UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

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

DELTA AIR LINES, INC.

     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 (or for such shorter period that the registrant was required to file such reports), 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  o     No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No  þ

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes  þ     No  o

Number of shares outstanding by each class of common stock, as of June 30, 2009:

Common Stock, $0.0001 par value—777,644,595 shares outstanding

This document is also available through our website at http://www.delta.com/about_delta/investor_relations.

 

 

     Unless otherwise indicated, Delta Air Lines, Inc. and our wholly-owned subsidiaries are collectively referred to as “Delta,” “we,” “us,” and “our.” Prior to October 30, 2008, these references do not include Northwest Airlines Corporation and its wholly-owned subsidiaries, including Northwest Airlines, Inc.

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 about 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 “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (“Form 10-K”) and “Part II, Item 1A. Risk Factors” in the Form 10-Q. All forward-looking statements speak only as of the date made, and 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.

DELTA AIR LINES, INC.
Consolidated Balance Sheets
Unaudited

		June 30,				December 31,
(in millions, except share data)		2009				2008
ASSETS
Current Assets:
Cash and cash equivalents		$	4,851			$	4,255
Short-term investments			91				212
Restricted cash and cash equivalents			361				429
Accounts receivable, net of an allowance for uncollectible accounts of $42 at June 30, 2009 and December 31, 2008, respectively			1,410				1,443
Hedge margin receivable			—				1,139
Expendable parts and supplies inventories, net of an allowance for obsolescence of $47 and $32 at June 30, 2009 and December 31, 2008, respectively			372				388
Deferred income taxes, net			316				401
Prepaid expenses and other			898				637
Total current assets			8,299				8,904
Property and Equipment, Net:
Property and equipment, net of accumulated depreciation and amortization of $2,243 and $1,558 at June 30, 2009 and December 31, 2008, respectively			20,916				20,627
Other Assets:
Goodwill			9,737				9,731
Identifiable intangibles, net of accumulated amortization of $402 and $354 at June 30, 2009 and December 31, 2008, respectively			4,888				4,944
Other noncurrent assets			640				808
Total other assets			15,265				15,483
Total assets		$	44,480			$	45,014
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt and capital leases		$	1,824			$	1,160
Air traffic liability			3,852				3,315
Accounts payable			1,580				1,604
Frequent flyer deferred revenue			1,580				1,624
Accrued salaries and related benefits			1,019				972
Hedge derivatives liability			150				1,247
Taxes payable			673				565
Other accrued liabilities			471				535
Total current liabilities			11,149				11,022
Noncurrent Liabilities:
Long-term debt and capital leases			14,774				15,411
Pension, postretirement and related benefits			11,101				10,895
Frequent flyer deferred revenue			3,367				3,489
Deferred income taxes, net			1,886				1,981
Other noncurrent liabilities			1,223				1,342
Total noncurrent liabilities			32,351				33,118
Commitments and Contingencies
Stockholders’ Equity:
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 787,148,627 and 702,685,427 shares issued at June 30, 2009 and December 31, 2008, respectively			—				—
Additional paid-in capital			13,765				13,714
Accumulated deficit			(9,659	)			(8,608	)
Accumulated other comprehensive loss			(2,963	)			(4,080	)
Treasury stock, at cost, 9,504,032 and 7,548,543 shares at June 30, 2009 and December 31, 2008, respectively			(163	)			(152	)
Total stockholders’ equity			980				874
Total liabilities and stockholders’ equity		$	44,480			$	45,014

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

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

		Three Months Ended June 30,								Six Months Ended June 30,
(in millions, except per share data)		2009				2008				2009				2008
Operating Revenue:
Passenger:
Mainline		$	4,564			$	3,627			$	8,931			$	6,688
Regional carriers			1,339				1,143				2,573				2,182
Total passenger revenue			5,903				4,770				11,504				8,870
Cargo			173				160				358				294
Other, net			924				569				1,822				1,101
Total operating revenue			7,000				5,499				13,684				10,265
Operating Expense:
Salaries and related costs			1,891				1,092				3,758				2,183
Aircraft fuel and related taxes			1,812				1,678				3,705				3,100
Contract carrier arrangements			965				967				1,873				1,895
Contracted services			376				257				834				511
Aircraft maintenance materials and outside repairs			392				295				816				563
Depreciation and amortization			383				302				767				599
Passenger commissions and other selling expenses			329				248				685				473
Landing fees and other rents			315				173				631				340
Passenger service			161				105				296				189
Aircraft rent			119				67				240				131
Impairment of goodwill and other intangible assets			—				1,196				—				7,296
Restructuring and merger-related items			58				104				157				120
Other			198				102				404				213
Total operating expense			6,999				6,586				14,166				17,613
Operating Income (Loss)			1				(1,087	)			(482	)			(7,348	)
Other (Expense) Income:
Interest expense			(324	)			(141	)			(632	)			(288	)
Interest income			9				25				19				52
Miscellaneous, net			61				40				48				31
Total other expense, net			(254	)			(76	)			(565	)			(205	)
Loss Before Income Taxes			(253	)			(1,163	)			(1,047	)			(7,553	)
Income Tax (Provision) Benefit			(4	)			119				(4	)			119
Net Loss		$	(257	)		$	(1,044	)		$	(1,051	)		$	(7,434	)
Basic and Diluted Loss per Share		$	(0.31	)		$	(2.64	)		$	(1.27	)		$	(18.79	)

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

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

		Six Months Ended June 30,
(in millions)		2009				2008
Net cash provided by operating activities		$	1,477			$	1,272
Cash Flows From Investing Activities:
Property and equipment additions:
Flight equipment, including advance payments			(498	)			(793	)
Ground property and equipment, including technology			(113	)			(113	)
Redemption of short-term investments			121				—
Proceeds from sales of flight equipment			76				83
Decrease in restricted cash and cash equivalents			10				6
Other, net			—				8
Net cash used in investing activities			(404	)			(809	)
Cash Flows From Financing Activities:
Payments on long-term debt and capital lease obligations			(853	)			(712	)
Proceeds from long-term obligations			390				848
Other, net			(14	)			(8	)
Net cash (used in) provided by financing activities			(477	)			128
Net Increase in Cash and Cash Equivalents			596				591
Cash and cash equivalents at beginning of period			4,255				2,648
Cash and cash equivalents at end of period		$	4,851			$	3,239
Non-cash transactions:
Flight equipment		$	385			$	—

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

DELTA AIR LINES, INC.
Notes to the Condensed Consolidated Financial Statements
June 30, 2009
(Unaudited)

NOTE 1. 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. 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.

     On October 29, 2008 (the “Closing Date”), a wholly-owned subsidiary of Delta merged (the “Merger”) with and into Northwest Airlines Corporation. On the Closing Date, (1) Northwest Airlines Corporation and its wholly-owned subsidiaries, including Northwest Airlines, Inc. (collectively, “Northwest”), became wholly-owned subsidiaries of Delta and (2) each share of Northwest common stock outstanding on the Closing Date or issuable under Northwest’s Plan of Reorganization (as defined in Note 9) was converted into the right to receive 1.25 shares of Delta common stock.

