 2.14 | $ | 1.68 | $ | 0.46 |
(1) | Market price for jet fuel at airport locations, including related taxes and transportation costs. |
(2) | MTM adjustments and settlements include the effects of the derivative transactions disclosed in Note 5 of the Notes to the Condensed Consolidated Financial Statements. For additional information and the reason for adjusting fuel expense, see "Supplemental Information" below. |
Non-Operating Results | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
(in millions) | 2018 | 2017 | Favorable (Unfavorable) | 2018 | 2017 | Favorable (Unfavorable) | |||||||||||||
Interest expense, net | $ | (84 | ) | $ | (100 | ) | $ | 16 | $ | (274 | ) | $ | (297 | ) | $ | 23 | |||
Unrealized gain/(loss) on investments, net | 50 | — | 50 | (171 | ) | — | (171 | ) | |||||||||||
Miscellaneous, net | 66 | 53 | 13 | 48 | (51 | ) | 99 | ||||||||||||
Total non-operating income/(expense), net | $ | 32 | $ | (47 | ) | $ | 79 | $ | (397 | ) | $ | (348 | ) | $ | (49 | ) |
Three Months Ended September 30, | % Increase (Decrease) | Nine Months Ended September 30, | % Increase (Decrease) | |||||||||||||
Consolidated(1) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue passenger miles (in millions) | 63,320 | 61,006 | 3.8 | % | 172,002 | 166,533 | 3.3 | % | ||||||||
Available seat miles (in millions) | 72,875 | 70,167 | 3.9 | % | 200,842 | 194,265 | 3.4 | % | ||||||||
Passenger mile yield | 17.05 | ¢ | 16.36 | ¢ | 4.2 | % | 17.50 | ¢ | 16.77 | ¢ | 4.4 | % | ||||
PRASM | 14.81 | ¢ | 14.22 | ¢ | 4.2 | % | 14.99 | ¢ | 14.37 | ¢ | 4.3 | % | ||||
TRASM | 16.40 | ¢ | 15.77 | ¢ | 4.0 | % | 16.78 | ¢ | 15.91 | ¢ | 5.5 | % | ||||
TRASM, adjusted(2) | 16.25 | ¢ | 15.58 | ¢ | 4.3 | % | 16.51 | ¢ | 15.78 | ¢ | 4.6 | % | ||||
CASM | 14.15 | ¢ | 13.17 | ¢ | 7.4 | % | 14.71 | ¢ | 13.44 | ¢ | 9.4 | % | ||||
CASM-Ex(2) | 9.62 | ¢ | 9.62 | ¢ | — | % | 10.19 | ¢ | 9.97 | ¢ | 2.2 | % | ||||
Passenger load factor | 86.9 | % | 86.9 | % | — | 85.6 | % | 85.7 | % | (0.1 | ) pts | |||||
Fuel gallons consumed (in millions) | 1,135 | 1,108 | 2.4 | % | 3,137 | 3,073 | 2.1 | % | ||||||||
Average price per fuel gallon(3) | $ | 2.21 | $ | 1.61 | 37.3 | % | $ | 2.13 | $ | 1.61 | 32.3 | % | ||||
Average price per fuel gallon, adjusted(3)(4) | $ | 2.22 | $ | 1.68 | 32.1 | % | $ | 2.14 | $ | 1.68 | 27.3 | % |
(1) | Includes the operations of our regional carriers under capacity purchase agreements. |
(2) | Non-GAAP financial measure defined and reconciled to TRASM and CASM, respectively, in "Supplemental Information" below. |
(3) | Includes the impact of fuel hedge activity and refinery segment results. |
(4) | Non-GAAP financial measure defined and reconciled to average fuel price per gallon in "Results of Operations" for the three and nine months ended September 30, 2018 and 2017. |
Current Fleet(1) | Commitments(1) | ||||||||||||
Aircraft Type | Owned | Capital Lease | Operating Lease | Total | Average Age | Purchase | Options | ||||||
B-717-200 | 3 | 15 | 73 | 91 | 17.1 | — | — | ||||||
B-737-700 | 10 | — | — | 10 | 9.7 | — | — | ||||||
B-737-800 | 73 | 4 | — | 77 | 17.0 | — | — | ||||||
B-737-900ER | 65 | — | 39 | 104 | 2.7 | 26 | — | ||||||
B-757-200 | 89 | 9 | 2 | 100 | 21.1 | — | — | ||||||
B-757-300 | 16 | — | — | 16 | 15.6 | — | — | ||||||
B-767-300 | 2 | — | — | 2 | 25.3 | — | — | ||||||
B-767-300ER | 55 | 1 | — | 56 | 22.3 | — | — | ||||||
B-767-400ER | 21 | — | — | 21 | 17.8 | — | — | ||||||
B-777-200ER | 8 | — | — | 8 | 18.8 | — | — | ||||||
B-777-200LR | 10 | — | — | 10 | 9.5 | — | — | ||||||
A220-100 (formerly called CS100) | — | — | — | — | — | 75 | 50 | ||||||
A319-100 | 55 | — | 2 | 57 | 16.6 | — | — | ||||||
A320-200 | 55 | 3 | 4 | 62 | 23.1 | — | — | ||||||
A321-200 | 35 | — | 28 | 63 | 1.0 | 64 | — | ||||||
A321-200neo | — | — | — | — | — | 100 | 100 | ||||||
A330-200 | 11 | — | — | 11 | 13.5 | — | — | ||||||
A330-300 | 28 | — | 3 | 31 | 9.7 | — | — | ||||||
A330-900neo | — | — | — | — | — | 25 | — | ||||||
A350-900 | 11 | — | — | 11 | 0.7 | 14 | — | ||||||
MD-88 | 80 | 13 | — | 93 | 28.0 | — | — | ||||||
MD-90 | 49 | — | — | 49 | 21.6 | — | — | ||||||
Total | 676 | 45 | 151 | 872 | 16.2 | 304 | 150 |
(1) | Excludes certain aircraft we own, lease or have committed to purchase that are operated by regional carriers on our behalf shown in the table below. |
Fleet Type | ||||||||||||
Carrier | CRJ-200 | CRJ-700 | CRJ-900(3) | Embraer 170 | Embraer 175 | Total | ||||||
Endeavor Air, Inc.(1) | 42 | 3 | 109 | — | — | 154 | ||||||
ExpressJet Airlines, Inc.(2) | — | 12 | — | — | — | 12 | ||||||
SkyWest Airlines, Inc. | 86 | 25 | 37 | — | 37 | 185 | ||||||
Compass Airlines, Inc. | — | — | — | — | 36 | 36 | ||||||
Republic Airline, Inc. | — | — | — | 22 | 16 | 38 | ||||||
GoJet Airlines, LLC | — | 22 | 7 | — | — | 29 | ||||||
Total | 128 | 62 | 153 | 22 | 89 | 454 |
(1) | Endeavor Air, Inc. is a wholly owned subsidiary of Delta. |
(2) | Our relationship with ExpressJet Airlines, Inc. will conclude by the end of November 2018. |
(3) | In June 2018, we signed an agreement with Bombardier Commercial Aircraft to purchase 20 CRJ-900 aircraft, which are not included in the table above other than the first aircraft, which was delivered in September 2018. These aircraft will be operated by SkyWest Airlines, Inc., and will replace older dual-class aircraft that they own or lease. The new aircraft will be delivered through 2020. |
Three Months Ended September 30, | ||||||
(in millions) | 2018 | 2017 | ||||
Pre-tax income | $ | 1,674 | $ | 1,776 | ||
Adjusted for: | ||||||
MTM adjustments and settlements | (16 | ) | (74 | ) | ||
Equity investment MTM adjustments | (7 | ) | (7 | ) | ||
Unrealized gain/loss on investments | (50 | ) | — | |||
Pre-tax income, adjusted for special items | $ | 1,601 | $ | 1,696 |
• | Third-party refinery sales. We adjust TRASM for refinery sales to third parties to determine TRASM, adjusted because these revenues are not related to our airline segment. TRASM, adjusted therefore provides a more meaningful comparison of revenue from our airline operations to the rest of the airline industry. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||
TRASM | 16.40 | ¢ | 15.77 | ¢ | 16.78 | ¢ | 15.91 | ¢ | |||||
Adjusted for: | |||||||||||||
Third-party refinery sales | (0.15 | ) | (0.18 | ) | (0.27 | ) | (0.13 | ) | |||||
TRASM, adjusted | 16.25 | ¢ | 15.58 | ¢ | 16.51 | ¢ | 15.78 | ¢ |
• | 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 better 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 September 30, | Nine Months Ended September 30, | ||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||
CASM | 14.15 | ¢ | 13.17 | ¢ | 14.71 | ¢ | 13.44 | ¢ | |||||
