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 September 30, 2009

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 September 30, 2009:

Common Stock, $0.0001 par value—779,521,801 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 “Part II, Item 1A. Risk Factors” in this 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)

		September 30,				December 31,
(in millions, except share data)		2009				2008
ASSETS
Current Assets:
Cash and cash equivalents		$	5,396			$	4,255
Short-term investments			92				212
Restricted cash and cash equivalents			478				429
Accounts receivable, net of an allowance for uncollectible accounts of $42 at September 30, 2009 and December 31, 2008, respectively			1,469				1,513
Hedge margin receivable			—				1,139
Expendable parts and supplies inventories, net of an allowance for obsolescence of $52 and $32 at September 30, 2009 and December 31, 2008, respectively			356				388
Deferred income taxes, net			291				401
Prepaid expenses and other			780				637
Total current assets			8,862				8,974
Property and Equipment, Net:
Property and equipment, net of accumulated depreciation and amortization of $2,584 and $1,558 at September 30, 2009 and December 31, 2008, respectively			20,658				20,627
Other Assets:
Goodwill			9,778				9,731
Identifiable intangibles, net of accumulated amortization of $427 and $354 at September 30, 2009 and December 31, 2008, respectively			4,864				4,944
Other noncurrent assets			691				808
Total other assets			15,333				15,483
Total assets		$	44,853			$	45,084
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt and capital leases		$	1,029			$	1,160
Air traffic liability			3,363				3,385
Accounts payable			1,483				1,604
Frequent flyer deferred revenue			1,535				1,624
Accrued salaries and related benefits			1,027				972
Hedge derivatives liability			160				1,247
Taxes payable			540				565
Other accrued liabilities			457				535
Total current liabilities			9,594				11,092
Noncurrent Liabilities:
Long-term debt and capital leases			16,655				15,411
Pension, postretirement and related benefits			11,217				10,895
Frequent flyer deferred revenue			3,365				3,489
Deferred income taxes, net			1,861				1,981
Other noncurrent liabilities			1,261				1,342
Total noncurrent liabilities			34,359				33,118
Commitments and Contingencies
Stockholders’ Equity:
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 789,122,254 and 702,685,427 shares issued at September 30, 2009 and December 31, 2008, respectively			—				—
Additional paid-in capital			13,791				13,714
Accumulated deficit			(9,820	)			(8,608	)
Accumulated other comprehensive loss			(2,907	)			(4,080	)
Treasury stock, at cost, 9,600,453 and 7,548,543 shares at September 30, 2009 and December 31, 2008, respectively			(164	)			(152	)
Total stockholders’ equity			900				874
Total liabilities and stockholders’ equity		$	44,853			$	45,084

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 September 30,								Nine Months Ended September 30,
(in millions, except per share data)		2009				2008				2009				2008
Operating Revenue:
Passenger:
Mainline		$	5,122			$	3,921			$	14,053			$	10,609
Regional carriers			1,402				1,057				3,975				3,239
Total passenger revenue			6,524				4,978				18,028				13,848
Cargo			177				162				535				456
Other, net			873				579				2,695				1,680
Total operating revenue			7,574				5,719				21,258				15,984
Operating Expense:
Aircraft fuel and related taxes			1,973				1,952				5,678				5,052
Salaries and related costs			1,894				1,086				5,652				3,269
Contract carrier arrangements			1,009				941				2,882				2,836
Contracted services			415				272				1,249				783
Depreciation and amortization			385				293				1,152				892
Aircraft maintenance materials and outside repairs			334				273				1,150				836
Passenger commissions and other selling expenses			384				259				1,069				732
Landing fees and other rents			340				179				971				519
Passenger service			181				122				477				311
Aircraft rent			123				70				363				201
Impairment of goodwill and other intangible assets			—				—				—				7,296
Restructuring and merger-related items			129				24				286				144
Other			203				117				607				330
Total operating expense			7,370				5,588				21,536				23,201
Operating Income (Loss)			204				131				(278	)			(7,217	)
Other (Expense) Income:
Interest expense			(319	)			(140	)			(951	)			(428	)
Interest income			4				21				23				73
Loss on extinguishment of debt			(83	)			—				(83	)			—
Miscellaneous, net			15				(62	)			63				(31	)
Total other expense, net			(383	)			(181	)			(948	)			(386	)
Loss Before Income Taxes			(179	)			(50	)			(1,226	)			(7,603	)
Income Tax Benefit			18				—				14				119
Net Loss		$	(161	)		$	(50	)		$	(1,212	)		$	(7,484	)
Basic and Diluted Loss per Share		$	(0.19	)		$	(0.13	)		$	(1.47	)		$	(18.91	)

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

DELTA AIR LINES, INC.