     Our Condensed Consolidated Financial Statements include the accounts of Delta Air Lines, Inc. and our wholly-owned subsidiaries. As a result of the Merger, the accounts of Northwest are included for all periods subsequent to the Closing Date.

     Management believes that the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including adjustments required by purchase accounting, normal recurring items and restructuring and merger-related 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, changes in global economic conditions and other factors, operating results for the three and six months ended June 30, 2009 are not necessarily indicative of operating results for the entire year.

     We have reclassified certain prior period amounts in our Condensed Consolidated Financial Statements to be consistent with our current period presentation.

     We have evaluated the financial statements for subsequent events through the date of the filing of this Form 10-Q.

New Accounting Standards

     In March 2008, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment to FASB Statement No. 133” (“SFAS 161”). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (1) how and why an entity uses derivative instruments, (2) how derivative instruments and related hedged items are accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), and (3) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS 161 is effective for fiscal years and interim periods. We adopted SFAS 161 on January 1, 2009.

     In April 2009, the FASB issued FASB Staff Position (“FSP”) 107-1 and Accounting Principles Board (“APB”) Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP 107-1 and APB 28-1”). FSP 107-1 and APB 28-1 amend FASB Statement No. 107, “Disclosures about Fair Values of Financial Instruments,” to require disclosures about the fair value of financial instruments in interim financial statements as well as in annual financial statements. It also amends APB Opinion No. 28, “Interim Financial Reporting,” to require those disclosures in all interim financial statements. We adopted FSP 107-1 and APB 28-1 effective April 1, 2009.

NOTE 2. FAIR VALUE MEASUREMENTS

     SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. SFAS 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Accordingly, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

	•		Level 1. Observable inputs such as quoted prices in active markets;
	•		Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
	•		Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

										Significant
						Quoted Prices				Other				Significant
						in Active				Observable				Unobservable
		June 30,				Markets				Inputs				Inputs
(in millions)		2009				(Level 1)				(Level 2)				(Level 3)
Cash equivalents		$	4,583			$	4,583			$	—			$	—
Short-term investments			91				—				—				91
Restricted cash equivalents			338				338				—				—
Long-term investments			128				—				—				128
Hedge derivatives asset, net			196				—				79				117

     We record our cash equivalents and short-term investments at estimated fair value. The estimated fair values of other financial instruments, including derivative instruments, have been determined using available market information and valuation methodologies, primarily discounted cash flow analyses and an option-pricing model.

     Valuation techniques for assets and liabilities in the Level 3 fair value hierarchy are based on the income approach using (1) a discounted cash flow model for investments and (2) an option-pricing model for fuel hedge option contracts. In addition, interest rate cash flow hedges are valued using a market and income approach using a discounted cash flow model.

Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

		Hedge Derivatives
(in millions)		Asset, Net
Balance at December 31, 2008		$	(1,091	)
Change in fair value included in earnings			(920	)
Change in fair value included in other comprehensive income			929
Purchases and settlements, net			1,199
Balance at June 30, 2009		$	117

     (Losses) gains included in earnings above for the six months ended June 30, 2009 are recorded on our Consolidated Statement of Operations as follows:

		Fuel Expense and				Other (Expense)
(in millions)		Related Taxes				Income
Total (losses) gains included in earnings		$	(940	)		$	20
Change in unrealized gains relating to assets and liabilities still held at June 30, 2009		$	—			$	17

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 following table presents information about our debt at June 30, 2009 and December 31, 2008:

		June 30,				December 31,
(in millions)		2009				2008
Carrying amount		$	16,078			$	16,006
Fair value(1)		$	14,953			$	12,695

(1)		The aggregate fair value of debt was based primarily on reported market values and recently completed market transactions.

NOTE 3. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

Aircraft Fuel Price Risk

     Our results of operations are materially impacted by changes in aircraft fuel prices, interest rates and foreign currency exchange rates. In an effort to manage our exposure to these risks, we periodically enter into various derivative instruments, including fuel, interest rate and foreign currency hedges. In accordance with SFAS 133, we are required to recognize all derivative instruments as either assets or liabilities at fair value on our Consolidated Balance Sheets and to recognize certain changes in the fair value of derivative instruments on our Consolidated Statements of Operations.

     We perform, at least quarterly, both a prospective and retrospective assessment of the effectiveness of our hedge contracts, including assessing the possibility of counterparty default. If we determine that a derivative is no longer expected to be highly effective, we discontinue hedge accounting prospectively and recognize subsequent changes in the fair value of the hedge in earnings. As a result of our effectiveness assessment at June 30, 2009, we believe our hedge contracts will continue to be highly effective in offsetting changes in cash flow or fair value attributable to the hedged risk.

Cash flow hedges

     For derivative instruments that are designated and qualify as cash flow hedges under SFAS 133, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings. The effective portion of the derivative represents the change in fair value of the hedge that offsets the change in fair value of the hedged item. To the extent the change in the fair value of the hedge does not perfectly offset the change in the fair value of the hedged item, the ineffective portion of the hedge is immediately recognized in other (expense) income on our Consolidated Statements of Operations. The following table summarizes the accounting treatment and classification of our cash flow hedges on our Condensed Consolidated Financial Statements:

				Impact of Unrealized Gains and Losses
				Consolidated		Consolidated
				Balance Sheets		Income Statements
Derivative Instrument(1)		Hedged Risk		Effective Portion		Ineffective Portion
Designated under SFAS 133:
Fuel hedges consisting of crude		Volatility in jet		Effective portion of hedge is		Excess, if any, over effective
oil, heating oil, and jet fuel		fuel prices		recorded in accumulated other		portion of hedge is recorded in
swaps, collars and call				comprehensive income		other (expense) income
options(2)
Interest rate swaps and call		Changes in		Entire hedge is recorded in		Expect hedge to fully offset
options		interest rates		accumulated other		hedged risk; no
				comprehensive income		ineffectiveness recorded
Foreign currency		Fluctuations in		Entire hedge is recorded in		Expect hedge to fully offset
forwards and collars		foreign currency		accumulated other		hedged risk; no
		exchange rates		comprehensive income		ineffectiveness recorded
Not qualifying or not designated under SFAS 133:
Fuel hedges consisting of crude		Volatility in jet		Entire amount of change in fair value of hedge is recorded in aircraft
oil, heating oil and jet fuel		fuel prices		fuel expense and related taxes
extendable swaps and three-
way collars

(1)		In the Merger, we assumed Northwest’s outstanding hedge contracts, which include fuel, interest rate and foreign currency cash flow hedges. On the Closing Date, we designated certain of these contracts as hedges in accordance with SFAS 133. The remaining Northwest derivative contracts that were not designated under SFAS 133 did not qualify for hedge accounting. All contracts assumed in the Merger that did not qualify for hedge accounting settled as of June 30, 2009.
(2)		Ineffectiveness on our fuel hedge option contracts is calculated using a “perfectly effective” hypothetical derivative, which acts as a proxy for the fair value of the change in expected cash flows from the purchase of aircraft fuel.

