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

For the quarterly period ended March 31, 2009

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.

     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):

     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 March 31, 2009:

Common Stock, $0.0001 par value—771,645,975 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”). 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)

		March 31,				December 31,
(in millions)		2009				2008
ASSETS
Current Assets:
Cash and cash equivalents		$	4,441			$	4,255
Short-term investments			67				212
Restricted cash and cash equivalents			387				429
Accounts receivable, net of an allowance for uncollectible accounts of $44 and $42 at March 31, 2009 and December 31, 2008, respectively			1,419				1,443
Hedge margin receivable			404				1,139
Expendable parts and supplies inventories, net of an allowance for obsolescence of $39 and $32 at March 31, 2009 and December 31, 2008, respectively			380				388
Deferred income taxes, net			332				401
Prepaid expenses and other			627				637
Total current assets			8,057				8,904
Property and Equipment, Net:
Property and Equipment, net of accumulated depreciation and amortization of $1,898 and $1,558 at March 31, 2009 and December 31, 2008, respectively			20,896				20,627
Other Assets:
Goodwill			9,729				9,731
Identifiable intangibles, net of accumulated amortization of $379 and $354 at March 31, 2009 and December 31, 2008, respectively			4,918				4,944
Other noncurrent assets			795				808
Total other assets			15,442				15,483
Total assets		$	44,395			$	45,014
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt and capital leases		$	1,853			$	1,160
Air traffic liability			3,625				3,315
Accounts payable			1,648				1,604
Frequent flyer deferred revenue			1,605				1,624
Accrued salaries and related benefits			1,004				972
Hedge derivatives liability			662				1,247
Taxes payable			591				565
Other accrued liabilities			539				535
Total current liabilities			11,527				11,022
Noncurrent Liabilities:
Long-term debt and capital leases			14,743				15,411
Pension, postretirement and related benefits			11,005				10,895
Frequent flyer deferred revenue			3,428				3,489
Deferred income taxes, net			1,901				1,981
Other noncurrent liabilities			1,272				1,342
Total noncurrent liabilities			32,349				33,118
Commitments and Contingencies
Stockholders’ Equity:
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 779,743,607 and 702,685,427 shares issued at March 31, 2009 and December 31, 2008, respectively			—				—
Additional paid-in capital			13,738				13,714
Accumulated deficit			(9,402	)			(8,608	)
Accumulated other comprehensive loss			(3,663	)			(4,080	)
Treasury stock, at cost, 8,097,632 and 7,548,543 shares at March 31, 2009 and December 31, 2008, respectively			(154	)			(152	)
Total stockholders’ equity			519				874
Total liabilities and stockholders’ equity		$	44,395			$	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
		March 31,				March 31,
(in millions, except per share data)		2009				2008
Operating Revenue:
Passenger:
Mainline		$	4,367			$	3,061
Regional carriers			1,234				1,039
Total passenger revenue			5,601				4,100
Cargo			185				134
Other, net			898				532
Total operating revenue			6,684				4,766
Operating Expense:
Aircraft fuel and related taxes			1,893				1,422
Salaries and related costs			1,867				1,091
Contract carrier arrangements			908				928
Contracted services			458				254
Aircraft maintenance materials and outside repairs			424				268
Depreciation and amortization			384				297
Passenger commissions and other selling expenses			356				225
Landing fees and other rents			316				167
Passenger service			135				84
Aircraft rent			121				64
Impairment of goodwill			—				6,100
Restructuring and merger-related items			99				16
Other			206				111
Total operating expense			7,167				11,027
Operating Loss			(483	)			(6,261	)
Other (Expense) Income:
Interest expense			(308	)			(147	)
Interest income			10				27
Miscellaneous, net			(13	)			(9	)
Total other expense, net			(311	)			(129	)
Loss Before Income Taxes			(794	)			(6,390	)
Income Taxes			—				—
Net Loss		$	(794	)		$	(6,390	)
Basic and Diluted Loss per Share		$	(0.96	)		$	(16.15	)

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

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

		Three Months Ended
		March 31,				March 31,
(in millions)		2009				2008
Net cash provided by operating activities		$	643			$	283
Cash Flows From Investing Activities:
Property and equipment additions:
Flight equipment, including advance payments			(386	)			(527	)
Ground property and equipment, including technology			(49	)			(59	)
Decrease in restricted cash and cash equivalents			18				4
Decrease in short-term investments			72				—
Proceeds from sales of flight equipment			74				25
Other, net			(1	)			7
Net cash used in investing activities			(272	)			(550	)
Cash Flows From Financing Activities:
Payments on long-term debt and capital lease obligations			(538	)			(615	)
Proceeds from long-term obligations			356				733
Other, net			(3	)			(7	)
Net cash (used in) provided by financing activities			(185	)			111
Net Increase (Decrease) in Cash and Cash Equivalents			186				(156	)
Cash and cash equivalents at beginning of period			4,255				2,648
Cash and cash equivalents at end of period		$	4,441			$	2,492
Non-cash transactions:
Flight equipment		$	201			$	—

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

DELTA AIR LINES, INC.
Notes to the Condensed Consolidated Financial Statements
March 31, 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 the period from January 1 to March 31, 2009.