Adjusted for: | |||||||||||||
Aircraft fuel and related taxes | (3.43 | ) | (2.54 | ) | (3.33 | ) | (2.55 | ) | |||||
Ancillary businesses and refinery | (0.56 | ) | (0.56 | ) | (0.70 | ) | (0.50 | ) | |||||
Profit sharing | (0.54 | ) | (0.45 | ) | (0.49 | ) | (0.41 | ) | |||||
CASM-Ex | 9.62 | ¢ | 9.62 | ¢ | 10.19 | ¢ | 9.97 | ¢ |
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value (in millions) of Shares That May Yet be Purchased Under the Plan or Programs | |||||||
July 2018 | 1,541,612 | $ | 51.62 | 1,541,612 | $ | 3,675 | |||||
August 2018 | 2,386,634 | $ | 55.69 | 2,386,634 | $ | 3,525 | |||||
September 2018 | 1,966,962 | $ | 57.92 | 1,966,962 | $ | 3,425 | |||||
Total | 5,895,208 | 5,895,208 |
15 |
31.1 |
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Delta Air Lines, Inc. | |
(Registrant) | |
/s/ Craig M. Meynard | |
Craig M. Meynard | |
Vice President and Chief Accounting Officer | |
(Principal Accounting Officer) | |
October 11, 2018 |
1. | I have reviewed this quarterly report on Form 10-Q of Delta Air Lines, Inc. ("Delta") for the quarterly period ended September 30, 2018; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Delta as of, and for, the periods presented in this report; |
4. | Delta's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Delta and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Delta, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of Delta's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in Delta's internal control over financial reporting that occurred during Delta's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, 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 equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Delta's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in Delta's internal control over financial reporting. |
October 11, 2018 | /s/ Edward H. Bastian |
Edward H. Bastian | |
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Delta Air Lines, Inc. ("Delta") for the quarterly period ended September 30, 2018; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Delta as of, and for, the periods presented in this report; |
4. | Delta's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Delta and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Delta, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of Delta's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in Delta's internal control over financial reporting that occurred during Delta's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, 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 equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Delta's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in Delta's internal control over financial reporting. |
October 11, 2018 | /s/ Paul A. Jacobson |
Paul A. Jacobson | |
Executive Vice President and Chief Financial Officer |
1. | such Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Delta. |
/s/ Edward H. Bastian | |
Edward H. Bastian | |
Chief Executive Officer | |
/s/ Paul A. Jacobson | |
Paul A. Jacobson | |
Executive Vice President and Chief Financial Officer | |
Document and Entity Information |
9 Months Ended |
---|---|
Sep. 30, 2018
shares
| |
Document and Entity Information [Abstract] | |
Document type | 10-Q |
Amendment flag | false |
Document period end date | Sep. 30, 2018 |
Document fiscal year focus | 2018 |
Document fiscal period focus | Q3 |
Entity registrant name | DELTA AIR LINES INC /DE/ |
Entity central index key | 0000027904 |
Current fiscal year end date | --12-31 |
Entity filer category | Large Accelerated Filer |
Entity emerging growth company | false |
Entity small business | false |
Entity common stock, shares outstanding | 685,618,701 |
Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) $ in Millions |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Current Assets: | ||
Allowance for uncollectible accounts | $ 12 | $ 12 |
Allowance for obsolescence | 125 | 113 |
Property and Equipment, Net: | ||
Accumulated depreciation and amortization | 15,552 | 14,097 |
Other Assets: | ||
Accumulated amortization of identifiable intangibles | $ 857 | $ 845 |
Stockholders' Equity: | ||
Common stock, par value (USD per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (shares) | 1,500,000,000 | 1,500,000,000 |
Common stock, shares issued (shares) | 693,799,424 | 714,674,160 |
Treasury stock, at cost (shares) | 8,180,723 | 7,476,181 |
Condensed Consolidated Statements of Cash Flows (Unaudited) - Reconciliation of Cash, Cash Equivalents, and Restricted Cash - USD ($) $ in Millions |
Sep. 30, 2018 |
Sep. 30, 2017 |
---|---|---|
Current Assets: | ||
Cash and cash equivalents | $ 1,380 | $ 1,478 |
Restricted cash included in prepaid expenses and other | 54 | 39 |
Other Assets: | ||
Cash restricted for airport construction | 1,214 | 0 |
Total cash, cash equivalents and restricted cash | $ 2,648 | $ 1,517 |
Summary of Significant Accounting Policies |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Delta Air Lines, Inc. and our wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by GAAP for complete financial statements. As a result, this Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying Notes in our Form 10-K for the year ended December 31, 2017. Management believes the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including normal recurring items, considered necessary for a fair statement of results for the interim periods presented. Due to seasonal variations in the demand for air travel, the volatility of aircraft fuel prices and other factors, operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of operating results for the entire year. We have recast prior period financial statements to conform with the adoption of the revenue recognition and retirement benefits standards described below. In addition, we have reclassified regional carriers fuel expense from regional carriers expense to aircraft fuel and related taxes, and consolidated ancillary businesses and refinery expenses into one financial statement line item, in addition to making other classification changes to conform to the current year presentation. Unless otherwise noted, all amounts disclosed are stated before consideration of income taxes. Recent Accounting Standards Standards Effective in Future Years Leases. In 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)." This ASU and subsequently issued amendments will require leases with durations greater than 12 months to be recognized on the balance sheet and is effective for interim and annual reporting periods beginning after December 15, 2018. In July 2018, the FASB issued ASU No. 2018-11, "Targeted Improvements - Leases (Topic 842)." This update provides an optional transition method that allows entities to elect to apply the standard prospectively at its effective date, versus recasting the prior periods presented. If elected, an entity would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We have not completed our assessment, including our evaluation of transition method and whether to early adopt, but the adoption of ASU 2016-02 will have a material impact on our Consolidated Balance Sheets. However, we do not expect the adoption to have a material impact on the recognition, measurement or presentation of lease expenses within the Condensed Consolidated Statements of Operations and Comprehensive Income ("income statement") or the Condensed Consolidated Statements of Cash Flows ("cash flows statement"). Information about our undiscounted future lease payments and the timing of those payments is in Note 7, "Lease Obligations," in our Form 10-K. Comprehensive Income. In February 2018, the FASB issued ASU No. 2018-02, "Income Statement—Reporting Comprehensive Income (Topic 220)." This standard provides an option to reclassify stranded tax effects within accumulated other comprehensive income/(loss) ("AOCI") to retained earnings due to the U.S. federal corporate income tax rate change in the Tax Cuts and Jobs Act of 2017. This standard is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. We have not completed our assessment, but the adoption of the standard may impact tax amounts stranded in AOCI related to our pension plans. We will adopt this standard effective January 1, 2019. Recently Adopted Standards Revenue from Contracts with Customers. In 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." Under this ASU and subsequently issued amendments, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration received. Entities may use a full retrospective approach or report the cumulative effect as of the date of adoption. We adopted this standard using the full retrospective transition method effective January 1, 2018 and recast prior year results as shown below. While the adoption of the new standard did not have a significant effect on earnings, approximately $2 billion of certain annual revenues that were previously classified in other revenue have been reclassified to passenger revenue. These revenues include baggage fees, administrative charges and other travel-related fees, which are deemed part of the single performance obligation of providing passenger transportation. In addition, the adoption of the new standard increased the rate used to account for frequent flyer miles. We previously analyzed our standalone sales of mileage credits to other airlines and customers to establish the accounting value for frequent flyer miles. Considering the guidance in the new standard, we changed our valuation of a mileage credit to an analysis of the award redemption value. The new valuation considers the quantitative value a passenger receives by redeeming miles for a ticket rather than paying cash. This change increased our frequent flyer liability at December 31, 2017 by $2.2 billion. The mileage deferral and redemption rates are approximately the same; therefore, assuming stable volume, there would not be a significant change in revenue recognized from the program in a given period. The adoption of the new standard also reduced our air traffic liability at December 31, 2017 by $524 million. This change primarily results from estimating the tickets that will expire unused and recognizing revenue at the scheduled flight date rather than when the unused tickets expire. See Note 2, "Revenue Recognition," for more information. Statement of Cash Flows. In 2016, the FASB issued ASU Nos. 2016-15 and 2016-18 related to the classification of certain cash receipts and cash payments, and the presentation of restricted cash within an entity's cash flows statement, respectively. We adopted these standards effective January 1, 2018. Financial Instruments. In 2016, the FASB issued ASU No. 2016-01, "Financial Instruments—Overall (Subtopic 825-10)." This standard makes several changes, including the elimination of the available-for-sale classification of equity investments, and requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income. In February 2018, the FASB issued ASU No. 2018-03, "Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10)" to clarify certain aspects of ASU No. 2016-01. We adopted these standards effective January 1, 2018. Our investments in GOL Linhas Aéreas Inteligentes, the parent company of VRG Linhas Aéreas (operating as GOL), and China Eastern were accounted for as available-for-sale with changes in fair value recognized in other comprehensive income. At the time of adoption, we reclassified an unrealized gain of $162 million related to these investments from AOCI to retained earnings. Our investment in Air France-KLM was accounted for at cost during 2017 as our investment agreement restricts the sale or transfer of these shares for five years. Upon adopting ASU Nos. 2016-01 and 2018-03, we recognized a $148 million gain in unrealized gain/(loss) on investments in our income statement related to the value of Air France-KLM's stock compared to our investment basis at December 31, 2017. Consistent with our investments in GOL and China Eastern, this investment is now accounted for at fair value with changes in fair value recognized in net income. Retirement Benefits. In 2017, the FASB issued ASU No. 2017-07, "Compensation—Retirement Benefits (Topic 715)." This standard requires an entity to report the service cost component in the same line item as other compensation costs. The other components of net (benefit) cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. We adopted this standard effective January 1, 2018. The components of the net (benefit) cost are shown in Note 7, "Employee Benefit Plans." As a result of the adoption, for the three and nine months ended September 30, 2017, we reclassified expense of $12 million and $36 million, respectively, from operating expense into non-operating income/(expense) in our income statement. Impact of Recently Adopted Standards We recast certain prior period amounts to conform with the adoption of the revenue recognition and retirement benefits standards, as shown in the tables below.
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Revenue Recognition |
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Revenue Recognition | REVENUE RECOGNITION Passenger Revenue Passenger revenue is primarily composed of passenger ticket sales, loyalty travel awards and travel-related services performed in conjunction with a passenger’s flight.