Fair value hedges

     For derivative instruments that are designated and qualify as a fair value hedge under SFAS 133, the gain or loss on the derivative and the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings. We include the gain or loss on the hedged item in the same account as the offsetting loss or gain on the related derivative instrument, resulting in no impact to our Consolidated Statements of Operations. The following table summarizes the accounting treatment and classification of our fair value hedges on our Condensed Consolidated Financial Statements:

				Impact of Unrealized Gains and Losses
				Consolidated		Consolidated
				Balance Sheets		Income Statements
Derivative Instrument		Hedged Risk		Effective Portion		Ineffective Portion
Designated under SFAS 133:
Interest rate swaps		Changes in		Entire fair value of hedge is		Expect hedge to be perfectly
		interest rates		recorded in long-term debt and		effective at offsetting changes in
				capital leases		fair value of the related debt; no
						ineffectiveness recorded

     During the June 2009 quarter, we terminated our interest rate swaps designated as fair value hedges, resulting in $65 million in cash proceeds from counterparties. As a result of the termination, we have a deferred $44 million gain, which will be amortized over the remaining life of the debt using an effective-interest method and recorded to interest expense.

Hedge Position

     The following tables reflect the estimated fair value gain (loss) position of our hedge contracts at June 30, 2009 and December 31, 2008:

										June 30, 2009
										Prepaid
										Expenses				Other								Hedge				Other				Hedge
		Notional				Maturity				and Other				Noncurrent				Accounts				Derivatives				Noncurrent				Margin
(in millions, unless otherwise stated)		Balance				Date				Assets				Assets				Payable				Liability				Liabilities				Payable(2)
Designated under SFAS 133
Fuel hedge swaps, collars and call options		1.2 billion gallons - crude oil, heating oil, jet fuel				July 2009 - December 2010				$	243			$	8			$	(89	)		$	(89	)		$	—
Interest rate swaps and caps designated as cash flow hedges(1)		$	1,700			December 2009 - May 2019					—				1				—				(36	)			(14	)
Foreign currency exchange caps and collars		79.8 billion Japanese Yen, 61.0 million Canadian Dollars				July 2009 - April 2012					4				5				—				(11	)			(5	)
Total designated under SFAS 133											247				14				(89	)			(136	)			(19	)
Not designated under SFAS 133
Fuel hedge swaps and collars(1)											—				—				(17	)			(14	)			—
Total not designated under SFAS 133											—				—				(17	)			(14	)			—
Total derivative instruments										$	247			$	14			$	(106	)		$	(150	)		$	(19	)		$	(11	)

(1)		Represents derivative contracts assumed from Northwest in the Merger.
(2)		Amounts are recorded in accounts payable on our Consolidated Balance Sheet.

		December 31, 2008
										Prepaid				Other								Hedge				Other				Hedge
(in millions,		Notional				Maturity				Expenses and				Noncurrent				Accounts				Derivatives				Noncurrent				Margin
unless otherwise stated)		Balance				Date				Other Assets				Assets				Payable				Liability				Liabilities				Receivable
Designated under SFAS 133
		1.9 billion gallons -
		crude oil,
Fuel hedge swaps, collars and call		heating oil, jet				January 2009 -
options(1)		fuel				December 2010				$	8			$	18			$	(66	)		$	(849	)		$	—
Interest rate swaps designated as						September 2011 -
fair value hedges(2)		$	1,000			July 2012					91				—				—				—				—
Interest rate swaps and call options						December 2009 -
designated as cash flow hedges(3)		$	1,700			May 2019					—				—				—				(32	)			(63	)
Foreign currency exchange forwards and collars(3)		45.0 billion				January -
		Japanese Yen					December 2009				—				—				—				(48	)			—
Total designated under SFAS 133											99				18				(66	)			(929	)			(63	)
Not designated under SFAS 133
		180 million
		gallons - crude
		oil, heating oil, jet				January -
Fuel hedge swaps and collars(3)		fuel				June 2009					—				—				(119	)			(318	)			—
Total not designated under SFAS 133											—				—				(119	)			(318	)			—
Total derivative instruments										$	99			$	18			$	(185	)		$	(1,247	)		$	(63	)		$	1,139

(1)		Includes $163 million in hedges assumed from Northwest in the Merger.
(2)		Includes $17 million in accrued interest receivable related to these interest rate swaps. In accordance with fair value hedge accounting, the carrying value of our long-term debt at December 31, 2008 included $74 million of fair value adjustments.
(3)		Represents derivative contracts assumed from Northwest in the Merger.

     As of June 30, 2009, our open fuel hedge gain position, excluding contracts we terminated early, for the six months ending December 31, 2009 and the year ending December 31, 2010 is as follows:

		Percentage of
		Projected				Contract
		Fuel				Fair Value at
		Requirements				June 30,
(in millions, unless otherwise stated)		Hedged				2009
Six months ending December 31, 2009			45	%		$	140
2010			9				110
Total			21	%		$	250

Hedge Gains (Losses)

     Gains (losses) recorded on our Condensed Consolidated Financial Statements for the three months ended June 30, 2009 and 2008 related to our hedge contracts designated under SFAS 133 are as follows:

										Effective Portion Reclassified
		Effective Portion Recognized								from Accumulated Other								Ineffective Portion Recognized
		in Other Comprehensive Loss								Comprehensive Loss to Earnings								in Other (Expense) Income
		Three Months Ended June 30,								Three Months Ended June 30,								Three Months Ended June 30,
(in millions)		2009				2008				2009				2008				2009				2008
Designated under SFAS 133
Fuel hedge swaps, collars and call options(1)		$	668			$	804			$	(398	)		$	313			$	46			$	31
Interest rate swaps and call options designated as cash flow hedges(2)			35				—				(1	)			—				—				—
Foreign currency exchange forwards and collars(3)			(19	)			—				(2	)			—				—				—
Total designated under SFAS 133		$	684			$	804			$	(401	)		$	313			$	46			$	31

(1)		Gains and losses on fuel hedge contracts reclassified from accumulated other comprehensive loss are recorded in aircraft fuel and related taxes.
(2)		Losses on interest rate swaps and call options reclassified from accumulated other comprehensive loss are recorded in interest expense.
(3)		Losses on foreign currency exchange contracts reclassified from accumulated other comprehensive loss are recorded in passenger and cargo revenue.