     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 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 and other factors, operating results for the three months ended March 31, 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.

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

						Quoted Prices				Significant
						in Active				Other				Significant
						Markets for				Observable				Unobservable
		March 31,				Identical Assets				Inputs				Inputs
(in millions)		2009				(Level 1)				(Level 2)				(Level 3)
Cash equivalents		$	4,180			$	4,180			$	—			$	—
Short-term investments			67				—				—				67
Restricted cash equivalents			382				382				—				—
Long-term investments			194				—				—				194
Hedge derivatives liability, net			(426	)			—				(43	)			(383	)

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

		Short-term				Long-term				Hedge Derivatives
(in millions)		Investments				Investments				Liability, Net
Balance at December 31, 2008		$	212			$	121			$	(1,091	)
Reclassification			(73	)			73				—
Change in fair value included in earnings			—				—				(574	)
Change in fair value included in other comprehensive income			—				—				421
Purchases and settlements, net			(72	)			—				861
Balance at March 31, 2009		$	67			$	194			$	(383	)

     Gains (losses) included in earnings above for the three months ended March 31, 2009 are recorded on our Consolidated Statement of Operations as follows:

		Fuel Expense and				Other (Expense)
(in millions)		Related Taxes				Income
Total gains (losses) included in earnings		$	(574	)		$	2
Change in unrealized losses relating to assets still held at March 31, 2009		$	(2	)		$	—

NOTE 3. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

     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.

Derivative Financial Instruments

     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 March 31, 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		Volatility in jet		Effective portion of hedge		Excess, if any, over
crude oil, heating oil, and		fuel prices		is recorded in accumulated		effective portion of hedge
jet fuel swaps, collars and				other comprehensive income		is recorded in other
call options(2)						(expense) income
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		Foreign currency		Entire hedge is recorded in		Expect hedge to fully offset
forwards and collars		exchange rate		accumulated other		hedged risk; no
		fluctuations		comprehensive income		ineffectiveness recorded
Not qualifying or not designated under SFAS 133:
Fuel hedges consisting of		Volatility in jet		Entire amount of change in fair value of hedge is recorded
crude oil, heating oil and jet		fuel prices		in aircraft fuel expense and related taxes
fuel extendable swaps and three-way collars

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 interest rates		Entire fair value of hedge is recorded in long-term debt and capital leases		Expect hedge to be perfectly effective at offsetting changes in fair value of the related debt; no ineffectiveness recorded

Hedge Position

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

		March 31, 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				Receivable(4)
Designated under SFAS 133
Fuel hedge swaps, collars and call options(1)		2.0 billion gallons — crude oil, heating oil, jet fuel				April 2009 - December 2010				$	72			$	29			$	(125	)		$	(539	)		$	—
Interest rate swaps designated as fair value hedges(2)			$1,000			September 2011 - July 2012					71				—				—				—				—
Interest rate swaps and call options designated as cash flow hedges(3)			$1,700			December 2009 - May 2019					—				—				—				(33	)			(50	)
Foreign currency exchange forwards and collars(3)		82.4 billion Japanese Yen				April 2009 - December 2011					3				10				—				(6	)			—
Total designated under SFAS 133											146				39				(125	)			(578	)			(50	)
Not designated under SFAS 133
Fuel hedge swaps and collars(3)		45 million gallons — crude oil				April - June 2009					—				—				(89	)			(84	)			—
Total not designated under SFAS 133											—				—				(89	)			(84	)			—
Total derivative instruments										$	146			$	39			$	(214	)		$	(662	)		$	(50	)		$	404

		December 31, 2008
										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				Receivable(4)
Designated under SFAS 133
Fuel hedge swaps, collars and call options(1)		1.9 billion gallons - crude oil, heating oil, jet fuel				January 2009 - December 2010				$	8			$	18			$	(66	)		$	(849	)		$	—
Interest rate swaps designated as fair value hedges(2)		$	1,000			September 2011 - July 2012					91				—				—				—				—
Interest rate swaps and call options designated as cash flow hedges(3)		$	1,700			December 2009 - May 2019					—				—								(32	)			(63	)
Foreign currency exchange forwards and collars(3)		45.0 billion Japanese Yen				January - December 2009					—				—								(48	)			—
Total designated under SFAS 133											99				18				(66	)			(929	)			(63	)
Not designated under SFAS 133
Fuel hedge swaps and collars(3)		180 million gallons - crude oil, heating oil, jet fuel				January - 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.
(4)		Represents the net margin postings we provided to counterparties that are associated with the open position of our hedge derivative contracts.

