Merger-related charges push Delta Q4 loss over $1 billion
Delta reported a fourth-quarter net loss of $1.4 billion, a figure swelled by $970 million in non-cash, merger-related charges. Delta completed its merger with Northwest in the fourth quarter.

Of the merger-related charges, $904 million was employee equity awards issued or vested in connection with the merger. There was an $18 million charge related to Delta's plans to close a concourse at the Cincinnati airport, and a $20 million write-down in the value of auction-rate securities.

Like other airlines, Delta saw the value of its fuel-hedge contracts plummet when the market price of oil dropped. The airline's fuel-hedge loss was $91 million.

Delta said if it were able to buy fuel at market prices the airline would have reported a $167 million net profit, excluding all fourth-quarter special charges.

The airline lost $8.9 billion in all of 2008, and expects to reverse its performance this year.

"Despite the difficult economic environment, we expect to be solidly profitable in 2009 driven by lower fuel costs, capacity discipline, and merger synergies," said Delta CEO Richard Anderson.

Delta said 2009 capacity would be down 6-8% from a year earlier, with domestic capacity down 10-12% and international down 3-5%.

MAC Approves Agreement with Delta for 10,000 Minnesota Jobs and 400 Daily Departures from Minneapolis-St. Paul Hub
The Metropolitan Airports Commission (MAC) voted in favor of an agreement with Delta Air Lines that would commit Delta to maintain 10,000 Minnesota jobs and 400 daily departures from its Minneapolis-St. Paul hub.

Delta CEO Richard Anderson called the agreement a win for all parties involved. "I want to commend the MAC and the leadership of Jeff Hamiel and Jack Lanners for approving an agreement that we believe is good for the State of Minnesota, the traveling public and our employees who live here," Anderson said. "This agreement solidifies our commitment to Minnesota and continues to build upon a long-standing relationship that Northwest, and now Delta will have with the state moving forward."

Anderson added, "I also want to thank Governor Pawlenty, and members of the state legislature from both parties, for their leadership in crafting an agreement that protects jobs and air service for the people Minnesota."

The new agreement is part of renegotiated repayment terms for approximately $245 million on bonds that the MAC issued for Northwest Airlines' use in 1992. Northwest is now a wholly owned subsidiary of Delta and, at issue, is a requirement that Northwest maintain a corporate headquarters in Minnesota.

In exchange for relief from this requirement, Delta agreed to increase its daily flight commitments from 187 in the original agreement to 400; to shorten the bond repayment period to 2016 from 2022; and to go beyond the original bond covenants and specific job functions that will stay in Minnesota as part of the 10,000 jobs commitment, including pilot and flight attendant bases; reservations centers in Chisholm and the Twin Cities; the pilot training center and technology center in Eagan; and the headquarters of Mesaba Airlines. In addition, Delta committed to place other well-paid airline management functions in Minnesota, including the Delta North headquarters; the new headquarters for management of Delta's regional airlines (Delta Connection); and to relocate the Compass Airlines headquarters from Virginia to Minnesota.

Northwest's outstanding obligations to the MAC are collateralized by assets valued at 140 percent of the amounts owed. Therefore, there was little or no risk to the state or the MAC for amending the covenants and extending the existing agreement. Repayment of the $245 million in outstanding obligations goes directly to the bondholders, not the state, MAC or Minnesota taxpayers.

Delta/Northwest Airport Facilities Begin Consolidation and Rebranding
Delta is moving quickly to deliver the benefits of our merger with Northwest to our customers, employees and the communities we serve. Consolidating facilities by introducing consistent signage and branding at airports around the world is a visual queue of the speed with which we are delivering merger benefits to your travelers.

Delta has begun the process of consolidating Delta and Northwest airport operation facilities into one, including check-in areas, gate areas and terminals. Rebranding airports currently branded as Northwest began in late 2008 and will continue throughout 2009. All domestic airports are expected to be complete in 2009, and all airports worldwide will be complete in 2010. To date, more than 12 airport stations have consolidated facilities and transitioned into the Delta brand.

Each airport location will feature signage as needed to direct your travelers to new or changed check-in locations, in addition to information made available on boarding passes and at delta.com and nwa.com. If you have questions regarding the airport consolidation or rebranding process, please feel free to contact your Delta/Northwest account manager.

Delta Introduces New Account-Linking, Mileage-Transfer Capabilities for SkyMiles, WorldPerks Members
Airline continues 2009 program alignment to create improved frequent flyer experience
Delta Air Lines today announced that Delta SkyMiles® and Northwest WorldPerks® members now have the ability to link frequent flyer accounts and transfer miles between both accounts at no charge. Members who link their accounts before March 15, 2009 will earn 500 bonus miles.

This new feature allows members who have SkyMiles and WorldPerks accounts to visit delta.com or nwa.com, link their accounts and transfer any amount of miles into either account on an unlimited basis. Both accounts will remain open and functioning until late 2009 when Delta plans to merge the two programs to deliver one best-in-class loyalty program for members in 2010.

"The mileage-transfer feature enables our frequent flyer members to immediately enjoy both SkyMiles and WorldPerks redemption opportunities, including Award Tickets, upgrades, merchandise and experiences. We encourage them to link their accounts today," said Jeff Robertson, Delta's vice president of Loyalty Programs. "This marks yet another step toward aligning the two programs and offering more value to our combined members."