     Gains (losses) recorded on our Condensed Consolidated Financial Statements for the six months ended June 30, 2009 and 2008 related to our hedge contracts designated under SFAS 133 are as follows:

										Effective Portion Reclassified from
		Effective Portion Recognized in								Accumulated Other								Ineffective Portion Recognized in
		Other Comprehensive Loss								Comprehensive Loss to Earnings								Other (Expense) Income
		Six Months Ended June 30,								Six Months Ended June 30,								Six Months Ended June 30,
(in millions)		2009				2008				2009				2008				2009				2008
Designated under SFAS 133
Fuel hedge swaps, collars and call options(1)		$	1,014			$	1,019			$	(1,061	)		$	354			$	37			$	14
Interest rate swaps and call options designated as cash flow hedges(2)			47				—				(1	)			—				—				—
Foreign currency exchange forwards and collars(3)			36				—				2				—				—				—
Total designated under SFAS 133		$	1,097			$	1,019			$	(1,060	)		$	354			$	37			$	14

(1)		Gains and losses on fuel hedge contracts reclassified from accumulated other comprehensive loss are recorded in aircraft fuel and related taxes.
(2)		Losses on interest rate swaps and call options reclassified from accumulated other comprehensive loss are recorded in interest expense.
(3)		Losses on foreign currency exchange contracts reclassified from accumulated other comprehensive loss are recorded in passenger and cargo revenue.

     We recorded a gain of $8 million and a loss of $15 million to aircraft fuel and related taxes on our Consolidated Statements of Operations for the three and six months ended June 30, 2009 related to Northwest derivative contracts that were not designated as hedges under SFAS 133. As of June 30, 2009, we recorded in accumulated other comprehensive loss on our Consolidated Balance Sheet $216 million of net losses on our hedge contracts scheduled to settle in the next 12 months.

Credit Risk

     To manage credit risk associated with our aircraft fuel price and interest rate hedging programs, we select counterparties based on their credit ratings and limit our exposure to any one counterparty. We also monitor the market position of these programs and our relative market position with each counterparty.

     In accordance with our hedge agreements, (1) we may require counterparties to fund the margin associated with our gain position on hedge contracts and (2) counterparties may require us to fund the margin associated with our loss position on these contracts. The amount of the margin, if any, is periodically adjusted based on the fair value of the hedge contracts. The margin requirements are intended to mitigate a party’s exposure to market volatility and the associated contracting party risk. We do not offset margin funded to counterparties or margin funded to us by counterparties against fair value amounts recorded for our hedge contracts.

     The hedge margin we receive from counterparties is recorded, as appropriate, in cash and cash equivalents or restricted cash, with the offsetting obligation in accounts payable on our Consolidated Balance Sheets. The margin we provide to counterparties is recorded in hedge margin receivable or restricted cash on our Consolidated Balance Sheets. All cash flows associated with purchasing and settling fuel hedge contracts are classified as operating cash flows on our Condensed Consolidated Statements of Cash Flows.

     In accordance with our interest rate swap and call option agreements, which qualify as cash flow hedges, the respective counterparties are not required to fund margin to us and we are not required to fund margin to them.

     Our accounts receivable are generated largely from the sale of passenger airline tickets and cargo transportation services. The majority of these sales are processed through major credit card companies, resulting in accounts receivable that may be subject to certain holdbacks by the credit card processors.

     We also have receivables from the sale of mileage credits under our SkyMiles and WorldPerks Programs to participating airlines and non-airline businesses such as credit card companies, hotels and car rental agencies. We believe the credit risk associated with these receivables is minimal and that the allowance for uncollectible accounts that we have provided is appropriate.

NOTE 4. DEBT

Northwest Credit Facilities

     Northwest is a party to a $904 million senior corporate credit facility (the “Bank Credit Facility”) and a $500 million revolving credit facility (the “$500 Million Revolving Credit Facility”). The Bank Credit Facility was fully drawn at June 30, 2009 and December 31, 2008. Northwest did not have any outstanding borrowings under the $500 Million Revolving Credit Facility at June 30, 2009 or December 31, 2008.

     The final maturity date for borrowings under the Bank Credit Facility and the $500 Million Revolving Credit Facility is the earlier of (1) the date that Northwest Airlines, Inc. is no longer a separate legal entity, including when it is merged with and into Delta Air Lines, Inc.; or (2) December 31, 2010 for the Bank Credit Facility, and October 29, 2009 and October 29, 2011 for the $300 million and $200 million tranches, respectively, under the $500 Million Revolving Credit Facility.

     To integrate the operations of Delta and Northwest Airlines, Inc., we must obtain a single operating certificate for the two airlines from the Federal Aviation Administration. When Northwest Airlines, Inc. is no longer a certificated carrier, key assets of the two companies would be combined into a single entity by merging Northwest Airlines, Inc. with and into Delta Air Lines, Inc. Because this merger could occur within the next 12 months, we classified borrowings under the Bank Credit Facility as short-term on our Consolidated Balance Sheet at June 30, 2009. In March 2009, we shortened the amortization period from December 2010 to March 2010 of the fair value adjustment (debt discount) recorded during purchase accounting on this debt.

Covenants

     We were in compliance with all covenants in our financing agreements at June 30, 2009.

NOTE 5. PURCHASE COMMITMENTS AND CONTINGENCIES

Aircraft Order Commitments

     Future commitments for aircraft on firm order as of June 30, 2009 are estimated to be approximately $1.8 billion. The following table shows the timing of these commitments:

Year Ending December 31,
(in millions)		Amount
Six months ending December 31, 2009		$	460
2010			1,010
2011			10
2012			100
2013			70
After 2013			110
Total		$	1,760

     Our aircraft order commitments as of June 30, 2009 consist of firm orders to purchase two B-777-200LR aircraft, three B-737-700 aircraft, 29 B-737-800 aircraft, two A320-200 aircraft, five A319-100 aircraft and two MD-90 aircraft.

     We have excluded from the table above our order for 18 B-787-8 aircraft. The Boeing Company (“Boeing”) has informed us that Boeing will be unable to meet the contractual delivery schedule for these aircraft. We are in discussions with Boeing regarding this situation.

     Our firm orders to purchase 29 B-737-800 aircraft include 27 B-737-800 aircraft for which we have entered into definitive agreements to sell to third parties immediately following delivery of these aircraft to us by the manufacturer. We have not received any notice that these parties have defaulted on their purchase obligations. These sales will reduce our future commitments by approximately $1.1 billion, including $290 million for the six months ending December 31, 2009 and $760 million for 2010.

     We have financing commitments from third parties, cancellation rights or, with respect to the 27 B-737-800 aircraft referred to above, definitive agreements to sell, all aircraft on firm order as of June 30, 2009. Under these financing commitments, third parties have agreed to finance, on a long-term basis, a substantial portion of the purchase price of the covered aircraft.

Contract Carrier Agreements

     During the six months ended June 30, 2009, we had Contract Carrier agreements with ten Contract Carriers, including our wholly-owned subsidiaries Comair, Inc., Compass Airlines, Inc., and Mesaba Aviation, Inc. For additional information about our Contract Carrier agreements, see Note 8 of the Notes to the Consolidated Financial Statements in our Form 10-K.