     As of March 31, 2009, our open fuel hedge (loss) gain position, excluding contracts we terminated early, for the nine months ending December 31, 2009 and the year ending December 31, 2010 is as follows:

		Percentage of
		Projected				Contract
		Fuel				Fair Value at
		Requirements				March 31,
(in millions, unless otherwise stated)		Hedged				2009
Nine months ending December 31, 2009			56	%		$	(485	)
2010			9				64
Total			29	%		$	(421	)

Hedge Gains (Losses)

     Gains (losses) recorded on our Condensed Consolidated Financial Statements for the three months ended March 31, 2009 and 2008 related to our fuel hedge contracts designated under SFAS 133 are as follows:

										Effective Portion Reclassified
		Effective Portion Recognized in								from Accumulated Other								Ineffective Portion Recognized
		Other Comprehensive Loss								Comprehensive Loss to Earnings								in Other (Expense) Income
		Three Months Ended March 31,								Three Months Ended March 31,								Three Months Ended March 31,
(in millions)		2009				2008				2009				2008				2009				2008
Designated under SFAS 133
Fuel hedge swaps, collars and call options (1)		$	346			$	215			$	(663	)		$	41			$	(9	)		$	(17	)
Interest rate swaps and call options designated as cash flow hedges (2)			12				—				—				—				—				—
Foreign currency exchange forwards and collars (3)			55				—				4				—				—				—
Total designated under SFAS 133		$	413			$	215			$	(659	)		$	41			$	(9	)		$	(17	)

(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 revenue.

      We recorded a loss of $23 million to aircraft fuel and related taxes on our Consolidated Statement of Operations for the three months ended March 31, 2009 related to Northwest derivative contracts that were not designated as hedges under SFAS 133. The $23 million loss includes a mark-to-market adjustment of $2 million related to derivative contracts settling in the June 2009 quarter. As of March 31, 2009, we recorded in accumulated other comprehensive loss on our Consolidated Balance Sheet $867 million of losses on our hedge contracts scheduled to settle in the next 12 months.

Hedge Margin

     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 other accrued liabilities on our Condensed 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.

     Due to our estimated fair value loss position on our fuel hedge contracts at March 31, 2009, counterparties required us to post $475 million of fuel hedge margin, which is recorded in hedge margin receivable on our Consolidated Balance Sheet.

     Due to the significant changes in interest rates, our interest rate swap agreements designated as fair value hedges were in a gain position. Accordingly, we required counterparties to post $71 million of margin associated with these agreements at March 31, 2009. The margin has been recorded as an offset to hedge margin receivable on our Consolidated Balance Sheet.

     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.

NOTE 4. DEBT

     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 March 31, 2009 and December 31, 2008. Northwest did not have any outstanding borrowings under the $500 Million Revolving Credit Facility at March 31, 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 we receive the single operating certificate, key assets of the two companies must be combined into a single entity. In order for this to occur, we intend to merge Northwest Airlines, Inc. with and into Delta Air Lines, Inc. As of March 31, 2009, we expect this merger to occur within the next 12 months. As a result, we classified borrowings under the Bank Credit Facility as short-term on our Consolidated Balance Sheet at March 31, 2009. In addition, 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, which will result in higher interest expense for the remainder of 2009.

Covenants

     We were in compliance with all covenants in our financing agreements at March 31, 2009.

NOTE 5. PURCHASE COMMITMENTS AND CONTINGENCIES

Aircraft Order Commitments

     Future commitments for aircraft on firm order as of March 31, 2009 are estimated to be approximately $2.4 billion. The following table shows the timing of these commitments:

Year Ending December 31,
(in millions)		Amount
Nine months ending December 31, 2009		$	1,020
2010			1,030
2011			20
2012			110
2013			90
After 2013			130
Total		$	2,400

     Our aircraft order commitments as of March 31, 2009 consist of firm orders to purchase five B-777-200LR aircraft, three B-737-700 aircraft, 33 B-737-800 aircraft, two A320-200 aircraft, five A319-100 aircraft and four CRJ-900 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 33 B-737-800 aircraft include 31 B-737-800 aircraft, 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 $1.2 billion, including $470 million for the nine months ending December 31, 2009 and $760 million for 2010.

     Our firm orders to purchase four CRJ-900 aircraft include two CRJ-900 aircraft which we have assigned to a regional air carrier (“Contract Carrier”). We are required to cure any default by the Contract Carrier of its purchase obligation, and have certain indemnification rights against the Contract Carrier for costs incurred in effecting such a cure.