The programs also recently announced that members may earn elite status by flying a designated number of flight segments on either Delta- or Northwest-operated flights. Additionally, SkyMiles and WorldPerks elite members continue to be eligible for complimentary First Class upgrades on both airlines' flights.

More information on the SkyMiles program is available at delta.com/skymiles. WorldPerks program information is available at nwa.com/worldperks.

AMR Corp., the parent company of American Airlines, reported a net loss of $340 million for the fourth quarter of 2008, while UAL Corp., United’s parent, lost $1.3 billion.

United’s total loss included a $449 million accounting loss from the decline in value of its fuel-hedging contracts. Excluding this and other non-cash losses, United lost $547 million in the fourth quarter.

"United, like many airlines across the industry, experienced significant cash pressures associated with fuel hedge positions in 2008 as oil prices declined more than $100 a barrel," said Kathryn Mikells, United’s senior vice president and CFO. "The cash impact, while significant, is now behind us, and we are well positioned to manage through a challenging 2009 with good expected cost performance building on our momentum from this past year."

The airline’s fourth-quarter passenger revenue plunged 8.7%, to $4.17 billion. On U.S. routes, passenger revenue fell 10.5%, to $1.99 billion. United’s widest revenue loss, percentage-wise, was on Asia flights (a 16.4% decrease, to $700 million).

United plans to further cut costs in 2009, eliminating about 1,000 salaried and management positions by the end of the year. Including last year’s job cuts, United will have eliminated approximately 2,500 positions since the beginning of 2008, or about 30% of its workforce.

Excluding special charges, American lost $214 million in the fourth quarter.

American's special items included a $23 million charge for aircraft groundings, facility write-offs and severance related to the company's previously announced capacity reductions during the last four months of 2008, and a non-cash pension settlement charge of $103 million driven by a large number of early pilot retirements in 2008.

"Our fourth-quarter and full-year 2008 results reflect the difficulties all airlines faced last year, but we believe our steps to reduce capacity, bolster liquidity and improve revenue helped us better manage the challenges of record fuel prices and a weak economy," said American CEO Gerard Arpey.

"We believe these actions and our fleet-renewal efforts have put us on sounder footing as we face continued economic uncertainty, slower travel demand and fuel-price volatility in 2009."

Fleet renewal (replacement of MD-80 aircraft) won’t happen as quickly as originally anticipated because of Boeing delivery delays, said American. The airline now expects to receive 29 Boeing 737s in 2009 (compared to 36 expected previously), 39 in 2010 (compared to 40 expected previously) and eight in the first quarter of 2011. The first deliveries are expected near the end of the first quarter of 2009.

Even though American will receive seven less Boeing 737s this year than it had anticipated, the airline still will retire the MD-80s it would have replaced because of reduced demand. As a result, American’s mainline capacity will decline by more than one percentage point compared with previous guidance provided in October.

AMR expects its full-year mainline capacity to decrease 6.5% in 2009 compared with 2008, with a reduction of domestic capacity of approximately 9% and a reduction of international capacity of 2.5%.

For all of 2008, American reported a $2.08 billion net loss; United lost $5.35 billion in 2008.

If major U.S. airlines want to find a silver lining in their frantic downsizing in 2008, they can take heart in this: The carriers' capacity cuts outpaced the declining demand for the year.

According to a Travel Weekly tabulation of airline reports, the top seven airlines cut capacity, or available seat miles, by about 8% during the year. However, traffic, as measured by revenue passenger miles, declined about 2.3%.

In effect, the airlines are ahead of the game. Unfortunately, says the Air Transport Association, that's not likely to be the case for global air travel this year, as the economy continues its nose dive and takes air travel demand along for the ride.

That seemed to be the case in December, when combined traffic for the seven biggest carriers fell 5.2%. United saw the biggest decline, about 12%. American reported an 8.2% drop in traffic, while Continental recorded a 7.3% drop.

In terms of the overall passenger headcount, the 2008 data show that the top seven carriers boarded about 4% fewer passengers.

United saw the biggest drop in boardings, with 7.7%. Statistically, Southwest stayed flat. When taking the top 10 U.S. carriers into account, AirTran, which recorded a gain of 3.5%, and JetBlue, which reported an increase of 2.5%, were the only airlines that flew more passengers than the year before.

The airlines had been warning analysts for months that demand was falling and would continue to do so.

"We are in an uncertain world," said Brandon Pederson, Alaska Airlines' vice president of finance. "Fewer people are flying."

Continental Treasurer Gerry Laderman told investors in the fall, "One advantage airlines have is they can always ground aircraft."

And the carriers plan to ground even more aircraft this year. David Beckerman, vice president of OAGBack Analytical Solutions, said there was still some capacity the airlines could squeeze out of the system.

AirTran is cutting domestic capacity by 3% to 7%, while Southwest is planning a cut of 4% to 5%, a bit less than the initially planned cut of 5% to 6%.

American and American Eagle are looking at 6% cuts, mostly on domestic routes. Delta, which now includes Northwest, said it would cut 6% to 8% of its capacity throughout this year.

But IATA says the planned cuts won't make up for the drop in demand. The organization this month issued its first forecast of a decrease in passenger traffic since 1991, predicting global passenger traffic will fall 3% in 2009.