Contingencies Related to Termination of Contract Carrier Agreements

     We may terminate the Chautauqua Airlines, Inc. (“Chautauqua) and Shuttle America Corporation (“Shuttle America”) agreements without cause at any time after May 2010 and January 2016, respectively, by providing certain advance notice. If we terminate either the Chautauqua or Shuttle America agreements without cause, Chautauqua or Shuttle America, respectively, has the right to (1) assign to us leased aircraft that the airline operates for us, provided we are able to continue the leases on the same terms the airline had prior to the assignment and (2) require us to purchase or lease any of the aircraft that the airline owns and operates for us at the time of the termination. If we are required to purchase aircraft owned by Chautauqua or Shuttle America, the purchase price would be equal to the amount necessary to (1) reimburse Chautauqua or Shuttle America for the equity it provided to purchase the aircraft and (2) repay in full any debt outstanding at such time that is not being assumed in connection with such purchase. If we are required to lease aircraft owned by Chautauqua or Shuttle America, the lease would have (1) a rate equal to the debt payments of Chautauqua or Shuttle America for the debt financing of the aircraft calculated as if 90% of the aircraft was debt financed by Chautauqua or Shuttle America and (2) other specified terms and conditions.

     We estimate that the total fair values, determined as of June 30, 2009, of the aircraft that Chautauqua or Shuttle America could assign to us or require that we purchase if we terminate without cause our Contract Carrier agreements with those airlines (the “Put Right”) are approximately $251 million and $473 million, respectively. The actual amount that we may be required to pay in these circumstances may be materially different from these estimates. If the Chautauqua or Shuttle America Put Right is exercised, we must also pay to the exercising carrier 10% interest (compounded monthly) on the equity the carrier provided when it purchased the put aircraft. These equity amounts for Chautauqua and Shuttle America total $25 million and $52 million, respectively.

Legal Contingencies

     We are involved in various legal proceedings relating to employment practices, environmental issues, bankruptcy matters, antitrust matters and other matters concerning our business. We cannot reasonably estimate the potential loss for certain legal proceedings because, for example, the litigation is in its early stages or the plaintiff does not specify the damages being sought.

Cincinnati Airport Settlement

     On April 24, 2007, the U.S. Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) approved our settlement agreement (the “Cincinnati Airport Settlement Agreement”) with the Kenton County Airport Board (“KCAB”) and UMB Bank, N.A., the trustee (the “Bond Trustee”) for the Series 1992 Bonds (as defined below), to restructure certain of our lease and other obligations at the Cincinnati-Northern Kentucky International Airport (the “Cincinnati Airport”). The Series 1992 Bonds include: (1) the $419 million Kenton County Airport Board Special Facilities Revenue Bonds, 1992 Series A (Delta Air Lines, Inc. Project), $397 million of which were then outstanding; and (2) the $19 million Kenton County Airport Board Special Facilities Revenue Bonds, 1992 Series B (Delta Air Lines, Inc. Project), $16 million of which were then outstanding.

     The Cincinnati Airport Settlement Agreement, among other things:

	•		provides for agreements under which we will continue to use certain facilities at the Cincinnati Airport at substantially reduced costs;
	•		settles all disputes among us, the KCAB, the Bond Trustee and the former, present and future holders of the Series 1992 Bonds (the “1992 Bondholders”);
	•		gives the Bond Trustee, on behalf of the 1992 Bondholders, a $260 million allowed general, unsecured claim in our bankruptcy proceedings; and
	•		provides for our issuance of $66 million principal amount of senior unsecured notes to the Bond Trustee on behalf of the 1992 Bondholders.

     On May 3, 2007, the parties to the Cincinnati Airport Settlement Agreement implemented that agreement in accordance with its terms. A small group of bondholders (the “Objecting Bondholders”) challenged the settlement in the U.S. District Court for the Southern District of New York (the “District Court”). In August 2007, the District Court affirmed the Bankruptcy Court’s order approving the settlement. The Objecting Bondholders appealed to the U.S. Court of Appeals for the Second Circuit, which in February 2009 upheld the District Court’s decision and subsequently denied the Objecting Bondholders’ petition for a rehearing en banc. The Objecting Bondholders have filed a petition for a writ of certiorari with the U.S. Supreme Court.

Credit Card Processing Agreements

Visa/MasterCard Processing Agreement

     In August 2008, we entered into an amendment to our Visa/MasterCard credit card processing agreement (the “Amended Processing Agreement”) that, among other things, extended the term of the agreement to December 31, 2011. The Amended Processing Agreement provides that no cash reserve (“Reserve”) is required except in certain circumstances, including in which we do not maintain a required level of unrestricted cash.

     In those circumstances where the processor can establish a Reserve, the amount of the Reserve would be equal to the potential liability of the credit card processor for tickets purchased with Visa or MasterCard that had not yet been used for travel. There was no Reserve as of June 30, 2009 or December 31, 2008.

American Express

     In December 2008, we amended our American Express credit card processing agreement (the “Amended Card Service Agreement”). The Amended Card Service Agreement provides that no withholding of our receivables will occur except in certain circumstances, including in which we do not maintain a required level of unrestricted cash. In those circumstances where American Express is permitted to withhold our receivables, the amount that can be withheld is an amount up to American Express’ potential liability for tickets purchased with the American Express credit card that had not yet been used for travel. No amounts were withheld as of June 30, 2009 or December 31, 2008.

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 and 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 condition, use or operation of the aircraft or such other equipment.

     We believe that our insurance would cover most of our exposure to such liabilities and related indemnities associated with the types of lease and financing agreements described above, including real estate leases. However, our insurance does not typically cover environmental liabilities, although we have certain policies in place to meet the requirements of applicable environmental laws.

     Certain of our aircraft and other financing transactions include provisions, which require us to make payments to preserve an expected economic return to the lenders if that economic return is diminished due to certain changes in law or regulations. In certain of these financing transactions, we also bear the risk of certain 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.

Employees Under Collective Bargaining Agreements

     At June 30, 2009, we had 82,968 full-time equivalent employees. Approximately 40% of these employees, including all of our pilots, Northwest Airlines’ airport employees and other categories of ground employees and Northwest Airlines’ flight attendants, are represented by labor unions.

War-Risk Insurance Contingency

     As a result of the terrorist attacks on September 11, 2001, aviation insurers significantly reduced the maximum amount of insurance coverage available to commercial air carriers for liability to persons (other than employees or passengers) for claims resulting from acts of terrorism, war or similar events. At the same time, aviation insurers significantly increased the premiums for such coverage and for aviation insurance in general. Since September 24, 2001, the U.S. government has been providing U.S. airlines with war-risk insurance to cover losses, including those resulting from terrorism, to passengers, third parties (ground damage) and the aircraft hull. The U.S. Secretary of Transportation has extended coverage through August 31, 2009 and we expect the coverage to be further extended. The withdrawal of government support of airline war-risk insurance would require us to obtain war-risk insurance coverage commercially, if available. Such commercial insurance could have substantially less desirable coverage than currently provided by the U.S. government, may not be adequate to protect our risk of loss from future acts of terrorism, may result in a material increase to our operating expense or may not be obtainable at all, resulting in an interruption to our operations.