     We have financing commitments from third parties, cancellation rights or, with respect to the 31 B-737-800 aircraft referred to above, definitive agreements to sell all Mainline and CRJ-900 aircraft on firm order as of March 31, 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 March 2009 quarter, 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 July 2015, 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 March 31, 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 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. The Objecting Bondholders have filed a petition with the U.S. Court of Appeals for the Second Circuit for a rehearing en banc.

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 March 31, 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 March 31, 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 March 31, 2009, we had 83,822 full-time equivalent employees. Approximately 42% 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. 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 March 31, 2009 and 2008 includes the following components:

										Other Postretirement								Other Postemployment
		Pension Benefits								Benefits								Benefits
(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				—				6				—				—				—
Net periodic cost		$	107			$	8			$	26			$	15			$	24			$	1

     In December 2008, Delta announced voluntary workforce reduction programs, which expanded company-subsidized retiree healthcare benefits to participants who would not have otherwise been eligible to receive this benefit, resulting in a special termination benefit charge of $6 million recorded in restructuring and merger-related items on our Consolidated Statement of Operations for the March 2009 quarter.

NOTE 7. COMPREHENSIVE LOSS

     The following table shows the components of accumulated other comprehensive loss for the March 2009 quarter:

		Unrecognized								Marketable
		Pension				Derivative				Equity				Valuation
(in millions)		Liability				Instruments				Securities				Allowance				Total
Balance at December 31, 2008		$	(1,696	)		$	(863	)		$	(6	)		$	(1,515	)		$	(4,080	)
Pension adjustment			4				—				—				—				4
Changes in fair value			—				(246	)			—				—				(246	)
Reclassification to earnings			—				659				—				—				659
Tax effect			(1	)			(155	)			—				156				—
Balance at March 31, 2009		$	(1,693	)		$	(605	)		$	(6	)		$	(1,359	)		$	(3,663	)

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 months ended March 31, 2009 and 2008:

(in millions)		2009				2008
Severance and related costs		$	50			$	16
Merger-related items			49				—
Total restructuring and merger-related items		$	99			$	16

     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 March 2009 quarter, 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 as discussed in Note 6. The portion of the charge related to the voluntary programs includes approximately 1,800 of the 2,500 program participants. Severance liabilities initially valued and recorded in connection with the Merger in the December 2008 quarter previously contemplated the elimination of 700 positions. We expect any additional charges to be incurred in connection with these programs will be immaterial.

     Merger-related items relates 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 March 31, 2009, and the activity for the three months then ended. The table also shows the balances for the restructuring charges assumed in the Merger as of March 31, 2009, and the activity for the three months then ended.

		Liability																Liability
		Balance at				Additional				Purchase								Balance at
		December 31,				Costs and				Accounting								March 31,
(in millions)		2008				Expenses				Adjustments				Payments				2009
Severance and related cost(1)		$	50			$	44			$	—			$	(16	)		$	78
Facilities and other(1)			54				—				(4	)			—				50
Total		$	104			$	44			$	(4	)		$	(16	)		$	128

     We decided to discontinue our dedicated freighter flying and ground our entire fleet of B747-200F aircraft by December 31, 2009 due to that fleet’s age and inefficiency. In connection with this decision, we performed an impairment analysis and no impairment currently exists.

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 March 31, 2009, under Delta’s Plan of Reorganization, we have (1) distributed 321 million shares of common stock to holders of $13.5 billion of allowed general, unsecured claims, (2) issued 14 million shares of common stock to eligible non-contract, non-management employees and (3) reserved 65 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 March 31, 2009, eight 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. In accordance with SFAS No. 128, “Earnings per Share,” 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 months ended March 31, 2009 and 2008 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 months ended March 31, 2009 also assumes there was outstanding at the beginning of that period 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) eight 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 March 31, 2009:

(in millions)				Shares(1)
Common stock issued and outstanding					772
Less:
		Unvested restricted stock			(21	)
Add:
		Shares reserved for future issuance under Delta’s Plan of Reorganization			65
		Shares reserved for future issuance relating to Northwest’s Plan of Reorganization, after giving effect to the 1.25 exchange ratio			8
		Shares issuable to Delta and Northwest pilots in connection with the Merger			1
Common stock considered outstanding for purposes of loss per share calculation					825

     The following table shows our computation of basic and diluted loss per share for the three months ended March 31, 2009 and 2008:

(in millions, except per share data)		2009				2008
Basic and diluted:
Net loss		$	(794	)		$	(6,390	)
Weighted average shares outstanding(1)			825				396
Basic and diluted loss per share		$	(0.96	)		$	(16.15	)

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 March 2009 quarter include the results of Northwest for that period. In contrast, our financial results under GAAP for the March 2008 quarter do not include the results of Northwest for that period. This impacts the comparability of our financial results under GAAP for the March 2009 and March 2008 quarters.

