DELTA AIR LINES INC /DE/ - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2004

[ ] 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 [ X ] No [ ]

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

Number of shares outstanding by each class of common stock,
as of July 31, 2004:

Common Stock, $1.50 par value - 125,607,315 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 the Airline Industry and Delta 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.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

ASSETS	June 30, 2004			December 31, 2003
	(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	1,966		$	2,710
Restricted cash	267			207
Accounts receivable, net of an allowance for uncollectible accounts
of $32 at June 30, 2004 and $38 at December 31, 2003	823			662
Expendable parts and supplies inventories, net of an allowance for
obsolescence of $178 at June 30, 2004 and $183 at December 31, 2003	215			202
Deferred income taxes, net	90			293
Prepaid expenses and other	455			476
Total current assets	3,816			4,550
PROPERTY AND EQUIPMENT:
Flight equipment	21,285			21,008
Accumulated depreciation	(6,883		)	(6,497		)
Flight equipment, net	14,402			14,511
Flight and ground equipment under capital leases	481			463
Accumulated amortization	(372		)	(353		)
Flight and ground equipment under capital leases, net	109			110
Ground property and equipment	4,674			4,477
Accumulated depreciation	(2,573		)	(2,408		)
Ground property and equipment, net	2,101			2,069
Advance payments for equipment	121			62
Total property and equipment, net	16,733			16,752
OTHER ASSETS:
Goodwill	2,092			2,092
Operating rights and other intangibles, net of accumulated amortization
of $182 at June 30, 2004 and $179 at December 31, 2003	92			95
Restricted investments for Boston airport terminal project	189			286
Deferred income taxes, net	–			869
Other noncurrent assets	1,253			1,295
Total other assets	3,626			4,637
Total assets	$	24,175		$	25,939

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

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

LIABILITIES AND SHAREOWNERS' DEFICIT	June 30, 2004				December 31, 2003
	(Unaudited)
CURRENT LIABILITIES:
Current maturities of long-term debt and capital leases	$	499			$	1,021
Accounts payable, deferred credits and other accrued liabilities	1,726				1,709
Air traffic liability		1,896				1,308
Taxes payable	551				498
Accrued salaries and related benefits		1,232				1,285
Accrued rent	185				336
Total current liabilities	6,089				6,157
NONCURRENT LIABILITIES:
Long-term debt and capital leases	11,555				11,040
Long-term debt issued by Massachusetts Port Authority	498				498
Postretirement benefits	2,220				2,253
Accrued rent	731				701
Pension and related benefits	4,711				4,886
Deferred income taxes, net	278				-
Other	202				204
Total noncurrent liabilities	20,195				19,582
DEFERRED CREDITS:
Deferred gains on sale and leaseback transactions	401				426
Deferred revenue and other credits		161				158
Total deferred credits		562				584
COMMITMENTS AND CONTINGENCIES (Notes 4 and 5)
EMPLOYEE STOCK OWNERSHIP PLAN PREFERRED STOCK:
Series B ESOP Convertible Preferred Stock, $1.00 par value, $72.00 stated and liquidation value; 5,678,176 shares issued and outstanding at June 30, 2004, and 5,839,708 shares issued and outstanding at December 31, 2003		409				420
Unearned compensation under employee stock ownership plan		(128		)		(145		)
Total Employee Stock Ownership Plan Preferred Stock		281				275
SHAREOWNERS' DEFICIT:
Common stock, $1.50 par value; 450,000,000 shares authorized; 180,915,087 shares issued at June 30, 2004 and shares at December 31, 2003		271				271
Additional paid-in capital		3,205				3,272
Retained earnings (deficit)		(1,512		)		844
Accumulated other comprehensive loss		(2,287		)		(2,338		)
Treasury stock at cost, 55,695,590 shares at June 30, 2004 and 57,370,142 shares at December 31, 2003		(2,629		)		(2,708		)
Total shareowners' deficit		(2,952		)		(659		)
Total liabilities and shareowners' deficit	$		24,173		$		25,939

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

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003

OPERATING REVENUES:
Passenger:
Mainline	$	2,895		$	2,560		$	5,455		$	5,075
Regional affiliates		761			662			1,442			1,217
Cargo		125			114			247			228
Other, net		180			160			346			300
Total operating revenues		3,961			3,496			7,490			6,820

OPERATING EXPENSES:
Salaries and related costs		1,584			1,592			3,193			3,226
Aircraft fuel		669			435			1,243			946
Depreciation and amortization		311			306			618			609
Contracted services		249			219			490			451
Contract carrier arrangements		237			190			474			359
Landing fees and other rents		220			212			437			430
Aircraft maintenance materials and outside repairs		164			159			321			303
Aircraft rent		182			179			363			362
Other selling expenses		145			124			271			239
Passenger commissions		58			50			105			105
Passenger service		85			76			163			156
Pension settlements, restructuring and related items, net		117			-			117			43
Appropriations Act reimbursements		-			(398	)		-			(398	)
Other		181			156			324			328
Total operating expenses		4,202			3,300			8,119			7,159

OPERATING INCOME (LOSS)		(241	)		196			(629	)		(339	)