Ticket Passenger tickets. We record sales of passenger tickets to be flown by us or that we sell on behalf of other airlines in air traffic liability. Passenger revenue is recognized when we provide transportation or when ticket breakage occurs. For tickets that we sell on behalf of other airlines, we reduce the air traffic liability when consideration is remitted to those airlines. We periodically evaluate the estimated air traffic liability and record any adjustments in our income statement. These adjustments relate primarily to refunds, exchanges, ticket breakage, transactions with other airlines and other items for which final settlement occurs in periods subsequent to the sale of the related tickets at amounts other than the original sales price. We recognized approximately $3.5 billion in passenger revenue during each of the nine months ended September 30, 2018 and 2017 that was recorded in our air traffic liability balances at December 31, 2017 and 2016, respectively. We expect the remaining balance of the December 31, 2017 liability to be recognized by the end of 2018. Ticket breakage. We estimate the value of tickets that will expire unused and recognize revenue at the scheduled flight date. Regional carriers. Our regional carriers include both our contract carrier agreements with third-party regional carriers ("contract carriers") and Endeavor Air, Inc., our wholly owned subsidiary. Our contract carrier agreements are primarily structured as capacity purchase agreements where we purchase all or a portion of the contract carrier's capacity and are responsible for selling the seat inventory we purchase. We record revenue related to our capacity purchase agreements in passenger revenue and the related expenses in regional carriers expense, excluding fuel. Loyalty Travel Awards Loyalty travel awards revenue is related to the redemption of mileage credits for travel. We recognize loyalty travel awards revenue in passenger revenue as mileage credits are redeemed and travel is provided. See below for discussion of our frequent flyer program accounting policies. Travel-Related Services Travel-related services are primarily composed of services performed in conjunction with a passenger’s flight, including administrative fees (such as ticket change fees), baggage fees and on-board sales. We recognize revenue for these services when the related transportation service is provided. Prior to the adoption of the new standard, the majority of these fees were classified in other revenue. Frequent Flyer Program Our frequent flyer program (the "SkyMiles program") generates customer loyalty by rewarding customers with incentives to travel on Delta. This program allows customers to earn mileage credits by flying on Delta, Delta Connection and other airlines that participate in the SkyMiles program. When traveling, customers earn redeemable mileage credits based on the passenger's loyalty program status and travel fare paid. Customers can also earn mileage credits through participating companies such as credit card companies, hotels and car rental agencies. To facilitate transactions with participating companies, we sell mileage credits to non-airline businesses, customers and other airlines. Mileage credits are redeemable by customers in future periods for air travel on Delta and other participating airlines, membership in our Sky Club and other program awards. To reflect the mileage credits earned, the SkyMiles program includes two types of transactions that are considered revenue arrangements with multiple performance obligations: (1) mileage credit earned with travel and (2) mileage credit sold to participating companies. Passenger Ticket Sales Earning Mileage Credits. Passenger ticket sales earning mileage credits under our SkyMiles program provide customers with (1) mileage credits earned and (2) air transportation. We value each performance obligation on a standalone basis. To value the mileage credits earned, we consider the quantitative value a passenger receives by redeeming miles for a ticket rather than paying cash which is referred to as equivalent ticket value ("ETV"). Our estimate of ETV is adjusted for mileage credits that are not likely to be redeemed ("breakage"). Management uses statistical models to estimate breakage based on historical redemption patterns. A change in assumptions as to the actual redemption activity for mileage credits or the estimated fair value of mileage credits expected to be redeemed could have a material impact on our revenue in the year in which the change occurs and in future years. We recognize breakage proportionally during the period in which the remaining mileage credits are actually redeemed. We defer revenue for the mileage credits when earned and recognize loyalty travel awards in passenger revenue as the miles are redeemed and services are provided. We record the air transportation portion of the passenger ticket sales in air traffic liability and recognize passenger revenue when we provide transportation or if the ticket goes unused. Sale of Mileage Credits. During the nine months ended September 30, 2018 and 2017, total cash sales from marketing agreements were $2.6 billion and $2.3 billion, respectively, which are allocated to travel and other performance obligations, as discussed below. Customers may earn mileage credits based on their spending with participating companies such as credit card companies, hotels and car rental agencies with which we have marketing agreements to sell mileage credits. Our contracts to sell mileage credits under these marketing agreements have multiple performance obligations. Payments are typically due monthly based on the volume of miles sold during the period, and the terms of our marketing contracts are generally from one to eight years. During the nine months ended September 30, 2018 and 2017, total cash sales from marketing agreements were $2.6 billion and $2.3 billion, respectively, which are allocated to travel and other performance obligations, as discussed below. Our most significant contract to sell mileage credits relates to our co-brand credit card relationship with American Express. Our agreements with American Express provide for joint marketing, grant certain benefits to Delta-American Express co-branded credit card holders ("cardholders") and American Express Membership Rewards program participants, and allow American Express to market using our customer database. Cardholders earn mileage credits for making purchases using co-branded cards, may check their first bag for free, are granted discounted access to Delta Sky Club lounges and receive other benefits while traveling on Delta. Additionally, participants in the American Express Membership Rewards program may exchange their points for mileage credits under the SkyMiles program. We sell mileage credits at agreed-upon rates to American Express which are then provided to their customers under the co-brand credit card program and the Membership Rewards program. We account for marketing agreements, including American Express, consistent with the accounting method that allocates the consideration received to the individual products and services delivered. We allocate the value based on the relative selling prices of those products and services, which generally consist of award travel, baggage fee waivers, lounge access and the use of our brand. We determined our best estimate of the selling prices by considering discounted cash flow analysis using multiple inputs and assumptions, including: (1) the expected number of miles awarded and number of miles redeemed, (2) ETV for the award travel obligation, (3) published rates on our website for baggage fees, discounted access to Delta Sky Club lounges and other benefits while traveling on Delta and (4) brand value. We defer the amount for award travel obligation as part of frequent flyer deferred revenue and recognize loyalty travel awards in passenger revenue as the mileage credits are used for travel. Revenue allocated to services performed in conjunction with a passenger’s flight, such as baggage fee waivers, is recognized as travel-related services in passenger revenue when the related service is performed. Revenue allocated to access Delta Sky Club lounges is recognized as miscellaneous in other revenue as access is provided. Revenue allocated to the remaining performance obligations, primarily brand value, is recorded as loyalty program in other revenue over time as miles are delivered. Current Activity of the Frequent Flyer Program. Mileage credits are combined in one homogeneous pool and are not separately identifiable. As such, the revenue is comprised of miles that were part of the frequent flyer deferred revenue balance at the beginning of the period as well as miles that were issued during the period. The table below presents the activity of the current and noncurrent frequent flyer liability, and includes miles earned through travel and miles sold to participating companies, which are primarily through marketing agreements.
The timing of mileage redemptions can vary widely; however, the majority of new miles are redeemed within two years. Passenger Revenue by Geographic Region Passenger revenue is recognized in a specific geographic region based on the origin and destination of each flight segment. Our passenger revenue by geographic region (as defined by the U.S. Department of Transportation) is summarized in the following table:
Cargo Revenue Cargo revenue is recognized when we provide the transportation. Other Revenue
Ancillary Businesses and Refinery. Ancillary businesses and refinery includes aircraft maintenance and staffing services we provide to third parties, our vacation wholesale operations, our private jet operations and refinery production sales to third parties. Third-party refinery production sales are at or near cost; accordingly, the margin on these sales is de minimis. See Note 10, "Segments," for more information on revenue recognition within our refinery segment. Loyalty Program. Loyalty program revenues relate to brand usage and other performance obligations embedded in mileage credits sold, including redemption of mileage credits for non-travel awards. These revenues are included within the total cash sales from marketing agreements, discussed above. Miscellaneous. Miscellaneous revenue is primarily composed of lounge access and codeshare revenues. Accounts Receivable Accounts receivable primarily consist of amounts due from credit card companies from the sale of passenger tickets, ancillary businesses and refinery sales, and other companies for the purchase of mileage credits under the SkyMiles program. We provide an allowance for uncollectible accounts equal to the estimated losses expected to be incurred based on historical chargebacks, write-offs, bankruptcies and other specific analyses. Bad debt expense was not material in any period presented. Passenger Taxes and Fees |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | FAIR VALUE MEASUREMENTS Assets (Liabilities) Measured at Fair Value on a Recurring Basis
Cash Equivalents and Restricted Cash Equivalents. Cash equivalents generally consist of money market funds. Restricted cash equivalents generally consist of money market funds and time deposits, which primarily relate to proceeds from debt issued to finance a portion of the construction costs for the new terminal facilities at the LaGuardia Airport, certain self-insurance obligations and other airport commitments. The fair value of these cash equivalents is based on a market approach using prices and other relevant information generated by market transactions involving identical or comparable assets. Short-Term Investments. The fair values of short-term investments are based on a market approach using industry standard valuation techniques that incorporate observable inputs such as quoted market prices, interest rates, benchmark curves, credit ratings of the security and other observable information. Long-Term Investments. Our long-term investments that are measured at fair value primarily consist of equity investments in the parent company of GOL, China Eastern and, as of January 1, 2018, Air France-KLM. Our equity investments are valued based on market prices and are classified in other noncurrent assets. Hedge Derivatives. A portion of our derivative contracts are negotiated over-the-counter with counterparties without going through a public exchange. Accordingly, our fair value assessments give consideration to the risk of counterparty default (as well as our own credit risk). Such contracts are classified as Level 2 within the fair value hierarchy. The remainder of our hedge contracts are comprised of futures contracts, which are traded on a public exchange. These contracts are classified within Level 1 of the fair value hierarchy.