		Nine Months Ended September 30,
(in millions)		2009				2008
Net cash provided by operating activities		$	1,452			$	282
Cash Flows From Investing Activities:
Property and equipment additions:
Flight equipment, including advance payments			(547	)			(1,056	)
Ground property and equipment, including technology			(185	)			(160	)
(Increase) decrease in restricted cash and cash equivalents			(124	)			2
Redemption of short-term investments			121				—
Redesignation of cash equivalents to short-term investments			—				(818	)
Proceeds from sales of flight equipment			86				110
Other, net			—				7
Net cash used in investing activities			(649	)			(1,915	)
Cash Flows From Financing Activities:
Payments on long-term debt and capital lease obligations			(2,056	)			(857	)
Proceeds from long-term obligations			2,472				2,014
Other, net			(78	)			(12	)
Net cash provided by financing activities			338				1,145
Net Increase (Decrease) in Cash and Cash Equivalents			1,141				(488	)
Cash and cash equivalents at beginning of period			4,255				2,648
Cash and cash equivalents at end of period		$	5,396			$	2,160
Non-cash transactions:
Aircraft delivered under seller financing		$	408			$	—
Flight equipment			43				16

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

DELTA AIR LINES, INC.

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.

     We have marketing alliances with other airlines to enhance our access to domestic and international markets. These arrangements can include codesharing, reciprocal frequent flyer program benefits, shared or reciprocal access to passenger lounges, joint promotions, common use of airport gates and ticket counters, ticket office co-location and other marketing agreements. We have received antitrust immunity for certain of our marketing arrangements, which enables us to offer a more integrated route network and develop common sales, marketing and discount programs for customers. Some of our marketing arrangements provide for the sharing of revenues and expenses. Revenues and expenses associated with collaborative arrangements are presented on a gross basis in the applicable line items in our Consolidated Statements of Operations.

     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 nine months ended September 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 “Disclosures about Derivative Instruments and Hedging Activities—an amendment to FASB Statement No. 133.” The standard 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, and (3) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. This standard is effective for fiscal years and interim periods. We adopted this standard on January 1, 2009.

     In April 2009, the FASB issued “Interim Disclosures about Fair Value of Financial Instruments.” The standard amends required disclosures about the fair value of financial instruments in interim financial statements as well as in annual financial statements. We adopted this standard on April 1, 2009.

NOTE 2. FAIR VALUE MEASUREMENTS

     Fair value is defined as 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. A three-tier fair value hierarchy is used to prioritize the inputs 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
		September 30,				Markets				Inputs				Inputs
(in millions)		2009				(Level 1)				(Level 2)				(Level 3)
Cash equivalents		$	5,085			$	5,085			$	—			$	—
Short-term investments			92				—				—				92
Restricted cash equivalents			489				489				—				—
Long-term investments			134				—				—				134
Hedge derivatives asset, net			32				—				(25	)			57

     We record our cash equivalents and short-term investments at estimated fair value. The estimated fair values of other financial instruments, including derivative instruments, are determined using available market information and valuation methodologies, primarily a discounted cash flow model 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			(1,159	)
Change in fair value included in other comprehensive income			1,116
Purchases and settlements, net			1,191
Balance at September 30, 2009		$	57

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

		Aircraft Fuel Expense and				Other (Expense)
(in millions)		Related Taxes				Income
Total (losses) gains included in earnings		$	(1,179	)		$	20
Change in unrealized gains relating to assets and liabilities still held at September 30, 2009		$	—			$	15

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 September 30, 2009 and December 31, 2008:

		September 30,				December 31,
(in millions)		2009				2008
Total debt at par value		$	18,655			$	17,865
Unamortized discount, net			(1,468	)			(1,859	)
Net carrying amount		$	17,187			$	16,006
Fair value (1)		$	17,476			$	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. We recognize all derivative instruments as either assets or liabilities at fair value on our Consolidated Balance Sheets and 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 September 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 as cash flow hedges, 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 as cash flow hedges:
Fuel hedges consisting of crude oil, heating oil, and jet fuel swaps, collars and call options(2)		Volatility in jet fuel prices		Effective portion of hedge is recorded in accumulated other comprehensive income		Excess, if any, over effective portion of hedge is recorded in other (expense) income
Interest rate swaps and call options		Changes in interest rates		Entire hedge is recorded in accumulated other comprehensive income		Expect hedge to fully offset hedged risk; no ineffectiveness recorded
Foreign currency forwards and collars		Fluctuations in foreign currency exchange rates		Entire hedge is recorded in accumulated other comprehensive income		Expect hedge to fully offset hedged risk; no ineffectiveness recorded
Not designated as hedges:
Fuel contracts consisting of crude oil, heating oil and jet fuel extendable swaps and three- way collars		Volatility in jet fuel prices		Entire amount of change in fair value of hedge is recorded in aircraft fuel expense and related taxes

(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. The remaining Northwest derivative contracts did not qualify for hedge accounting and 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 as fair value hedges, 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 as fair value hedges:
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

     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 deferred a $39 million gain as of September 30, 2009, which will be amortized through 2011 and 2012, 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 September 30, 2009 and December 31, 2008:

										September 30, 2009
																		Hedge				Other				Hedge
		Notional				Maturity								Accounts				Derivatives				Noncurrent				Margin
(in millions, unless otherwise stated)		Balance				Date				Assets				Payable				Liability				Liabilities				Receivable
Designated as hedges
Fuel hedge swaps, collars and call options		772 million gallons - crude oil, heating oil, jet fuel				October 2009 - December 2010				$	157			$	(4	)		$	(93	)		$	—
Interest rate swaps and call options designated as cash flow hedges(1)		$	1,597			December 2009 - May 2019					2				—				(39	)			(27	)
Foreign currency exchange call options and collars		63.7 billion Japanese Yen, 257 million Canadian Dollars				October 2009 - July 2012					—				—				(28	)			(25	)
Total derivative instruments										$	159			$	(4	)		$	(160	)		$	(52	)		$	—