     In the accompanying 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 March 2008 quarter which is 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.

Overview

     The worsening global economy is placing significant pressure on the airline industry, including Delta. We reported a consolidated net loss of $794 million for the March 2009 quarter, which reflects $686 million in fuel hedge losses, weak demand for air travel as a result of the global recession, and $99 million in restructuring and merger-related items. For the quarter, our operating margin was a negative 7%.

     Total operating revenue declined 15%¹ in the March 2009 quarter on a 6%¹ decrease in system capacity, compared with the March 2008 quarter on a combined basis. Passenger and cargo revenue decreased as a result of reduced capacity and weak economic conditions. Passenger mile yield declined 9%¹ in the March 2009 quarter, compared with the March 2008 quarter on a combined basis, reflecting significantly reduced demand particularly in international markets, competitive pricing pressures and unfavorable foreign currency exchange rates. We partially offset the passenger and cargo revenue decline with other revenue from new or increased administrative service charges and baggage handling fees.

     Our Mainline operating cost per available seat mile (“CASM”) excluding fuel expense increased 5%¹ in the March 2009 quarter, compared to a March 2008 quarter on a combined basis. Approximately half of this increase is due to an increase in pension expense as a result of an erosion in value in pension trust assets driven by market conditions. The other half of the increase primarily relates to timing differences between the implementation of capacity reductions and the achievement of associated cost savings.

     At March 31, 2009, we had $4.4 billion in cash and cash equivalents and $67 million in short-term investments. In addition, we had $500 million in an undrawn revolving credit facility.

Capacity and Economy

     The global recession has resulted in weak demand for air travel, particularly in the Atlantic market. In March 2009, we announced plans to reduce international capacity by an additional 10% compared to the prior year, beginning in September 2009. Accordingly, in the December 2009 quarter, we expect system capacity to be down 6-8%, and international capacity to be down 9-11%, year over year. As a result of these reductions, we plan to remove from the fleet in 2009 30-40 mainline aircraft. In addition, we grounded three dedicated cargo freighter B-747-200F aircraft during the March 2009 quarter and are planning to ground the remaining seven dedicated cargo freighters by December 31, 2009. Furthermore, we anticipate removing over 30 regional jets from our network over the next 18 months, including 11 by the end of this year. We believe we have flexibility in our network and fleet to remove additional capacity if the environment warrants.

Fuel

     Fuel is one of our most significant costs. During 2008, fuel prices fluctuated dramatically, hovering around $100 per barrel at the beginning of that year and escalating to $145 per barrel by mid-summer. Throughout the summer of 2008, fuel prices remained at record high levels and were forecasted to continue to rise. Based on this outlook, in 2008, we added fuel hedge contracts to protect against further increases in fuel prices. However, fuel prices fell dramatically, creating sizeable losses on our fuel hedge contracts. During the December 2008 quarter, we early terminated many of our fuel hedge contracts covering fuel purchases in 2009 to limit our exposure to additional losses and margin posting requirements. In accordance with GAAP, losses on fuel hedge contracts that relate to fuel purchases in 2009 are recognized in the period when the hedged fuel is purchased and consumed, even if the hedged contract is early terminated in 2008.

     As of March 31, 2009, we recorded in accumulated other comprehensive loss on our Consolidated Balance Sheet approximately $900 million of losses on our fuel hedge contracts. This includes (1) fuel hedge contracts that were open on March 31, 2009, (2) fuel hedge contracts that we early terminated but which relate to fuel purchases after March 31, 2009 and (3) unamortized premiums on fuel hedge collar and call option contracts. The ultimate loss (or gain) on our open fuel hedge contracts at March 31, 2009 will be based on market prices when the contract is settled. In contrast, the loss on our early terminated fuel hedge contracts, and the expense associated with premiums on our fuel hedge collar and call option contracts, will not change based on future market prices. Assuming crude oil prices of $50 per barrel for purposes of calculating the fair value of our open fuel hedge contracts at March 31, 2009, we expect to recognize the following losses on our Consolidated Statements of Operations for the periods indicated:

	•		Approximately $500 million in the June 2009 quarter (which includes $300 million for open contracts, $150 million for early terminated contracts, and $50 million for option premiums);
	•		Approximately $275 million in the September 2009 quarter (which includes $75 million for open contracts, $110 million for early terminated contracts, and $90 million for option premiums); and
	•		Approximately $80 million in the December 2009 quarter (which includes $30 million for early terminated contracts and $50 million for option premiums).

      Based on contract settlements and current fuel prices, we anticipate fuel hedge margin that we are required to post with counterparties will be less than $100 million after the June 2009 quarter.

      Beginning in November 2008, in response to the decrease in crude oil prices, we entered into fuel hedge contracts which primarily consist of swap and call option contracts at an average crude oil price of $61 per barrel for approximately 33% of our expected consumption for the nine months ending December 31, 2009.