• Foreign Currency Exchange Contracts. Our foreign currency derivatives consist of Japanese yen and Euro forward contracts and are valued based on data readily observable in public markets.
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Investments |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | INVESTMENTS Short-Term Investments The estimated fair values of short-term investments, which approximate cost at September 30, 2018, are shown below by contractual maturity. Actual maturities may differ from contractual maturities because issuers of the securities may have the right to retire our investments without prepayment penalties.
Long-Term Investments We have developed strategic relationships with a number of airlines through equity investments and other forms of cooperation and support. Strategic relationships improve our coordination with these airlines and enable our customers to seamlessly connect to more destinations while enjoying a consistent, high-quality travel experience. Equity Method Investments
We account for these investments under the equity method of accounting and recognize our portion of their financial results in miscellaneous in our income statement under non-operating income/(expense). Fair Value Investments
Additionally, GOL has a $300 million five-year term loan facility with third parties, which we have guaranteed. Our entire guaranty is secured by GOL's ownership interest in Smiles, GOL's publicly traded loyalty program. Because GOL remains in compliance with the terms of its loan facility, we have not recorded a liability on our Consolidated Balance Sheet as of September 30, 2018.
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Derivatives and Risk Management |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives and Risk Management | DERIVATIVES AND RISK MANAGEMENT Changes in fuel prices, interest rates and foreign currency exchange rates impact our results of operations. In an effort to manage our exposure to these risks, we enter into derivative contracts and adjust our derivative portfolio as market conditions change. Fuel Price Risk Changes in fuel prices materially impact our results of operations. Our derivative contracts to hedge the financial risk from changing fuel prices are primarily related to Monroe’s refining margins. During the three and nine months ended September 30, 2018, we recorded fuel hedge gains of $7 million and fuel hedge losses of $85 million, respectively. During the three and nine months ended September 30, 2017, we recorded fuel hedge losses of $100 million and $3 million, respectively. Foreign Currency Exchange Risk We are subject to foreign currency exchange rate risk because we have revenue and expense denominated in foreign currencies with our primary exposures being the Japanese yen and the Euro. To manage exchange rate risk, we execute both our international revenue and expense transactions in the same foreign currency to the extent practicable. From time to time, we may also enter into foreign currency option and forward contracts. Our Japanese yen foreign currency exchange contracts are designated as cash flow hedges with the effective portion of the gains or losses on the derivatives recorded in passenger revenue in the income statement in the same period in which the hedged transaction affects earnings. In January 2018, we entered into a three-year U.S. dollar-Euro cross currency swap with a notional value of €375 million. This swap was intended to mitigate foreign currency volatility resulting from our Euro-denominated investment in Air France-KLM. In response to favorable changes in interest rates and the U.S. dollar-Euro exchange rate, we settled the cross currency swap in August 2018. Upon settlement, realized gains of $12 million and $18 million were reflected in miscellaneous under non-operating income/(expense) during the three and nine months ended September 30, 2018, respectively. Subsequently, we entered into a new U.S. dollar-Euro cross currency swap with a notional value of €397 million and a maturity date in December 2020. During the three months ended September 30, 2018, we recorded an unrealized loss on this new swap of $12 million, which is reflected in unrealized gain/(loss) on investments under non-operating income/(expense). Interest Rate Risk Our exposure to market risk from adverse 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. In April 2018, we entered into interest rate swaps which are designated as fair value hedges. These swaps range from three to ten years and have a total notional value of $1.6 billion. The objective of the swaps is to manage toward a higher percentage of net floating rate debt by swapping payments of fixed rate interest on the unsecured notes that we issued in the June 2018 quarter for payments of floating rate interest. The gains/losses on the swaps are recorded within interest expense in the income statement and offset the gain/losses in the related debt obligations due to interest rate fluctuations. Hedge Position as of September 30, 2018
Hedge Position as of December 31, 2017
Offsetting Assets and Liabilities We have master netting arrangements with our counterparties giving us the right to offset hedge assets and liabilities. However, we have elected not to offset the fair value positions recorded on our Consolidated Balance Sheets. The following table shows the net fair value positions by counterparty had we elected to offset.
Designated Hedge Gains (Losses) Gains (losses) related to our foreign currency exchange contracts are as follows:
Credit Risk |
Long-Term Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | LONG-TERM DEBT The following table summarizes our long-term debt:
2018 Unsecured Notes During the June 2018 quarter, we issued $1.6 billion in aggregate principal amount of unsecured notes, consisting of $600 million of 3.4% Notes due 2021, $500 million of 3.8% Notes due 2023 and $500 million of 4.375% Notes due 2028 (collectively, the "Notes"). Concurrently with issuing the Notes, we entered into interest rate derivatives that swapped payments of fixed rate interest for payments of floating rate interest, which reduced our effective interest rate to one-month LIBOR plus 1.17%. See Note 5, "Derivatives," for more information about the interest rate swaps. The Notes are equal in right of payment with our other unsubordinated indebtedness and senior in right of payment to our future subordinated debt. The Notes are subject to covenants that, among other things, limit our ability to incur liens securing indebtedness for borrowed money or capital leases and engage in mergers and consolidations or transfer all or substantially all of our assets, in each case subject to certain exceptions. The Notes are also subject to customary event of default provisions, including cross-defaults to other material indebtedness. If we experience certain changes of control, followed by a ratings decline of any series of Notes by two of the ratings agencies to a rating below investment grade, we must offer to repurchase such series. We used the net proceeds from the offering of the Notes to repay borrowings outstanding under our secured Pacific term loan B-1 facility and 2015 term loan facility and for general corporate purposes. 2018 Unsecured Revolving Credit Facility During the June 2018 quarter, we entered into a $2.65 billion unsecured revolving credit facility, up to $500 million of which may be used for the issuance of letters of credit (the “Revolving Credit Facility”). The Revolving Credit Facility was undrawn at the time we entered into it and remains undrawn. The Revolving Credit Facility replaced the undrawn secured Pacific Revolving Credit Facility and the 2015 Revolving Credit Facility, both of which were terminated in conjunction with the repayment of the term loans described above. The Revolving Credit Facility is split evenly into a $1.325 billion three-year facility and a $1.325 billion five-year facility. Borrowings on both facilities bear interest at a variable rate equal to LIBOR, or another index rate, in each case plus a specified margin. NYTDC Special Facilities Revenue Bonds During the June 2018 quarter, the New York Transportation Development Corporation ("NYTDC") issued Special Facilities Revenue Bonds, Series 2018 (the "2018 Bonds") in the aggregate principal amount of $1.4 billion. We entered into loan agreements with the NYTDC to use the proceeds from the 2018 Bonds to finance a portion of the construction costs for the new terminal facilities at the LaGuardia Airport. The proceeds from the 2018 Bonds are recorded in cash restricted for airport construction on the Consolidated Balance Sheet. Additional information about the construction project at the LaGuardia Airport is included in Note 8, "Airport Development," in our Form 10-K. We are required to pay debt service on the 2018 Bonds through payments under loan agreements with NYTDC, and we have guaranteed the 2018 Bonds. Fair Value of Debt 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. The fair value of debt, shown below, is principally based on reported market values, recently completed market transactions and estimates based on interest rates, maturities, credit risk and underlying collateral. Long-term debt is primarily classified as Level 2 within the fair value hierarchy.