		December 31, 2008
																		Hedge				Other				Hedge
(in millions,		Notional				Maturity								Accounts				Derivatives				Noncurrent				Margin
unless otherwise stated)		Balance				Date				Assets				Payable				Liability				Liabilities				Receivable
Designated as hedges
Fuel hedge swaps, collars and call options(1)		1.9 billion gallons- crude oil, heating oil, jet fuel				January 2009 - December 2010				$	26			$	(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											117				(66	)			(929	)			(63	)
Not designated as hedges
Fuel swap and collar contracts(3)		180 million gallons - crude oil, heating oil, jet fuel				January - June 2009					—				(119	)			(318	)			—
Total not designated											—				(119	)			(318	)			—
Total derivative instruments										$	117			$	(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 September 30, 2009, our open fuel hedge gain position for the three months ending December 31, 2009 and the year ending December 31, 2010 is as follows:

		Percentage of
		Projected
		Fuel				Fair Value at
		Requirements				September 30,
(in millions, unless otherwise stated)		Hedged				2009
Three months ending December 31, 2009			39	%		$	37
2010			11				113
Total			17	%		$	150

Hedge Gains (Losses)

     Gains (losses) recorded on our Condensed Consolidated Financial Statements for the three months ended September 30, 2009 and 2008 related to our designated hedge contracts 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								Three Months Ended								Three Months Ended
		September 30,								September 30,								September 30,
(in millions)		2009				2008				2009				2008				2009				2008
Designated as hedges
Fuel hedge swaps, collars and call options(1)		$	140			$	(1,177	)		$	(226	)		$	179			$	8			$	(25	)
Interest rate swaps and call options designated as cash flow hedges(2)			(16	)			—				1				—				—				—
Foreign currency exchange forwards and collars(3)			(52	)			—				—				—				—				—
Total designated		$	72			$	(1,177	)		$	(225	)		$	179			$	8			$	(25	)

     Gains (losses) recorded on our Condensed Consolidated Financial Statements for the nine months ended September 30, 2009 and 2008 related to our designated hedge contracts 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
		Nine Months Ended								Nine Months Ended								Nine Months Ended
		September 30,								September 30,								September 30,
(in millions)		2009				2008				2009				2008				2009				2008
Designated as hedges
Fuel hedge swaps, collars and call options(1)		$	1,154			$	(158	)		$	(1,287	)		$	533			$	45			$	(11	)
Interest rate swaps and call options designated as cash flow hedges(2)			31				—				—				—				—				—
Foreign currency exchange forwards and collars(3)			(16	)			—				2				—				—				—
Total designated		$	1,169			$	(158	)		$	(1,285	)		$	533			$	45			$	(11	)

     We recorded a loss of $15 million to aircraft fuel and related taxes on our Consolidated Statements of Operations for the nine months ended September 30, 2009 related to Northwest derivative contracts that were not designated as hedges. As of September 30, 2009, we recorded in accumulated other comprehensive loss on our Consolidated Balance Sheet $108 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, interest rate and foreign currency 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 hedge 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 Flow.

     Due to the estimated fair value position of our fuel hedge contracts, we did not receive from or provide to counterparties any fuel hedge margin as of September 30, 2009.

     In accordance with our interest rate and foreign currency hedge agreements, 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 Program 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

     In September 2009, we borrowed a total of $2.1 billion under three new financings: (1) Senior Secured Credit Facilities; (2) Senior Secured Notes; and (3) Senior Second Lien Notes. A portion of the net proceeds was used to repay in full the Bank Credit Facility due in 2010 with the remainder of the proceeds available for general corporate purposes. The new financing agreements are guaranteed by substantially all of our subsidiaries and secured by the Pacific route authorities and certain related assets.

     The following table summarizes our debt at September 30, 2009 and December 31, 2008:

		September 30,				December 31,
(in millions)		2009				2008
Senior Secured Exit Financing Facilities due from 2012 to 2014		$	2,446			$	2,448
Senior Secured Credit Facilities due 2013			750				—
Senior Secured Notes due 2014			750				—
Senior Second Lien Notes due 2015			600				—
Bank Credit Facility due 2010			—				904
Northwest Revolving Credit Facility due 2009			—				—
Certificates due in installments from 2009 to 2023			5,427				5,844
Aircraft financings due in installments from 2009 to 2025			6,421				6,224
Other secured financings due in installments from 2009 to 2031			1,006				1,180
Total secured debt			17,400				16,600
American Express agreement			1,000				1,000
Other unsecured debt due in installments from 2009 to 2030			255				265
Total unsecured debt			1,255				1,265
Total secured and unsecured debt			18,655				17,865
Unamortized discount, net(1)			(1,468	)			(1,859	)
Total debt			17,187				16,006
Less: current maturities			(933	)			(1,068	)
Total long-term debt		$	16,254			$	14,938

Senior Secured Exit Financing Facilities

     In connection with Delta’s emergence from bankruptcy in April 2007, we entered into a senior secured exit financing facility (the “Senior Secured Exit Financing Facilities”) to borrow up to $2.5 billion. The Senior Secured Exit Financing Facilities consist of a $1.0 billion first-lien revolving credit facility (the “Exit Revolving Facility”), a $600 million first-lien synthetic revolving facility (the “Synthetic Facility”) (together with the Exit Revolving Facility, the “First-Lien Facilities”), and a $900 million second-lien term loan facility (the “Term Loan” or the “Second-Lien Facility”). During 2008, we borrowed the entire amount of the Exit Revolving Facility. Borrowings under the First-Lien Facilities are due in April 2012 and borrowings under the Second-Lien Facility are due in April 2014. As of September 30, 2009, the Senior Secured Exit Financing Facilities had an interest rate ranging from 2.2% to 3.5% per annum.

