SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-5424

DELTA AIR LINES, INC.

State of Incorporation: Delaware

IRS Employer Identification No.: 58-0218548

P.O. Box 20706, Atlanta, Georgia 30320-6001

Telephone: (404) 715-2600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements for the past 90 days.
Yes þ   No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act).
Yes þ   No o

Number of shares outstanding by each class of common stock,
as of April 30, 2005:

Common Stock, $1.50 par value - 143,646,694 shares outstanding

This document is also available on our web site at http://investor.delta.com/edgar.cfm.

FORWARD-LOOKING STATEMENTS

     Statements in this Form 10-Q (or otherwise made by us or on our behalf) that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations. For examples of such risks and uncertainties, please see the cautionary statements contained in “Risk Factors Relating to Delta” and “Risk Factors Relating to the Airline Industry” in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report.

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Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DELTA AIR LINES, INC.
Consolidated Balance Sheets
(In Millions, Except Share Data)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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DELTA AIR LINES, INC.
Consolidated Balance Sheets
(In Millions, Except Share Data)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
(In Millions, Except Share and Per Share Data)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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DELTA AIR LINES, INC.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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DELTA AIR LINES, INC.

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DELTA AIR LINES, INC.
Aircraft Fleet Table  ⁽¹⁾
(Unaudited)

Our aircraft fleet, orders, options and rolling options at March 31, 2005 are summarized in the following table. Options have scheduled delivery slots. Rolling options replace options and are assigned delivery slots as options expire or are exercised.

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DELTA AIR LINES, INC.
Notes to the Condensed Consolidated Financial Statements
March 31, 2005
(Unaudited)

1. ACCOUNTING AND REPORTING POLICIES

Basis of Presentation

     The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, 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 the accompanying Notes in our Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (“Form 10-K”).

     Management believes that the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal recurring items and restructuring and related items, considered necessary for a fair statement of results for the interim periods presented. We have reclassified certain prior period amounts in our Condensed Consolidated Financial Statements to be consistent with our current period presentation. The effect of these reclassifications is not material.

     Due to seasonal variations in the demand for air travel and other factors, operating results for the three months ended March 31, 2005 are not necessarily indicative of operating results for the entire year.

Business Environment

Financial Results

     We recorded an unaudited consolidated net loss of $1.1 billion in the three months ended March 31, 2005. This loss reflects the substantial challenges we face due to historically high aircraft fuel prices and a sharp decline in passenger mile yield. As discussed elsewhere in this Form 10-Q, our financial results for the March 2005 quarter included a $387 million net charge due to pension settlements, asset writedowns, restructuring and related items, and an income tax benefit associated with adjustments to our additional minimum pension liability. Our cash and cash equivalents and short-term investments were $1.8 billion at March 31, 2005.

     Historically high aircraft fuel prices are having a significant adverse effect on our financial performance. Fuel expense increased 54%, or $310 million, in the March 2005 quarter compared to the corresponding period in 2004, with approximately 94%, or

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$290 million, of this increase due to higher fuel prices. Our average fuel price per gallon was $1.42 for the March 2005 quarter, a 49% increase over the same period a year ago. Fare increases implemented during the March 2005 quarter in response to rising aircraft fuel prices offset only a small portion of those cost increases. During the March 2005 quarter, we had no hedges or contractual arrangements in place to reduce our fuel costs below market levels, and we have no such arrangements that would reduce our costs below market levels in future periods.

     A weak pricing environment is also having a materially negative impact on our financial results. Although revenue passenger miles (“RPMs”), or traffic, rose 12% in the March 2005 quarter compared to the corresponding period in 2004, passenger revenue increased only 3% due to an 8% decrease in passenger mile yield on a year-over-year basis. We believe the decrease in passenger mile yield reflects permanent changes in the airline industry revenue environment due to various factors, including the continuing growth of low-cost carriers. We compete with low-cost carriers in most of our domestic markets, particularly at our primary hub in Atlanta and on routes between the Northeast and Florida. The decline in passenger mile yield also reflects the fact that we compete with airlines operating under Chapter 11 of the U.S. Bankruptcy Code.