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Employee Benefit Plans |
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Employee Benefit Plans | EMPLOYEE BENEFIT PLANS The following table shows the components of net (benefit) cost:
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Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Aircraft Purchase and Lease Commitments Our future aircraft purchase commitments totaled approximately $15.5 billion at September 30, 2018:
Our future aircraft purchase commitments included the following aircraft at September 30, 2018:
In June 2018, we signed an agreement with Bombardier Commercial Aircraft to purchase 20 CRJ-900 aircraft. These aircraft will be operated by SkyWest Airlines, Inc., and will replace older dual-class aircraft that they own or lease. The new aircraft will be delivered through 2020. Legal Contingencies We are involved in various legal proceedings related to employment practices, environmental issues, antitrust matters and other matters concerning our business. We record liabilities for losses from legal proceedings when we determine that it is probable that the outcome in a legal proceeding will be unfavorable and the amount of loss can be reasonably estimated. Although the outcome of the legal proceedings in which we are involved cannot be predicted with certainty, we believe that the resolution of these matters will not have a material adverse effect on our Condensed Consolidated Financial Statements. Other Contingencies General Indemnifications We are the lessee under many commercial real estate leases. It is common in these transactions for us, as the lessee, to agree to indemnify the lessor and the lessor's related parties for tort, environmental and other liabilities that arise out of or relate to our use or occupancy of the leased premises. This type of indemnity would typically make us responsible to indemnified parties for liabilities arising out of the conduct of, among others, contractors, licensees and invitees at, or in connection with, the use or occupancy of the leased premises. This indemnity often extends to related liabilities arising from the negligence of the indemnified parties, but usually excludes any liabilities caused by either their sole or gross negligence or their willful misconduct. Our aircraft and other equipment lease and financing agreements typically contain provisions requiring us, as the lessee or obligor, to indemnify the other parties to those agreements, including certain of those parties' related persons, against virtually any liabilities that might arise from the use or operation of the aircraft or other equipment. We believe that our insurance would cover most of our exposure to liabilities and related indemnities associated with the commercial real estate leases and aircraft and other equipment lease and financing agreements described above. While our insurance does not typically cover environmental liabilities, we have insurance policies in place as required by applicable environmental laws. Some of our aircraft and other financing transactions include provisions that require us to make payments to preserve an expected economic return to the lenders if that economic return is diminished due to specified changes in law or regulations. In some of these financing transactions, we also bear the risk of changes in tax laws that would subject payments to non-U.S. lenders to withholding taxes. We cannot reasonably estimate our potential future payments under the indemnities and related provisions described above because we cannot predict (1) when and under what circumstances these provisions may be triggered and (2) the amount that would be payable if the provisions were triggered because the amounts would be based on facts and circumstances existing at such time. Other |
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Accumulated Other Comprehensive Loss | ACCUMULATED OTHER COMPREHENSIVE LOSS The following tables show the components of accumulated other comprehensive loss:
(3) Includes $700 million of deferred income tax expense primarily related to pension and other benefit obligations that will not be recognized in net income until these obligations are fully extinguished. We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to continuing operations.
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segments | SEGMENTS Refinery Operations Our refinery segment operates for the benefit of the airline segment by providing jet fuel to the airline segment from its own production and through jet fuel obtained through agreements with third parties. The refinery's production consists of jet fuel, as well as non-jet fuel products. We use several counterparties to exchange the non-jet fuel products produced by the refinery for jet fuel consumed in our airline operations. The gross fair value of the products exchanged under these agreements during the three and nine months ended September 30, 2018 was $1.1 billion and $3.1 billion, respectively, compared to $910 million and $2.4 billion, respectively, for the three and nine months ended September 30, 2017. Segment Reporting Segment results are prepared based on our internal accounting methods described below, with reconciliations to consolidated amounts in accordance with GAAP. Our segments are not designed to measure operating income or loss directly related to the products and services included in each segment on a stand-alone basis.
(3) These sales were at or near cost; accordingly, the margin on these sales is de minimis.
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Restructuring |
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Sep. 30, 2018 | |||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||
Restructuring | RESTRUCTURING The following table shows the balances and activity for restructuring charges:
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Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | EARNINGS PER SHARE We calculate basic earnings per share by dividing net income by the weighted average number of common shares outstanding, excluding restricted shares. We calculate diluted earnings per share by dividing net income by the weighted average number of common shares outstanding plus the dilutive effect of outstanding share-based awards, including stock options and restricted stock awards. Antidilutive common stock equivalents excluded from the diluted earnings per share calculation are not material. The following table shows the computation of basic and diluted earnings per share:
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Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Delta Air Lines, Inc. and our wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by GAAP for complete financial statements. As a result, this Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying Notes in our Form 10-K for the year ended December 31, 2017. Management believes the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including normal recurring items, considered necessary for a fair statement of results for the interim periods presented. Due to seasonal variations in the demand for air travel, the volatility of aircraft fuel prices and other factors, operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of operating results for the entire year. We have recast prior period financial statements to conform with the adoption of the revenue recognition and retirement benefits standards described below. In addition, we have reclassified regional carriers fuel expense from regional carriers expense to aircraft fuel and related taxes, and consolidated ancillary businesses and refinery expenses into one financial statement line item, in addition to making other classification changes to conform to the current year presentation. |
Recent Accounting Standards | Recent Accounting Standards Standards Effective in Future Years Leases. In 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)." This ASU and subsequently issued amendments will require leases with durations greater than 12 months to be recognized on the balance sheet and is effective for interim and annual reporting periods beginning after December 15, 2018. In July 2018, the FASB issued ASU No. 2018-11, "Targeted Improvements - Leases (Topic 842)." This update provides an optional transition method that allows entities to elect to apply the standard prospectively at its effective date, versus recasting the prior periods presented. If elected, an entity would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We have not completed our assessment, including our evaluation of transition method and whether to early adopt, but the adoption of ASU 2016-02 will have a material impact on our Consolidated Balance Sheets. However, we do not expect the adoption to have a material impact on the recognition, measurement or presentation of lease expenses within the Condensed Consolidated Statements of Operations and Comprehensive Income ("income statement") or the Condensed Consolidated Statements of Cash Flows ("cash flows statement"). Information about our undiscounted future lease payments and the timing of those payments is in Note 7, "Lease Obligations," in our Form 