Merger Synergies

     As a result of the Merger, we expect to recognize $500 million in synergy benefits in 2009, primarily in the second half of the year, and over $1 billion in synergy benefits in 2010. In an effort to mitigate the negative impacts of the recession, we are implementing initiatives to increase revenues and reduce costs, including acceleration of Merger integration activities. We regularly evaluate the costs of achieving the Merger synergies against the expected benefits and believe the synergy benefits significantly exceed the integration costs. Our ability to realize the synergies depends, among other things, on our successfully aligning technologies of the two airlines, receiving a single operating certificate and resolving labor representation differences while maintaining productive employee relations. Currently, our goal is to obtain a single operating certificate from the Federal Aviation Administration by the end of 2009.

      Our goal is to resolve all remaining employee representation and seniority integration issues as promptly as possible. Seniority and representation issues have already been resolved for approximately 25% of our workforce. The integration of some portions of the rest of the pre-merger Delta and pre-merger Northwest workforces may be challenging because representation and seniority integration issues must be resolved. 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.

     We expect to achieve revenue synergies through more effective utilization of our combined fleet. In April 2009, we began the initial cross fleeting whereby certain Northwest aircraft operated on Delta routes and Delta aircraft served Northwest routes to better match capacity and demand. As part of this effort, we moved larger Northwest aircraft to New York and to Atlanta, and moved some of Delta’s smaller international aircraft to Minneapolis and Detroit.

Results of Operations—March 2009 and 2008 Quarters

Operating Revenue

																		Increase
																		(Decrease)
														Increase due to				Excluding
		Three Months Ended March 31,								Increase				Northwest				Northwest
(in millions)		2009				2008				(Decrease)				Operations				Operations
Operating Revenue:
Passenger:
Mainline		$	4,367			$	3,061			$	1,306			$	1,794			$	(488	)
Regional carriers			1,234				1,039				195				443				(248	)
Total passenger revenue			5,601				4,100				1,501				2,237				(736	)
Cargo			185				134				51				92				(41	)
Other, net			898				532				366				269				97
Total operating revenue		$	6,684			$	4,766			$	1,918			$	2,598			$	(680	)

     Northwest Operations. As a result of the Merger, our results of operations for the March 2009 quarter include Northwest’s operations for the period from January 1 to March 31, 2009. The addition of Northwest to our operations increased operating revenue $2.6 billion and available seat miles (“ASMs”), or capacity, 59%, for the March 2009 quarter. Northwest’s operations are not included in our results of operations for the March 2008 quarter.

						Increase (Decrease) vs.
		Three Months				Three Months Ended March 31, 2008
		Ended				Passenger
		March 31,				Mile								Load
(in millions)		2009				Yield				PRASM				Factor
Passenger Revenue:
North America		$	2,648				(8	)%			(7	)%		1.1 pts
Atlantic			843				(13	)%			(19	)%		(5.8) pts
Latin America			321				(3	)%			(11	)%		(6.2) pts
Pacific			555				(10	)%			(4	)%		5.6 pts
Total Mainline			4,367				(9	)%			(10	)%		(0.7) pts
Regional carriers			1,234				(9	)%			(13	)%		(3.6) pts
Total passenger revenue		$	5,601				(10	)%			(12	)%		(1.1) pts

     Mainline Passenger Revenue. Mainline passenger revenue increased in the March 2009 quarter due to the inclusion of Northwest’s operations, partially offset by weakened demand for air travel from the global recession and related capacity reductions. Passenger mile yield and passenger revenue per available seat mile (“PRASM”) declined 9% and 10%, respectively.

	•		North American Passenger Revenue. North American passenger revenue increased 56% due to the inclusion of Northwest’s operations. North American PRASM decreased 7% as a result of an 8% decrease in passenger mile yield. The decrease in passenger mile yield reflects a reduction in business demand due to the global recession and an overall decrease in average fares due to competitive pricing pressures. Excluding Northwest’s operations, we reduced capacity by 9% for the March 2009 quarter compared to the March 2008 quarter. Load factor was flat as a result of our decrease in capacity.
	•		International Passenger Revenue. International passenger revenue increased 63% due to the inclusion of Northwest’s operations. International PRASM decreased 13% as a result of a 2.8 point decrease in load factor and 9% decrease in passenger mile yield. The decrease in passenger mile yield reflects significantly reduced demand for international travel and competitive pricing pressures (especially in the Atlantic and Pacific markets, which have seen decreases of 13% and 10%, respectively, in passenger mile yield), primarily reflecting a significant decrease in business demand due to the global recession. Also contributing to the decrease in passenger mile yield in the Atlantic market were unfavorable foreign currency exchange rates. Excluding Northwest’s operations, we increased international capacity by 8% for the March 2009 quarter compared to the March 2008 quarter due to the addition of routes in 2008.