     Our obligations under the Senior Secured Exit Financing Facilities are guaranteed by substantially all of our domestic subsidiaries, including Northwest Airlines Corporation and certain of its subsidiaries (the “Guarantors”). The Senior Secured Exit Financing Facilities and the related guarantees are secured by liens on substantially all of our and the Guarantors’ present and future assets (excluding, in the case of Northwest Guarantors, assets subject to existing liens at the time of closing of the Merger) (the “Collateral”). The First-Lien Facilities are secured by a first priority security interest in the Collateral. The Second-Lien Facility is secured by a second priority security interest in the Collateral.

     The Senior Secured Exit Financing Facilities include affirmative, negative and financial covenants that restrict our ability to, among other things, incur additional secured indebtedness, make investments, sell or otherwise dispose of assets if not in compliance with the collateral coverage ratio tests, pay dividends or repurchase stock. These covenants may have a material adverse impact on our operations. The Senior Secured Exit Financing Facilities contain financial covenants that require us to:

•

maintain a minimum fixed charge coverage ratio (defined as the ratio of (1) earnings before interest, taxes, depreciation, amortization and aircraft rent, and subject to other adjustments to net income (“EBITDAR”) to (2) the sum of gross cash interest expense, cash aircraft rent expense and the interest portion of our capitalized lease obligations, for successive trailing 12-month periods ending at each quarter-end date through the maturity date of the respective Senior Secured Exit Financing Facilities), which minimum ratio is 1.20:1 in the case of the First-Lien Facilities and 1.02:1 in the case of the Second-Lien Facility;

•

maintain unrestricted cash, cash equivalents and permitted investments of not less than $750 million in the case of the First-Lien Facilities and $650 million in the case of the Second-Lien Facility;

•

maintain a minimum total collateral coverage ratio (defined as the ratio of (1) certain of the Collateral that meets specified eligibility standards (“Eligible Collateral”) to (2) the sum of the aggregate outstanding exposure under the First-Lien Facilities and the Second-Lien Facility and the aggregate termination value of certain hedging agreements) of 125% at all times; and

•

in the case of the First-Lien Facilities, also maintain a minimum first-lien collateral coverage ratio (together with the total collateral coverage ratio described above, the “collateral coverage ratios”) (defined as the ratio of (1) Eligible Collateral to (2) the sum of the aggregate outstanding exposure under the First Lien Facilities and the aggregate termination value of certain hedging agreements) of 175% at all times.

     If the collateral coverage ratios are not maintained, we must either provide additional collateral to secure our obligations, or we must repay the loans under the Senior Secured Exit Financing Facilities by an amount necessary to maintain compliance with the collateral coverage ratios.

     The Senior Secured Exit Financing Facilities contain events of default customary for senior secured exit financings, including cross-defaults to other material indebtedness and certain change of control events. The Senior Secured Exit Financing Facilities also include events of default specific to our business, including the suspension of all or substantially all of our flights and other operations for more than two consecutive days (other than as a result of a Federal Aviation Administration (“FAA”) suspension due to extraordinary events similarly affecting other major U.S. air carriers). Upon the occurrence of an event of default, the outstanding obligations under the Senior Secured Exit Financing Facilities may be accelerated and become due and payable immediately and our cash may become restricted.

Senior Secured Credit Facilities

     In September 2009, we entered into a first-lien revolving credit facility in the aggregate principal amount of $500 million (the “Revolving Facility”) and a first-lien term loan facility in the aggregate principal amount of $250 million (the “Term Facility” and collectively with the Revolving Facility, the “Senior Secured Credit Facilities”). The Senior Secured Credit Facilities are guaranteed by the Guarantors and are secured by a first lien on our Pacific route authorities and certain related assets (the “Pacific Collateral”). Lenders under the Senior Secured Credit Facilities and holders of the Senior Secured Notes (as described below) will have equal rights to payment and collateral.

     Borrowings under the Term Facility will be repaid in an amount equal to 1% of the original principal amount of the term loans annually (to be paid in equal quarterly installments), with the balance of the term loans due and payable in September 2013. Borrowings under the Term Facility bear interest at a variable rate equal to LIBOR or another index rate, in each case plus a specified margin. As of September 30, 2009, the Term Facility had an interest rate of 8.8% per annum.

     In September 2009, we borrowed the entire amount of the Revolving Facility, which matures in March 2013. Borrowings under the Revolving Facility can be prepaid without penalty and amounts prepaid can be reborrowed. Borrowings under the Revolving Facility bear interest at a variable rate equal to LIBOR or another index rate, in each case plus a specified margin. As of September 30, 2009, the Revolving Facility had an interest rate of 9.4% per annum.