Other

     We have certain contracts for goods and services that require us to pay a penalty, acquire inventory specific to us or purchase contract specific equipment, as defined by each respective contract, if we terminate the contract without cause prior to its expiration date. Because these obligations are contingent on our termination of the contract without cause prior to its expiration date, no obligation would exist unless such a termination occurs.

NOTE 6. EMPLOYEE BENEFIT PLANS

Net Periodic Benefit Cost

     Net periodic cost for the three months ended June 30, 2009 and 2008 includes the following components:

										Other Postretirement								Other Postemployment
		Pension Benefits								Benefits								Benefits
		Three Months Ended								Three Months Ended								Three Months Ended
		June 30,								June 30,								June 30,
(in millions)		2009				2008				2009				2008				2009				2008
Service cost		$	—			$	—			$	5			$	2			$	8			$	7
Interest cost			251				114				20				14				31				32
Expected return on plan assets			(154	)			(106	)			—				—				(19	)			(38	)
Recognized net actuarial loss (gain)			8				—				(5	)			(1	)			4				—
Special termination and settlements			2				—				—				—				—				—
Net periodic cost		$	107			$	8			$	20			$	15			$	24			$	1

     Net periodic cost for the six months ended June 30, 2009 and 2008 includes the following components:

										Other Postretirement								Other Postemployment
		Pension Benefits								Benefits								Benefits
		Six Months Ended								Six Months Ended								Six Months Ended
		June 30,								June 30,								June 30,
(in millions)		2009				2008				2009				2008				2009				2008
Service cost		$	—			$	—			$	10			$	4			$	16			$	14
Interest cost			502				228				40				29				62				63
Expected return on plan assets			(308	)			(211	)			—				—				(38	)			(75	)
Recognized net actuarial loss (gain)			16				—				(10	)			(3	)			8				—
Special termination and settlements			4				—				6				—				—				—
Net periodic cost		$	214			$	17			$	46			$	30			$	48			$	2

NOTE 7. COMPREHENSIVE LOSS

     The following table shows the components of accumulated other comprehensive loss for the six months ended June 30, 2009:

		Unrecognized				Derivative				Marketable				Valuation
(in millions)		Pension Liability				Instruments				Equity Securities				Allowance				Total
Balance at December 31, 2008		$	(1,696	)		$	(863	)		$	(6	)		$	(1,515	)		$	(4,080	)
Pension adjustment			11				—				—				—				11
Changes in fair value			—				37				9				—				46
Reclassification to earnings			—				1,060				—				—				1,060
Tax effect			(4	)			(403	)			(3	)			410				—
Balance at June 30, 2009		$	(1,689	)		$	(169	)		$	—			$	(1,105	)		$	(2,963	)

NOTE 8. RESTRUCTURING AND MERGER-RELATED ITEMS

     The following table shows charges recorded in restructuring and merger-related items on our Consolidated Statements of Operations for the three and six months ended June 30, 2009 and 2008:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(in millions)		2009				2008				2009				2008
Severance and related costs		$	—			$	96			$	50			$	112
Facilities and other			—				6				—				6
Merger-related items			58				2				107				2
Total restructuring and merger-related items		$	58			$	104			$	157			$	120

     Severance and related costs primarily relates to voluntary workforce reduction programs for U.S. non-pilot employees announced in March and December 2008 in which approximately 4,200 and 2,500 employees, respectively, elected to participate. During the six months ended June 30, 2009, we recorded a $50 million charge associated with the December 2008 workforce reduction program, including $6 million of special termination benefits related to retiree healthcare. We expect any additional charges to be incurred in connection with these programs will be immaterial. During the three and six months ended June 30, 2008, we recorded $96 million and $112 million, respectively, associated with the March 2008 workforce reduction programs.

     Merger-related items relate to costs associated with integrating the operations of Northwest into Delta, including costs related to information technology, employee relocation and training, and re-branding of aircraft and stations.

     The following table shows the balances for these restructuring charges as of June 30, 2009, and the activity for the six months then ended. The table also shows the balances for the restructuring charges assumed in the Merger as of June 30, 2009, and the activity for the six months then ended.

		Liability																Liability
		Balance at				Additional				Purchase								Balance at
		December 31,				Costs and				Accounting								June 30,
(in millions)		2008				Expenses				Adjustments				Payments				2009
Severance and related cost(1)		$	50			$	44			$	—			$	(49	)		$	45
Facilities and other(1)			54				—				(2	)			(1	)			51
Total		$	104			$	44			$	(2	)		$	(50	)		$	96

     We acquired a B-747-200F dedicated cargo freighter fleet in our Merger with Northwest and recorded the fair value of the fleet at the Closing Date. We decided to ground the entire fleet by December 31, 2009 due to its age and inefficiency. As a result, we reviewed the fleet and related spare engines for impairment during the six months ended June 30, 2009 and concluded that no impairment existed.

NOTE 9. BANKRUPTCY CLAIMS RESOLUTION

     In September 2005, we and substantially all of our subsidiaries (the “Delta Debtors”) filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code (the “Bankruptcy Code”). On April 30, 2007, the Delta Debtors emerged from bankruptcy. Under the Delta Debtors’ Joint Plan of Reorganization (“Delta’s Plan of Reorganization”), most holders of allowed general, unsecured claims against the Delta Debtors received or will receive Delta common stock in satisfaction of their claims. Delta’s Plan of Reorganization contemplates the distribution of 400 million shares of common stock, consisting of 386 million shares to holders of allowed general, unsecured claims and 14 million shares to eligible non-contract, non-management employees. As of June 30, 2009, under Delta’s Plan of Reorganization, we have (1) distributed 327 million shares of common stock to holders of $13.7 billion of allowed general, unsecured claims, (2) issued 14 million shares of common stock to eligible non-contract, non-management employees and (3) reserved 59 million shares of common stock for future issuance to holders of allowed general, unsecured claims.

     In September 2005, Northwest and substantially all of its subsidiaries (the “Northwest Debtors”) filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code. On May 31, 2007, the Northwest Debtors emerged from bankruptcy. The Northwest Debtors’ First Amended Joint and Consolidated Plan of Reorganization (“Northwest’s Plan of Reorganization”) generally provides for the distribution of Northwest common stock to the Northwest Debtors’ creditors, employees and others in satisfaction of allowed general, unsecured claims. Pursuant to the Merger Agreement, each outstanding share of Northwest common stock (including shares issuable pursuant to Northwest’s Plan of Reorganization) was converted into the right to receive 1.25 shares of Delta common stock. As of June 30, 2009, seven million shares of Delta common stock were reserved for issuance in exchange for shares of Northwest common stock that, but for the Merger, would have been issued under Northwest’s Plan of Reorganization.