     Our transformation plan, which is discussed in our Form 10-K and below, is intended to position us to achieve long-term success by appropriately aligning our cost structure with the revenue we can generate, and by enabling us to compete with low-cost carriers. Historically high aircraft fuel prices are, however, masking the progress we are making under our transformation plan. Accordingly, we believe that actions in addition to those contemplated by our transformation plan are essential if we are to achieve our goals. Therefore, we are evaluating potential strategies intended to further reduce our cost structure and to increase our liquidity. These strategies include additional cost reductions and revenue initiatives; further reductions in capital spending; potential asset sales; and accessing the capital markets by issuing equity or convertible debt securities. There can be no assurance that we will be able to implement any of these strategies or that these strategies, if implemented, will be sufficient to enable us to maintain adequate liquidity.

Our Transformation Plan

     On September 8, 2004, we outlined key elements of our transformation plan, which is intended to deliver approximately $5 billion in annual benefits by the end of 2006 (as compared to 2002), while also improving the service we provide to our customers. By the end of 2004, we had achieved approximately $2.3 billion of the $5 billion in targeted benefits under our previously implemented profit improvement program. We believe we are on track to achieve the remaining $2.7 billion in targeted benefits under our transformation plan. By the end of September 2005, we expect to implement initiatives that are intended to realize materially all of the targeted benefits.

     During the March 2005 quarter, we took several key actions under our transformation plan, including:

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	•	The implementation of Operation Clockwork, the redesign of our primary hub in Atlanta from a banked to a continuous hub to improve reliability and to reduce congestion. As a result of operational efficiencies from this initiative, we were able to increase system-wide capacity with the same number of aircraft.
	•	The dehubbing of our Dallas–Fort Worth operation and redeploying aircraft used in that market to grow our hub operations in Atlanta, Cincinnati and Salt Lake City, as well as offering new destinations and expanded frequencies in key focus cities such as New York City and Orlando.
	•	The expansion of our SimpliFaresTM initiative within the 48 contiguous United States. SimpliFares is a fundamental change in our pricing structure that is intended to better meet customer needs; to simplify our business; and to assist us in achieving a lower cost structure. Under SimpliFares, we lowered unrestricted fares on some routes by as much as 50%; reduced the number of fare categories; implemented a fare cap; and eliminated the Saturday night stay requirement that existed for certain fares. To date, SimpliFares is meeting our revenue expectations. Although SimpliFares has resulted in less traffic stimulation than we anticipated, this has been offset by a lower decline in passenger mile yield than we expected. While we expect SimpliFares will have a negative impact on our operating results for some period, we believe it will provide net benefits to us over the longer term by stimulating traffic; improving productivity by simplifying our product; and increasing customer usage of delta.com, our lowest cost distribution channel.
	•	The announcement of plans to outsource (1) heavy maintenance visits on certain aircraft types which, combined with efficiencies from consolidating certain maintenance work from Tampa to Atlanta, is expected to provide total savings of approximately $240 million over five years; and (2) certain human resources and payroll functions, which is expected to yield aggregate savings of approximately $40 million over seven years as well as allowing us to forego significant capital expenditures.

     For additional information about our transformation plan, including other key elements of that plan, see Note 1 of the Notes to the Consolidated Financial Statements in our Form 10-K.

Liquidity

     At March 31, 2005, we had cash and cash equivalents and short-term investments totaling $1.8 billion. During the March 2005 quarter, net borrowings totaled approximately $355 million, which included (1) the final installment of $250 million under our financing agreement with American Express Travel Services Company, Inc. (“Amex”); (2) $85 million under a commitment from a third party to

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finance on a long-term secured basis our purchase of five regional jet aircraft delivered to us during the March 2005 quarter; and (3) $20 million in net borrowings under the revolving credit facility which is part of our financing agreement with GE Commercial Finance and other lenders (“GE Commercial Finance Facility”). Except for com