     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 $248 million primarily as a result of an 8% decrease in passenger mile yield and 17% decrease in traffic on a 15% decrease in capacity due to the slowing economy.

     Cargo. Cargo revenue increased due to the inclusion of Northwest’s operations, partially offset by significantly reduced cargo yields and decreased international volume. During the March 2009 quarter, we grounded three B-747-200F aircraft.

     Other, net. Other, net revenue increased primarily due to the inclusion of Northwest’s operations. Excluding Northwest’s operations, other, net revenue increased $97 million primarily due to new or increased administrative service charges and baggage handling fees and higher SkyMiles program revenue, partially offset by reduced volume in Delta Global Services, LLC, our staffing services business to third parties.

Operating Expense

														Increase (Decrease) due to:
		Three Months Ended March 31,								Increase				Northwest
(in millions)		2009				2008				(Decrease)				Operations				Other
Operating Expense:
Aircraft fuel and related taxes		$	1,893			$	1,422			$	471			$	586			$	(115	)
Salaries and related costs			1,867				1,091				776				748				28
Contract carrier arrangements			908				928				(20	)			190				(210	)
Contracted services			458				254				204				222				(18	)
Aircraft maintenance materials and outside repairs			424				268				156				155				1
Depreciation and amortization			384				297				87				127				(40	)
Passenger commissions and other selling expenses			356				225				131				175				(44	)
Landing fees and other rents			316				167				149				148				1
Passenger service			135				84				51				53				(2	)
Aircraft rent			121				64				57				58				(1	)
Impairment of goodwill			—				6,100				(6,100	)			—				(6,100	)
Restructuring and merger-related items(1)			99				16				83				—				83
Other			206				111				95				103				(8	)
Total operating expense		$	7,167			$	11,027			$	(3,860	)		$	2,565			$	(6,425	)

     Northwest Operations. As a result of the Merger, our results of operations for the March 2009 quarter include Northwest’s operations for the period from January 1 to March 31, 2009. The addition of Northwest to our operations increased operating expense $2.6 billion and capacity 59% for the March 2009 quarter. Northwest’s operations are not included in our results of operations for the March 2008 quarter.

     The operating expenses discussed below do not include the impact of Northwest’s operations for the March 2009 quarter.

     Aircraft fuel and related taxes. Aircraft fuel and related taxes decreased $115 million primarily due to decreases of (1) $660 million associated with lower average fuel prices and (2) $91 million from a 6% decline in fuel consumption due to capacity reductions. These decreases were partially offset by $594 million in fuel hedge losses for the March 2009 quarter, compared to $41 million in fuel hedge gains for the March 2008 quarter.

     Salaries and related costs. The $28 million increase in salaries and related costs reflects higher pension expense from a decline in the value of our defined benefit plan assets as a result of market conditions and pay increases for pilot and non-pilot frontline employees. These increases were partially offset by a reduction in inactive and retiree group insurance claims and an 8% average decrease in headcount primarily related to workforce reduction programs in connection with our capacity reductions.

     Contract carrier arrangements. Contract carrier arrangements expense decreased $210 million primarily due to decreases of (1) $135 million associated with lower average fuel prices and (2) $39 million from a 12% decline in fuel consumption due to capacity reductions.

     Depreciation and amortization. In December 2008, we announced a multi-year extension of our co-brand credit card relationship with American Express (the “American Express Agreement”). Accordingly, we extended the useful life of the American Express Agreement intangible asset to the date the contract expires, which drove a $34 million decrease in depreciation and amortization expense.

     Passenger commissions and other selling expenses. Passenger commissions and other selling expenses decreased $44 million in connection with the decrease in passenger revenue.

     Impairment of goodwill. During the March 2008 quarter, we experienced a significant decline in market capitalization driven primarily by record high fuel prices and overall airline industry conditions. In addition, the announcement of our intention to merge with Northwest established a stock exchange ratio based on the relative valuation of Delta and Northwest. As a result of these indicators, we determined goodwill was impaired and recorded a non-cash charge of $6.1 billion based on a preliminary assessment. We finalized the impairment test during the June 2008 quarter and recorded an additional non-cash charge of $839 million.

     Restructuring and merger- related items. Restructuring and merger-related items totaled a $99 million charge in the March 2009 quarter, primarily consisting of the following:

	•		Merger-related charges. $49 million in 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. We expect to incur total one-time cash costs of approximately $500 million over approximately three years to integrate the two airlines.
	•		Severance and related costs. $50 million in restructuring and related charges primarily in connection with voluntary workforce reduction programs for U.S. non-pilot employees announced in December 2008.