10-K. Comprehensive Income. In February 2018, the FASB issued ASU No. 2018-02, "Income Statement—Reporting Comprehensive Income (Topic 220)." This standard provides an option to reclassify stranded tax effects within accumulated other comprehensive income/(loss) ("AOCI") to retained earnings due to the U.S. federal corporate income tax rate change in the Tax Cuts and Jobs Act of 2017. This standard is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. We have not completed our assessment, but the adoption of the standard may impact tax amounts stranded in AOCI related to our pension plans. We will adopt this standard effective January 1, 2019. Recently Adopted Standards Revenue from Contracts with Customers. In 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." Under this ASU and subsequently issued amendments, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration received. Entities may use a full retrospective approach or report the cumulative effect as of the date of adoption. We adopted this standard using the full retrospective transition method effective January 1, 2018 and recast prior year results as shown below. While the adoption of the new standard did not have a significant effect on earnings, approximately $2 billion of certain annual revenues that were previously classified in other revenue have been reclassified to passenger revenue. These revenues include baggage fees, administrative charges and other travel-related fees, which are deemed part of the single performance obligation of providing passenger transportation. In addition, the adoption of the new standard increased the rate used to account for frequent flyer miles. We previously analyzed our standalone sales of mileage credits to other airlines and customers to establish the accounting value for frequent flyer miles. Considering the guidance in the new standard, we changed our valuation of a mileage credit to an analysis of the award redemption value. The new valuation considers the quantitative value a passenger receives by redeeming miles for a ticket rather than paying cash. This change increased our frequent flyer liability at December 31, 2017 by $2.2 billion. The mileage deferral and redemption rates are approximately the same; therefore, assuming stable volume, there would not be a significant change in revenue recognized from the program in a given period. The adoption of the new standard also reduced our air traffic liability at December 31, 2017 by $524 million. This change primarily results from estimating the tickets that will expire unused and recognizing revenue at the scheduled flight date rather than when the unused tickets expire. See Note 2, "Revenue Recognition," for more information. Statement of Cash Flows. In 2016, the FASB issued ASU Nos. 2016-15 and 2016-18 related to the classification of certain cash receipts and cash payments, and the presentation of restricted cash within an entity's cash flows statement, respectively. We adopted these standards effective January 1, 2018. Financial Instruments. In 2016, the FASB issued ASU No. 2016-01, "Financial Instruments—Overall (Subtopic 825-10)." This standard makes several changes, including the elimination of the available-for-sale classification of equity investments, and requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income. In February 2018, the FASB issued ASU No. 2018-03, "Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10)" to clarify certain aspects of ASU No. 2016-01. We adopted these standards effective January 1, 2018. Our investments in GOL Linhas Aéreas Inteligentes, the parent company of VRG Linhas Aéreas (operating as GOL), and China Eastern were accounted for as available-for-sale with changes in fair value recognized in other comprehensive income. At the time of adoption, we reclassified an unrealized gain of $162 million related to these investments from AOCI to retained earnings. Our investment in Air France-KLM was accounted for at cost during 2017 as our investment agreement restricts the sale or transfer of these shares for five years. Upon adopting ASU Nos. 2016-01 and 2018-03, we recognized a $148 million gain in unrealized gain/(loss) on investments in our income statement related to the value of Air France-KLM's stock compared to our investment basis at December 31, 2017. Consistent with our investments in GOL and China Eastern, this investment is now accounted for at fair value with changes in fair value recognized in net income. |
Summary of Significant Accounting Policies (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of impact of recently adopted accounting standards | We recast certain prior period amounts to conform with the adoption of the revenue recognition and retirement benefits standards, as shown in the tables below.
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Revenue Recognition (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of disaggregation of revenue | Other Revenue
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Schedule of activity in frequent flyer liability | The table below presents the activity of the current and noncurrent frequent flyer liability, and includes miles earned through travel and miles sold to participating companies, which are primarily through marketing agreements.
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Schedule of revenue by geographic region | Our passenger revenue by geographic region (as defined by the U.S. Department of Transportation) is summarized in the following table:
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assets (liabilities) measured at fair value on a recurring basis | Assets (Liabilities) Measured at Fair Value on a Recurring Basis
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Investments (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of maturities for short-term investments | The estimated fair values of short-term investments, which approximate cost at September 30, 2018, are shown below by contractual maturity. Actual maturities may differ from contractual maturities because issuers of the securities may have the right to retire our investments without prepayment penalties.
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Derivatives and Risk Management (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of hedge positions | Hedge Position as of September 30, 2018
Hedge Position as of December 31, 2017
Offsetting Assets and Liabilities We have master netting arrangements with our counterparties giving us the right to offset hedge assets and liabilities. However, we have elected not to offset the fair value positions recorded on our Consolidated Balance Sheets. The following table shows the net fair value positions by counterparty had we elected to offset.
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Schedule of designated hedge gains (losses) | Gains (losses) related to our foreign currency exchange contracts are as follows:
|
Long-Term Debt (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | The following table summarizes our long-term debt:
(5) Certain aircraft and other financings are comprised of variable rate debt.
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Schedule of estimated fair value of debt instruments | The fair value of debt, shown below, is principally based on reported market values, recently completed market transactions and estimates based on interest rates, maturities, credit risk and underlying collateral. Long-term debt is primarily classified as Level 2 within the fair value hierarchy.
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Employee Benefit Plans (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components net (benefit) costs | The following table shows the components of net (benefit) cost:
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Commitments and Contingencies (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future aircraft purchase commitments | Our future aircraft purchase commitments totaled approximately $15.5 billion at September 30, 2018:
Our future aircraft purchase commitments included the following aircraft at September 30, 2018:
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Accumulated Other Comprehensive Loss (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of accumulated other comprehensive loss | The following tables show the components of accumulated other comprehensive loss:
(3) Includes $700 million of deferred income tax expense primarily related to pension and other benefit obligations that will not be recognized in net income until these obligations are fully extinguished. We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to continuing operations.
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Segments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment reporting information | Segment results are prepared based on our internal accounting methods described below, with reconciliations to consolidated amounts in accordance with GAAP. Our segments are not designed to measure operating income or loss directly related to the products and services included in each segment on a stand-alone basis.
(3) These sales were at or near cost; accordingly, the margin on these sales is de minimis.