     The Senior Secured Credit Facilities contain affirmative and negative covenants and default provisions that are substantially similar to the ones described under “Senior Secured Exit Financing Facilities” above. The Senior Secured Credit Facilities also contain financial covenants that require Delta to:

•

maintain a minimum fixed charge coverage ratio (defined as the ratio of (1) EBITDAR (excluding gains and losses arising under fuel hedging arrangements incurred prior to the closing date of the Senior Secured Credit Facilities) to (2) the sum of cash interest expense plus cash aircraft rent expense plus the interest portion of Delta’s capitalized lease obligations) in each case for the twelve-month period ending as of the last day of each fiscal quarter of not less than 1.20 to 1;

•

maintain a minimum collateral coverage ratio (defined as the ratio of aggregate current market value of the collateral to the sum of the aggregate outstanding exposure under the Senior Secured Credit Facilities and certain obligations with equal rights to payment and collateral and the aggregate principal amount of the outstanding Senior Secured Notes) of 1.60:1; and

•

maintain unrestricted cash, cash equivalents and short-term investments of not less than $2 billion.

     The Senior Secured Credit Facilities also contain mandatory prepayment provisions that require us in certain instances to prepay obligations under the Senior Secured Credit Facilities in connection with dispositions of collateral. In addition, if the collateral coverage ratio is less than 1.60:1, we must either provide additional collateral in the form of cash or additional routes and slots to secure our obligations, or we must repay the loans under the Senior Secured Credit Facilities by an amount necessary to comply with the collateral coverage ratio.

Senior Secured Notes

     Also in September 2009, we issued $750 million of Senior Secured Notes (the “Senior Secured Notes”). The Senior Secured Notes mature in September 2014 and have a fixed interest rate of 9.5% per annum. We may redeem some or all of the Senior Secured Notes at any time on or after September 15, 2011 at specified redemption prices. If we sell certain of our assets or if we experience specific kinds of changes in control, we must offer to repurchase the Senior Secured Notes.

     Our obligations under the Senior Secured Notes are guaranteed by the Guarantors. The Senior Secured Notes and related guarantees are secured on a senior basis equally and ratably with the indebtedness incurred under our Senior Secured Credit Facilities by security interests in the Pacific Collateral.

     The Senior Secured Notes include covenants that, among other things, restrict our ability to sell assets, incur additional indebtedness, issue preferred stock, make investments or pay dividends. In addition, in the event the collateral coverage ratio, which has the same definition as the Senior Secured Credit Facilities, is less than 1.60:1, we must pay additional interest on the Senior Secured Notes at the rate of 2% per annum until the collateral coverage ratio equals at least 1.60:1.

     The Senior Secured Notes contain events of default customary for similar financings, including cross-defaults to other material indebtedness. Upon the occurrence of an event of default, the outstanding obligations under the Senior Secured Notes may be accelerated and become due and payable immediately.

Senior Second Lien Notes

     Also in September 2009, we issued $600 million of Senior Second Lien Notes (the “Senior Second Lien Notes”). The Senior Second Lien Notes mature in March 2015 and have a fixed interest rate of 12.25% per annum. We may redeem some or all of the Senior Second Lien Notes at any time on or after March 15, 2012 at specified redemption prices. If we sell certain of our assets or if we experience specific kinds of changes in control, we must offer to repurchase the Senior Second Lien Notes.

     Our obligations under the Senior Second Lien Notes are guaranteed by the Guarantors. The Senior Second Lien Notes and related guarantees are secured on a junior basis by security interests in the Pacific Collateral.

     The Senior Second Lien Notes include covenants and default provisions that are substantially similar to the ones described under “Senior Secured Notes” above. In addition, in the event (1) the collateral coverage ratio (defined as the ratio of aggregate current market value of the collateral to the sum of the aggregate outstanding exposure under the Senior Secured Credit Facilities and certain obligations with equal rights to payment and collateral, the aggregate principal amount of the outstanding Senior Secured Notes, and the aggregate principal amount of the outstanding Senior Second Lien Notes and any other permitted junior indebtedness that is secured by the collateral) is less than 1.00:1 or (2) we are required to pay additional interest on the Senior Secured Notes, we must pay additional interest on the Senior Second Lien Notes at the rate of 2% per annum until the later of (a) the collateral coverage ratio equals at least 1.00:1 or (b) special interest on the Senior Secured Notes ceases to accrue.

Northwest Revolving Credit Facility

     In September 2009, we amended the Northwest Revolving Credit Facility to, among other things, reduce its borrowing limit from $500 million to $300 million and change its maturity date to December 30, 2009. Borrowings under the Northwest Revolving Credit Facility can be prepaid without penalty and amounts prepaid can be reborrowed. Borrowings under the Northwest Revolving Credit Facility are guaranteed by Northwest Airlines Corporation and certain of its subsidiaries. The Northwest Revolving Credit Facility and related guarantees are secured by substantially all of Northwest’s unencumbered assets as of October 29, 2008.