     The Delta Debtors and the Northwest Debtors will continue to settle claims and file objections with the bankruptcy courts regarding claims. In light of the substantial number and amount of claims filed, we expect the claims resolution process will take considerable time to complete. We believe there will be no further material impact to the Consolidated Statements of Operations from the settlement of claims because the holders of such claims will receive under Delta’s and Northwest’s Plan of Reorganization, as the case may be, only their pro rata share of the distributions of common stock contemplated by the applicable Plan of Reorganization.

NOTE 10. LOSS PER SHARE

     We calculate basic loss per share by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding. Shares issuable upon the satisfaction of certain conditions are considered outstanding and included in the computation of basic loss per share. Accordingly, the calculation of basic loss per share for the three and six months ended June 30, 2009 and 2008, respectively, assumes there was outstanding at the beginning of each of these periods all 386 million shares contemplated by Delta’s Plan of Reorganization to be distributed to holders of allowed general, unsecured claims. Similarly, the calculation of basic loss per share for the three and six months ended June 30, 2009 also assumes there was outstanding at the beginning of each of these periods the following shares in connection with the Merger: (1) 50 million shares of Delta common stock we agreed to issue on behalf of Delta and Northwest pilots and (2) nine million shares of Delta common stock reserved for issuance in exchange for shares of Northwest common stock that, but for the Merger, would have been issued under Northwest’s Plan of Reorganization.

     The following table shows the reconciliation of actual shares issued and outstanding to those considered outstanding for purposes of the calculation of basic loss per share as of June 30, 2009:

(in millions)		Shares(1)
Common stock issued and outstanding			778
Less:
Unvested restricted stock			(17	)
Add:
Shares reserved for future issuance under Delta’s Plan of Reorganization			59
Shares reserved for future issuance relating to Northwest’s Plan of Reorganization, after giving effect to the 1.25 exchange ratio			7
Shares issuable to Delta and Northwest pilots in connection with the Merger			1
Common stock considered outstanding for purposes of loss per share calculation			828

     The following table shows our computation of basic and diluted loss per share for the three and six months ended June 30, 2009 and 2008:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(in millions, except per share data)		2009				2008				2009				2008
Basic and diluted:
Net loss		$	(257	)		$	(1,044	)		$	(1,051	)		$	(7,434	)
Weighted average shares outstanding(1)			827				396				826				396
Basic and diluted loss per share		$	(0.31	)		$	(2.64	)		$	(1.27	)		$	(18.79	)

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General Information

     We provide scheduled air transportation for passengers and cargo throughout the United States (“U.S.”) and around the world. On October 29, 2008 (the “Closing Date”), we completed our merger (the “Merger”) with Northwest, creating the world’s largest airline. The Merger better positions us to manage through economic cycles and volatile oil prices, invest in our fleet, improve services for customers and achieve our strategic objectives.

     Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). In accordance with GAAP, our financial results include the results of Northwest for periods after the Closing Date, but not for periods before the Closing Date. Accordingly, our financial results under GAAP for the three and six months ended June 30, 2009 include the results of Northwest. In contrast, our financial results under GAAP for the three and six months ended June 30, 2008, do not include the results of Northwest. This impacts the comparability of our financial results under GAAP for the three and six months ended June 30, 2009 and 2008.

     In the accompanying “June Quarter Financial Highlights — 2009 Compared to 2008 Combined” analysis of financial information, we sometimes use information that is derived from our Consolidated Financial Statements, but that is not presented in accordance with GAAP. Certain of this information is considered “non-GAAP financial measures” under the U.S. Securities and Exchange Commission rules. These non-GAAP financial measures include financial information for the three and six months ended June 30, 2008 presented on a combined basis, which means the financial results for Delta and Northwest are combined as if the Merger had occurred on January 1, 2008. See “Supplemental Information” below for the reasons we use combined and other non-GAAP financial measures, as well as for a reconciliation to the corresponding financial measures under GAAP.

June Quarter Financial Highlights — 2009 Compared to 2008 Combined

     For the June 2009 quarter, we reported a net loss of $257 million. These results reflect significant weakness in the airline revenue environment due to the global recession and the impact of the H1N1 virus. Our loss for the quarter also includes $390 million in fuel hedge losses and $58 million in merger-related items.

     Total operating revenue declined $2.1 billion, or 23%, in the June 2009 quarter on a 7% decrease in system capacity, compared with the June 2008 quarter on a combined basis. Passenger revenue accounted for $2.0 billion of the decrease. Passenger revenue per available seat mile (“PRASM”) declined 20%, as a result of a 19% decrease in passenger mile yield. The decrease in passenger mile yield reflects significantly reduced demand, particularly in international markets, a reduction in business demand, and competitive pricing pressures.

     Volatile fuel prices continue to represent a significant risk to our business and the airline industry as a whole. While our fuel cost per gallon during the June 2009 quarter declined 39% year-over-year contributing to $1.6 billion in lower fuel expense, crude oil prices have risen 57% from December 31, 2008 to June 30, 2009. Fuel expense includes $390 million in losses from our fuel hedging program, specifically from hedges purchased in 2008 during the period fuel prices reached record highs. We expect fuel hedge losses to be significantly less in the second half of 2009; although, we will recognize losses of $256 million for the September 2009 quarter and $87 million for the December 2009 quarter associated with contracts we terminated early and unamortized premiums on fuel hedge call option contracts.

     We continue to focus on disciplined spending, productivity initiatives and accelerating merger synergies. Our consolidated operating cost per available seat mile (“CASM”) excluding special items (as defined in “Supplemental Information” below) and fuel expense increased 2% in the June 2009 quarter, compared to the June 2008 quarter on a combined basis, on 7% lower capacity. The increase is primarily due to an increase in pension expense from a decrease in value in pension trust assets as a result of declines in the financial markets.

     At June 30, 2009, we had $4.9 billion in cash, cash equivalents and short-term investments. In addition, we had $500 million in an undrawn revolving credit facility. For the six month period ending June 30, 2009, we reported $1.5 billion in operating cash flow.

Response to Global Economic Recession

     In an effort to lessen the impact of the global recession, we continue to implement initiatives to reduce costs, increase revenues and preserve liquidity. As previously announced, we will reduce international capacity by 15%, compared to the prior year on a combined basis, beginning in September 2009 to align our capacity with declining demand in the marketplace. At the same time, we remain committed to diversifying our international network and have added more than 20 new international markets this year.

     To reduce fleet costs, we plan to remove 30-40 Mainline passenger aircraft from the fleet during 2009. In addition, we will retire our entire fleet of B-747-200F freighter aircraft by the end of 2009 due to that fleet’s age and inefficiency. Furthermore, we anticipate removing over 30 regional jets from our network over the next 18 months. We believe we have flexibility in our network and fleet to remove additional capacity if the environment warrants.