Other (Expense) Income

     Other expense, net for the March 2009 quarter was $311 million, compared to $129 million for the March 2008 quarter. This change is primarily attributable to (1) a $161 million, or 110%, increase in interest expense primarily due to a higher level of debt outstanding, including Northwest debt for the March 2009 quarter and the borrowing in 2008 of the entire amount of our $1.0 billion revolving credit facility (the “Revolving Facility”), (2) a $17 million decrease in interest income primarily from significantly reduced short-term interest rates and (3) $4 million increase to miscellaneous, net expense due to the following:

		Increase (Decrease) vs.
		Three Months Ended
(in millions)		March 31, 2008
Miscellaneous, net
Unfavorable foreign currency exchange rates		$	26
Mark-to-market adjustments on the ineffective portion of our fuel hedge contracts			(11	)
Northwest non-operating expense for the March 2009 quarter			(6	)
Impairment of our investment in insured auction rate securities in 2008			(4	)
Other			(1	)
Total miscellaneous, net		$	4

Income Taxes

     We did not record an income tax benefit as a result of our March 2009 and 2008 quarter losses. The deferred tax asset resulting from such net operating losses is fully reserved by a valuation allowance.

Operating Statistics

     The following table sets forth our operating statistics for the three months ended March 31, 2009 and 2008:

		2009												2008
		Consolidated				Delta				Northwest				Delta
Consolidated:
Revenue passenger miles (“RPMs”) (millions)(1)			42,960				26,023				16,937				28,205
ASMs (millions)(1)			55,740				34,405				21,335				36,092
Passenger mile yield(1)			13.04	¢			12.93	¢			13.21	¢			14.54	¢
PRASM(1)			10.05	¢			9.78	¢			10.49	¢			11.36	¢
CASM(1)			12.86	¢			13.22	¢			12.27	¢			30.55	¢
Passenger load factor(1)			77.1	%			75.6	%			79.4	%			78.1	%
Fuel gallons consumed (millions)(1)			924				559				365				602
Average price per fuel gallon, net of hedging activity(1)		$	2.26			$	2.60			$	1.74			$	2.90
Number of aircraft in fleet, end of period			1,015				563				452				584
Full-time equivalent employees, end of period			83,822				50,886				32,936				55,382
Mainline:
RPMs (millions)			37,201				22,365				14,836				23,795
ASMs (millions)			47,764				29,435				18,329				30,270
CASM			12.14	¢			12.21	¢			12.02	¢			32.29	¢
Number of aircraft in fleet, end of period			750				442				308				451

	•		Atlantic Southeast Airlines, Inc., SkyWest Airlines, Inc., Chautauqua Airlines, Inc., Freedom Airlines, Inc., Shuttle America Corporation and Pinnacle Airlines, Inc. (“Pinnacle”) for all periods presented; and
	•		ExpressJet Airlines, Inc. for the three months ended March 31, 2008.

Fleet Information

     Our active fleet, orders, options and rolling options at March 31, 2009 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.

		Current Fleet
						Capital				Operating								Average												Rolling
Aircraft Type		Owned				Lease				Lease				Total				Age				Orders				Options(4)				Options(4)
Passenger Aircraft:
B-737-700			7				—				—				7				0.5				3				—				—
B-737-800			71				—				—				71				8.4				33	(1)			60				115
B-747-400			4				—				12				16				15.4				—				—				—
B-757-200			90				33				34				157				16.9				—				—				—
B-757-200ER			—				2				15				17				11.2				—				—				—
B-757-300			16				—				—				16				6.1				—				—				—
B-767-300			4				—				14				18				18.2				—				—				—
B-767-300ER			48				—				9				57				12.9				—				6				—
B-767-400ER			21				—				—				21				8.1				—				12				—
B-777-200ER			8				—				—				8				9.2				—				—				—
B-777-200LR			5				—				—				5				0.4				5				26				10
B-787-8			—				—				—				—				—				—	(2)			18				—
A319-100			55				—				2				57				7.2				5				—				—
A320-200			41				—				28				69				14.1				2				—				—
A330-200			11				—				—				11				4.0				—				—				—
A330-300			21				—				—				21				3.6				—				—				—
MD-88			63				33				21				117				18.7				—				—				—
MD-90			16				—				—				16				13.3				—				—				—
DC-9			66				—				—				66				35.5				—				—				—
CRJ-100			21				13				39				73				11.8				—				—				—
CRJ-200			4				—				27				31				5.3				—				4				—
CRJ-700			15				—				—				15				5.4				—				5				—
CRJ-900			54				—				—				54				1.2				4	(3)			20				—
Saab 340			—				—				49				49				11.3				—				—				—
EMB 175			36				—				—				36				1.0				—				36				—
Freighter Aircraft:
B-747-200F			4				—				3				7				23.5				—				—				—
Total			681				81				253				1,015				13.1				52				187				125