     The Northwest Revolving Credit Facility contains financial covenants that require Northwest to maintain (1) unrestricted cash, cash equivalents and short-term investments, together with the undrawn amount of the Northwest Revolving Credit Facility (“Cash Liquidity”), of not less than $1.25 billion, (2) a minimum collateral coverage threshold (defined as the appraised value of certain eligible collateral) of not less than $625 million and (3) a minimum ratio of EBITDAR to consolidated fixed charges.

     The Northwest Revolving Credit Facility contains events of default customary for financings of its type, including cross-defaults to other material indebtedness. Upon the occurrence of an event of default, the outstanding obligations under the Northwest Revolving Credit Facility may be accelerated and become due and payable immediately and our cash may become restricted. Additionally, if at any time Cash Liquidity is less than $2.25 billion, the commitment of each lender under the Northwest Revolving Credit Facility is reduced by 50%.

Other Financing Agreements

     Certificates. Pass-Through Trust Certificates and Enhanced Equipment Trust Certificates (collectively, the “Certificates”) are secured by 237 aircraft. As of September 30, 2009, the Certificates had interest rates ranging from 1.0% to 9.2%.

     Aircraft Financing. We have $6.4 billion of loans secured by 304 aircraft, not including aircraft securing the Certificates, which had interest rates ranging from 0.7% to 7.2% at September 30, 2009. During 2008, we entered into agreements to borrow up to $1.6 billion to finance the purchase of 35 aircraft. In the first nine months of 2009, we took delivery of and financed 19 aircraft.

     Other Secured Financings. Other secured financings primarily include (1) manufacturer term loans, secured by spare parts, spare engines and aircraft, (2) real estate loans, (3) a Northwest Metropolitan Airport Commission loan and (4) a receivables securitization. The financings had annual interest rates ranging from 1.5% to 8.8% at September 30, 2009.

     American Express Agreement. In December 2008, we announced a multi-year extension of the American Express Agreement. As part of the American Express Agreement, we received $1.0 billion from American Express for an advance purchase of SkyMiles, which amount is classified as long-term debt. This obligation will not be satisfied by cash payments, but through the purchases of SkyMiles by American Express over an expected two year period beginning in December 2010.

Covenants

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

Future Maturities

     The following table summarizes scheduled maturities of our debt, including current maturities, at September 30, 2009:

Years Ending December 31,
(in millions)		Total
Three months ending December 31, 2009		$	318
2010			2,046
2011			2,489
2012			3,393
2013			1,838
2014			2,823
Thereafter			5,748
			18,655
Unamortized discount, net			(1,468	)
Total		$	17,187

NOTE 5. PURCHASE COMMITMENTS AND CONTINGENCIES

Aircraft Order Commitments

     Future commitments for aircraft on firm order as of September 30, 2009 are estimated to be approximately $1.6 billion. The following table shows the timing of these commitments:

Year Ending December 31,
(in millions)		Total
Three months ending December 31, 2009		$	260
2010			1,030
2011			10
2012			100
2013			70
2014			110
Total		$	1,580

     Our aircraft order commitments as of September 30, 2009 consist of firm orders to purchase two B-777-200LR aircraft, one B-737-700 aircraft, 27 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 27 B-737-800 aircraft include 25 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 $1.0 billion, including $200 million for the three 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 September 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 nine months ended September 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 September 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 $200 million and $440 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 1992 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 September 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 September 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 September 30, 2009, we had 81,740 full-time equivalent employees. Approximately 39% of these employees, including all of our pilots, Northwest’s airport employees and other categories of ground employees and Northwest’s 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, 2010. 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 September 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
		September 30,								September 30,								September 30,
(in millions)		2009				2008				2009				2008				2009				2008
Service cost		$	—			$	—			$	5			$	2			$	9			$	7
Interest cost			250				114				22				14				32				32
Expected return on plan assets			(153	)			(106	)			—				—				(21	)			(38	)
Recognized net actuarial loss (gain)			9				—				(4	)			(1	)			5				—
Special termination and settlements			4				—				—				—				—				—
Net periodic cost		$	110			$	8			$	23			$	15			$	25			$	1

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

										Other Postretirement								Other Postemployment
		Pension Benefits								Benefits								Benefits
		Nine Months Ended								Nine Months Ended								Nine Months Ended
		September 30,								September 30,								September 30,
(in millions)		2009				2008				2009				2008				2009				2008
Service cost		$	—			$	—			$	15			$	6			$	25			$	21
Interest cost			752				342				62				43				94				95
Expected return on plan assets			(461	)			(317	)			—				—				(59	)			(113	)
Recognized net actuarial loss (gain)			25				—				(14	)			(4	)			13				—
Special termination and settlements			8				—				6				—				—				—
Net periodic cost		$	324			$	25			$	69			$	45			$	73			$	3

NOTE 7. COMPREHENSIVE LOSS

     The following table shows the components of accumulated other comprehensive loss for the nine months ended September 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			(5	)			—				—				—				(5	)
Changes in fair value			—				(116	)			9				—				(107	)
Reclassification to earnings			—				1,285				—				—				1,285
Tax effect			2				(430	)			(3	)			431				—
Balance at September 30, 2009		$	(1,699	)		$	(124	)		$	—			$	(1,084	)		$	(2,907	)

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 nine months ended September 30, 2009 and 2008:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in millions)		2009				2008				2009				2008
Severance and related costs		$	51			$	2			$	101			$	114
Contract carrier restructuring			—				14				—				14
Facilities and other			8				1				8				7
Merger-related items			70				7				177				9
Total restructuring and merger-related items		$	129			$	24			$	286			$	144

     Severance and related costs primarily relates to workforce reduction programs for U.S. employees. During the three and nine months ended September 30, 2009, we recorded $51 million and $101 million, respectively, associated with workforce reduction programs, including $6 million of special termination benefits related to retiree healthcare during the nine months ended September 30, 2009. We expect any additional charges to be incurred in connection with these programs will be immaterial. During the three and nine months ended September 30, 2008, we recorded $2 million and $114 million, respectively, associated with 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.