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Restructuring (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||
Schedule of restructuring reserve and activity | The following table shows the balances and activity for restructuring charges:
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Earnings Per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of computation of basic and diluted earnings per share | The following table shows the computation of basic and diluted earnings per share:
|
Revenue Recognition - Passenger Revenue (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | $ 11,953 | $ 11,061 | $ 33,696 | $ 30,910 |
Passenger | ||||
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | 10,796 | 9,979 | 30,107 | 27,925 |
Ticket | ||||
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | 9,553 | 8,812 | 26,514 | 24,523 |
Loyalty travel awards | ||||
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | 678 | 622 | 1,976 | 1,826 |
Travel-related services | ||||
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | $ 565 | $ 545 | $ 1,617 | $ 1,576 |
Revenue Recognition - Narrative (Details) - USD ($) $ in Billions |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Disaggregation of Revenue [Line Items] | ||
Cash sales of mileage credits | $ 2.6 | $ 2.3 |
Majority of new miles redemption period (in years) | 2 years | |
Marketing contracts duration, minimum | 1 year | |
Marketing contracts duration, maximum | 8 years | |
Air Traffic | ||
Disaggregation of Revenue [Line Items] | ||
Revenue recognized that was previously deferred | $ 3.5 | $ 3.5 |
Revenue Recognition - Frequent Flyer Liability (Details) - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Frequent Flyer Liability Activity [Roll Forward] | ||
Mileage credits earned | $ 2,322 | $ 2,193 |
Travel mileage credits redeemed | (1,976) | (1,826) |
Non-travel mileage credits redeemed | (125) | (114) |
Frequent Flyer | ||
Frequent Flyer Liability Activity [Roll Forward] | ||
Deferred revenue (current and noncurrent), beginning | 6,321 | 5,922 |
Deferred revenue (current and noncurrent), ending | $ 6,542 | $ 6,175 |
Revenue Recognition - Passenger Revenue by Geographic Region (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | $ 11,953 | $ 11,061 | $ 33,696 | $ 30,910 |
Passenger | ||||
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | 10,796 | 9,979 | 30,107 | 27,925 |
Passenger | Domestic | ||||
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | 7,395 | 6,775 | 21,093 | 19,521 |
Passenger | Atlantic | ||||
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | 1,996 | 1,802 | 4,837 | 4,297 |
Passenger | Latin America | ||||
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | 675 | 693 | 2,228 | 2,226 |
Passenger | Pacific | ||||
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | $ 730 | $ 709 | $ 1,949 | $ 1,881 |
Revenue Recognition - Other Revenue (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | $ 11,953 | $ 11,061 | $ 33,696 | $ 30,910 |
Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | 931 | 891 | 2,938 | 2,443 |
Ancillary businesses and refinery | ||||
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | 433 | 419 | 1,475 | 1,050 |
Loyalty program | ||||
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | 369 | 317 | 1,075 | 939 |
Miscellaneous | ||||
Disaggregation of Revenue [Line Items] | ||||
Operating revenue | $ 129 | $ 155 | $ 388 | $ 454 |
Fair Value Measurements - Narrative (Details) - Fuel hedge contracts - Income Approach, Option Pricing Model - Option Volatility |
Sep. 30, 2018 |
---|---|
Minimum | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Measurement input | 0.18 |
Maximum | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Measurement input | 0.32 |
Investments - Schedule of maturities for short-term investments (Details) $ in Millions |
Sep. 30, 2018
USD ($)
|
---|---|
Short-Term Investments by Contractual Maturity: | |
Due in one year or less | $ 226 |
Due after one year through three years | 228 |
Due after three years through five years | 6 |
Due after five years | 18 |
Total | $ 478 |
Derivatives and Risk Management - Offsetting Assets and Liabilities (Details) - USD ($) $ in Millions |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Derivative | ||
Total derivative contracts, net | $ (76) | $ (83) |
Prepaid Expenses and Other | ||
Derivative | ||
Net derivative contracts, assets | 14 | 0 |
Other Noncurrent Assets | ||
Derivative | ||
Net derivative contracts, assets | 0 | 1 |
Other Accrued Liabilities | ||
Derivative | ||
Net derivative contracts, liabilities | (31) | (68) |
Other Noncurrent Liabilities | ||
Derivative | ||
Net derivative contracts, liabilities | $ (59) | $ (16) |
Derivatives and Risk Management - Designated Hedge Gains (Losses) (Details) - Foreign currency exchange contracts - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net | ||||
Effective Portion Reclassified from AOCI to Earnings | $ (1) | $ 0 | $ (4) | $ 11 |
Effective Portion Recognized in Other Comprehensive Income | $ 4 | $ (15) | $ 3 | $ (48) |
Long-Term Debt - Schedule of Fair Value of Debt (Details) - USD ($) $ in Millions |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt | ||
Total debt at par value | $ 8,864 | $ 8,539 |
Unamortized premium (discount) and debt issue cost, net | 17 | (99) |
Total debt | 8,881 | 8,440 |
Fair value | $ 9,000 | $ 8,700 |
Employee Benefit Plans - Schedule of Benefit Plan Components (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Pension Benefits | ||||
Defined Benefit Plan Disclosure | ||||
Service cost | $ 0 | $ 0 | $ 0 | $ 0 |
Interest cost | 195 | 213 | 586 | 639 |
Expected return on plan assets | (329) | (286) | (988) | (858) |
Amortization of prior service credit | 0 | 0 | 0 | 0 |
Recognized net actuarial loss | 66 | 66 | 199 | 198 |
Settlements | 0 | 0 | 4 | 0 |
Net (benefit) cost | (68) | (7) | (199) | (21) |
Other Postretirement and Postemployment Benefits | ||||
Defined Benefit Plan Disclosure | ||||
Service cost | 21 | 22 | 64 | 66 |
Interest cost | 32 | 35 | 95 | 105 |
Expected return on plan assets | (17) | (17) | (50) | (51) |
Amortization of prior service credit | (7) | (7) | (20) | (21) |
Recognized net actuarial loss | 10 | 8 | 27 | 24 |
Settlements | 0 | 0 | 0 | 0 |
Net (benefit) cost | $ 39 | $ 41 | $ 116 | $ 123 |
Commitments and Contingencies - Aircraft Purchase Commitments By Period (Details) - Future aircraft purchase commitments $ in Millions |
Sep. 30, 2018
USD ($)
|
---|---|
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity | |
Three months ending December 31, 2018 | $ 640 |
2019 | 3,330 |
2020 | 3,420 |
2021 | 3,920 |
2022 | 2,440 |
Thereafter | 1,770 |
Total | $ 15,520 |
Segments - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Segment Reporting Information, Profit (Loss) | ||||
Operating revenue | $ 11,953 | $ 11,061 | $ 33,696 | $ 30,910 |
Intersegment Sales/Other | Exchanged products | ||||
Segment Reporting Information, Profit (Loss) | ||||
Operating revenue | $ (1,110) | $ (910) | $ (3,081) | $ (2,399) |
Restructuring - Schedule of Restructuring Charges (Details) - Lease Restructuring $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2018
USD ($)
| |
Restructuring Reserve | |
Liability as of January 1, 2018 | $ 237 |
Payments | (54) |
Additional expenses and other | 1 |
Liability as of June 30, 2018 | $ 184 |
Restructuring - Narrative (Details) |
9 Months Ended |
---|---|
Sep. 30, 2018
seat
| |
Domestic | Regional carrier | |
Restructuring Cost and Reserve | |
Number of seats in plane | 50 |
Earnings Per Share - Schedule of Computation for Earnings Per Share Types (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Earnings Per Share [Abstract] | ||||
Net income | $ 1,312 | $ 1,159 | $ 2,884 | $ 2,907 |
Basic weighted average shares outstanding (shares) | 686 | 716 | 695 | 724 |
Dilutive effect of share-based awards (shares) | 2 | 3 | 2 | 3 |
Diluted weighted average shares outstanding (shares) | 688 | 719 | 697 | 727 |
Basic earnings per share (USD per share) | $ 1.91 | $ 1.62 | $ 4.15 | $ 4.01 |
Diluted earnings per share (USD per share) | $ 1.91 | $ 1.61 | $ 4.14 | $ 4.00 |
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