     At June 30, 2009, our combined workforce was 10% lower year-over-year, reflecting reductions from normal attrition, as well as voluntary workforce reduction programs offered to align our workforce with reduced capacity.

Merger Synergies

     As a result of the Merger, we targeted at least $500 million in synergy benefits in 2009 and $2 billion in total annual synergy benefits by 2012. Our ability to fully realize the targeted synergies is dependent on achievement of three main goals: (1) receipt of a single operating certificate from the Federal Aviation Administration, which we expect to achieve by the end of 2009, (2) a successful integration of technologies of the two airlines, which we expect to occur in the first half of 2010 and (3) resolution of labor representation issues. Two unions, the Association of Flight Attendants, which represents Northwest’s flight attendants, and the International Association of Machinists and Aerospace Workers, which represents Northwest’s airport employees and other categories of ground employees, have not announced when they will seek to resolve those issues.

Outlook

     The ongoing global recession, the impact of the H1N1 virus and volatile fuel prices are placing significant pressure on the airline industry, including Delta. We are not planning for any meaningful recovery in the revenue environment in 2009. We expect our revenue decline in 2009 to exceed the benefits we expect to receive in that year from lower year-over-year fuel prices, capacity reductions and merger synergies. As a result, we now expect to record a net loss for the full year 2009.

Results of Operations—June 2009 and 2008 Quarters

Operating Revenue

																		Increase
																		(Decrease)
														Increase due to				Excluding
		Three Months Ended June 30,												Northwest				Northwest
(in millions)		2009				2008				Increase				Operations				Operations
Operating Revenue:
Passenger:
Mainline		$	4,564			$	3,627			$	937			$	1,802			$	(865	)
Regional carriers			1,339				1,143				196				462				(266	)
Total passenger revenue			5,903				4,770				1,133				2,264				(1,131	)
Cargo			173				160				13				84				(71	)
Other, net			924				569				355				274				81
Total operating revenue		$	7,000			$	5,499			$	1,501			$	2,622			$	(1,121	)

     Northwest Operations. As a result of the Merger, our results of operations for the June 2009 quarter include Northwest’s operations. The addition of Northwest to our operations increased operating revenue $2.6 billion and available seat miles (“ASMs”), or capacity, 59% for the June 2009 quarter. Northwest’s operations are not included in our results of operations for the June 2008 quarter.

						Increase (Decrease) vs.
		Three Months				Three Months Ended June 30, 2008
		Ended				Passenger
		June 30,				Mile								Load
(in millions)		2009				Yield				PRASM				Factor
Passenger Revenue:
Domestic		$	2,723				(13	)%			(13	)%		0.7  pts
Atlantic			1,131				(27	)%			(26	)%		0.8  pts
Latin America			287				(17	)%			(19	)%		(2.7)pts
Pacific			423				(16	)%			(15	)%		0.8  pts
Total Mainline			4,564				(18	)%			(18	)%		0.1  pts
Regional carriers			1,339				(17	)%			(19	)%		(1.9)pts
Total passenger revenue		$	5,903				(19	)%			(19	)%		(0.2)pts

     Mainline Passenger Revenue. Mainline passenger revenue increased in the June 2009 quarter due to the inclusion of Northwest’s operations, partially offset by weakened demand for air travel from the global recession, the effects of the H1N1 virus and related capacity reductions. Passenger mile yield and PRASM both declined 18%.

	•		Domestic Passenger Revenue. Domestic passenger revenue increased 53% due to the inclusion of Northwest’s operations. Domestic PRASM decreased 13% as a result of a 13% decrease in passenger mile yield. The decrease in passenger mile yield reflects (1) a reduction in business demand due to the global recession, (2) an overall decrease in average fares due to competitive pricing pressures and (3) lower fuel surcharges due to the year-over-year decline in fuel prices. Excluding Northwest’s operations, we reduced capacity by 8% for the June 2009 quarter compared to the June 2008 quarter, while load factor increased 1.0 point.
	•		International Passenger Revenue. International passenger revenue increased 45% due to the inclusion of Northwest’s operations. International PRASM decreased 25% as a result of a 25% decrease in passenger mile yield. The decrease in passenger mile yield reflects (1) significantly reduced demand for international travel, (2) competitive pricing pressures (especially in the Atlantic market, which has seen a decrease of 27% in passenger mile yield), primarily reflecting a significant decrease in business demand due to the global recession and (3) the impact of the H1N1 virus, most notably in the Pacific and Latin American markets. Also contributing to the decrease in passenger mile yield in the Atlantic market were unfavorable foreign currency exchange rates and lower fuel surcharges due to the year-over-year decline in fuel prices. Excluding Northwest’s operations, we reduced international capacity by 4% for the June 2009 quarter compared to the June 2008 quarter.

     Regional carriers. Passenger revenue of regional carriers increased due to the inclusion of Northwest’s operations, including its Compass Airlines, Inc. and Mesaba Aviation, Inc. subsidiaries. Excluding Northwest’s operations, regional carriers’ revenue declined $266 million primarily as a result of a 16% decrease in passenger mile yield and 9% decrease in traffic on an 8% decrease in capacity.

     Cargo. Cargo revenue increased due to the inclusion of Northwest’s operations, partially offset by the effects of capacity reductions, significantly reduced cargo yields, decreased international volume and lower fuel surcharges due to the year-over-year decline in fuel prices. During the June 2009 quarter, we grounded one dedicated freighter B-747-200F aircraft as part of our plan to retire that fleet by December 31, 2009.

     Other, net. Other, net revenue increased primarily due to the inclusion of Northwest’s operations. Excluding Northwest’s operations, other, net revenue increased $81 million primarily due to new or increased administrative service charges and baggage handling fees and higher SkyMiles program revenue.

Operating Expense

														Increase (Decrease) due to:
		Three Months Ended June 30,								Increase				Northwest
(in millions)		2009				2008				(Decrease)				Operations				Other
Operating Expense:
Salaries and related costs		$	1,891			$	1,092			$	799			$	733			$	66
Aircraft fuel and related taxes			1,812				1,678				134				599				(465	)
Contract carrier arrangements			965				967				(2	)			222				(224	)
Contracted services			376				257				119				144				(25	)
Aircraft maintenance materials and outside repairs			392				295				97				153				(56	)
Depreciation and amortization			383				302				81				126				(45	)
Passenger commissions and other selling expenses			329				248				81				124				(43	)
Landing fees and other rents			315				173				142				131				11
Passenger service			161				105				56				62				(6	)
Aircraft rent			119				67				52				60				(8	)
Impairment of goodwill and other intangible assets			—				1,196				(1,196	)			—				(1,196	)
Restructuring and merger-related items(1)			58				104				(46	)			—				(46	)
Other			198				102				96				104				(8	)
Total operating expense		$	6,999			$	6,586			$	413			$	2,458			$	(2,045	)