     Contract carrier restructuring costs for the three and nine months ended September 30, 2008 relate primarily to the early termination of certain capacity purchase agreements with our contract carriers.

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

		Liability																Liability
		Balance at				Additional				Purchase								Balance at
		December 31,				Costs and				Accounting								September 30,
(in millions)		2008				Expenses				Adjustments				Payments				2009
Severance and related cost(1)		$	50			$	95			$	—			$	(69	)		$	76
Facilities and other(1)			54				8				18				(6	)			74
Total		$	104			$	103			$	18			$	(75	)		$	150

     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 intend 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 nine months ended September 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 September 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 September 30, 2009, six 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 nine months ended September 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 nine months ended September 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 September 30, 2009:

(in millions)		Shares(1)
Common stock issued and outstanding			780
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			6
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 nine months ended September 30, 2009 and 2008:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in millions, except per share data)		2009				2008				2009				2008
Basic and diluted:
Net loss		$	(161	)		$	(50	)		$	(1,212	)		$	(7,484	)
Weighted average shares outstanding(1)			828				396				826				396
Basic and diluted loss per share		$	(0.19	)		$	(0.13	)		$	(1.47	)		$	(18.91	)

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 nine months ended September 30, 2009 include the results of Northwest. In contrast, our financial results under GAAP for the three and nine months ended September 30, 2008 do not include the results of Northwest. This impacts the comparability of our financial results under GAAP for the three and nine months ended September 30, 2009 and 2008.

     In the accompanying “September 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 nine months ended September 30, 2008 presented on a combined basis, which means the financial results for pre-Merger Delta and pre-Merger Northwest are combined beginning 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.

September Quarter Financial Highlights — 2009 Compared to 2008 Combined

     For the September 2009 quarter, we reported a net loss of $161 million. These results reflect significant weakness in the airline revenue environment due to the global recession. Our loss for the quarter also includes an $83 million non-cash loss on the extinguishment of debt, a $78 million charge for merger-related items and a $51 million charge for employee workforce reduction programs.

     Total operating revenue declined $2.0 billion, or 21%, in the September 2009 quarter on a 4% decrease in system capacity, compared with the September 2008 quarter on a combined basis. Passenger revenue accounted for $1.8 billion of the decrease. Passenger revenue per available seat mile (“PRASM”) declined 18%, as a result of a 19% decrease in passenger mile yield. The decrease in passenger mile yield reflects (1) significantly reduced demand, particularly in international markets, (2) a reduction in business demand, (3) competitive pricing pressures and (4) lower fuel surcharges due to the year-over-year decline on fuel prices.

     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 September 2009 quarter declined 44% year-over-year contributing to $1.9 billion in lower fuel expense, crude oil prices have risen 58% from December 31, 2008 to September 30, 2009. Fuel expense in the September 2009 quarter includes $226 million in losses from our fuel hedge program.

     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 September 2009 quarter, compared to the September 2008 quarter on a combined basis, on 4% lower capacity. The increase primarily reflects an increase in pension expense from a decrease in value in pension trust assets due to declines in the financial markets.

     At September 30, 2009, we had $5.5 billion in cash, cash equivalents and short-term investments and $300 million in an undrawn revolving credit facility. In September 2009, we borrowed a total of $2.1 billion under three new financings, consisting of:

•

$750 million of senior secured credit facilities, which include a $500 million first—lien revolving credit facility and a $250 million first-lien term loan facility;

•

$750 million of senior secured notes; and

•

$600 million of senior second lien notes.

     A portion of the net proceeds was used to repay in full Northwest’s approximately $900 million senior secured exit financing facility due in 2010 with the remainder of the proceeds available for general corporate purposes. The new financing agreements are guaranteed by substantially all of our subsidiaries and secured by our Pacific route authorities and certain related assets.

Business Overview

     Recent Initiatives. We believe that our diverse global network, hub structure and alliances with other airlines result in a competitive advantage over other domestic and international airlines. In 2009, we implemented a joint venture with Air France-KLM that further strengthens our transatlantic network, expanded our alliance agreement with Alaska Airlines and Horizon Air to enhance our west coast presence, and received U.S. Department of Transportation approval for a codesharing agreement with Virgin Blue, which will expand our network between the U.S. and Australia and the South Pacific.

     Expanding our presence in New York City is another key component of our network strategy. In August 2009, we announced our intention to make New York’s LaGuardia Airport a domestic hub through a slot transaction with US Airways. The agreement, which is subject to government approvals, calls for US Airways to transfer 125 operating slot pairs to us at LaGuardia and for us to transfer 42 operating slot pairs to US Airways at Reagan National Airport in Washington, D.C. In addition, we plan to swap gates at LaGuardia to consolidate all of our operations (including the Delta Shuttle) into an expanded main terminal facility with 11 additional gates. We also continue to make investments in our international operation at John F. Kennedy International Airport in New York City and explore long-term options to upgrade the facility.

     Merger Synergies. As a result of our integration efforts, we are now targeting over $700 million in synergy benefits in 2009 and continue to target $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) 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 pre-merger unions, the Association of Flight Attendants-CWA, which represented flight attendants at pre-merger Northwest Airlines, Inc., and the International Association of Machinists (“IAM”), which represented various categories of ground employees at pre-merger Northwest Airlines, Inc., only recently filed with the National Mediation Board to resolve post-merger representation issues. The IAM filed for only a portion of the workgroups it represented at Northwest Airlines, Inc. pre-merger. It is unclear when representation issues will be fully resolved in those workgroups and, therefore, when integration of those workgroups can be completed.

Outlook

     The ongoing global recession continues to place significant pressure on the airline industry. As a result, we continue to take actions intended to adapt our business to the current environment. This includes strengthening our network through the airline alliances and proposed slot transaction discussed above; right sizing our operations with passenger capacity reductions and by discontinuing dedicated freighter service; and managing costs and liquidity. We expect our system capacity in 2010 to be approximately 3% lower than in 2009.

Results of Operations—September 2009 and 2008 Quarters

Operating Revenue

																		Decrease
														Increase due to				Excluding
		Three Months Ended September 30,												Northwest				Northwest
(in millions)		2009				2008				Increase				Operations				Operations
Operating Revenue:
Passenger:
Mainline		$	5,122			$	3,921			$	1,201			$	1,898			$	(697	)
Regional carriers			1,402				1,057				345				492				(147	)
Total passenger revenue			6,524				4,978				1,546				2,390				(844	)
Cargo			177				162				15				99				(84	)
Other, net			873				579				294				363				(69	)
Total operating revenue		$	7,574			$	5,719			$	1,855			$	2,852			$	(997	)

     Northwest Operations. As a result of the Merger, our results of operations for the September 2009 quarter include Northwest’s operations. The addition of Northwest to our operations increased operating revenue $2.9 billion and available seat miles (“ASMs”), or capacity, 58% for the September 2009 quarter. Northwest’s operations are not included in our results of operations for the September 2008 quarter.

						Increase (Decrease) vs.
		Three Months				Three Months Ended September 30, 2008
		Ended				Passenger
		September 30,				Mile								Load
(in millions)		2009				Yield				PRASM				Factor
Passenger Revenue:
Domestic		$	2,901				(9	)%			(9	)%		0.1  pts
Atlantic			1,353				(27	)%			(22	)%		4.9  pts
Latin America			294				(21	)%			(19	)%		2.3  pts
Pacific			574				(20	)%			(15	)%		4.5  pts
Total Mainline			5,122				(17	)%			(15	)%		1.8  pts
Regional carriers			1,402				(14	)%			(14	)%		(0.2)pts
Total passenger revenue		$	6,524				(17	)%			(15	)%		1.6  pts

     Mainline Passenger Revenue. Mainline passenger revenue increased in the September 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 PRASM declined 17% and 15%, respectively.

•

Domestic Passenger Revenue. Domestic passenger revenue increased 52% due to the inclusion of Northwest’s operations. Domestic PRASM decreased 9% as a result of a 9% 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 6% for the September 2009 quarter compared to the September 2008 quarter.

•

International Passenger Revenue. International passenger revenue increased 45% due to the inclusion of Northwest’s operations. International PRASM decreased 22% as a result of a 26% decrease in passenger mile yield. The decrease in passenger mile yield reflects (1) significantly reduced demand for international travel and (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. 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 3% for the September 2009 quarter compared to the September 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 $147 million primarily as a result of a 14% decrease in passenger mile yield.

     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.

     Other, net. Other, net revenue increased primarily due to the inclusion of Northwest’s operations. Excluding Northwest’s operations, other, net revenue decreased $69 million primarily due to (1) a reduction in ancillary business, such as our aircraft maintenance and repair service, and (2) lower administrative service charges, partially offset by increased baggage handling fees.

Operating Expense

														Increase (Decrease) due to:
		Three Months Ended September 30,												Northwest
(in millions)		2009				2008				Increase				Operations				Other
Operating Expense:
Aircraft fuel and related taxes		$	1,973			$	1,952			$	21			$	670			$	(649	)
Salaries and related costs			1,894				1,086				808				764				44
Contract carrier arrangements			1,009				941				68				246				(178	)
Contracted services			415				272				143				183				(40	)
Depreciation and amortization			385				293				92				136				(44	)
Aircraft maintenance materials and outside repairs			334				273				61				130				(69	)
Passenger commissions and other selling expenses			384				259				125				146				(21	)
Landing fees and other rents			340				179				161				125				36
Passenger service			181				122				59				76				(17	)
Aircraft rent			123				70				53				60				(7	)
Restructuring and merger-related items(1)			129				24				105				—				105
Other			203				117				86				100				(14	)
Total operating expense		$	7,370			$	5,588			$	1,782			$	2,636			$	(854	)