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

Or

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 þ 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 (Do not check if a smaller reporting company)		Smaller reporting company o

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, 2010:

Common Stock, $0.0001 par value — 788,920,494 shares outstanding

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

 

 

     Unless otherwise indicated, the terms “Delta,” “we,” “us,” and “our” refer to Delta Air Lines, Inc. and its subsidiaries. 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 I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (“Form 10-K”) and 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)		2010				2009
ASSETS
Current Assets:
Cash and cash equivalents		$	3,436			$	4,607
Short-term investments			439				71
Restricted cash, cash equivalents and short-term investments			418				423
Accounts receivable, net of an allowance for uncollectible accounts of $36 and $47 at September 30, 2010 and December 31, 2009, respectively			1,512				1,353
Expendable parts and supplies inventories, net of an allowance for obsolescence of $106 and $75 at September 30, 2010 and December 31, 2009, respectively			278				327
Deferred income taxes, net			167				107
Prepaid expenses and other			1,071				853
Total current assets			7,321				7,741
Property and Equipment, Net:
Property and equipment, net of accumulated depreciation and amortization of $3,836 and $2,924 at September 30, 2010 and December 31, 2009, respectively			20,184				20,433
Other Assets:
Goodwill			9,794				9,787
Identifiable intangibles, net of accumulated amortization of $512 and $451 at September 30, 2010 and December 31, 2009, respectively			4,766				4,829
Other noncurrent assets			1,088				749
Total other assets			15,648				15,365
Total assets		$	43,153			$	43,539
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt and capital leases		$	2,302			$	1,533
Air traffic liability			3,767				3,074
Accounts payable			1,661				1,249
Frequent flyer deferred revenue			1,610				1,614
Accrued salaries and related benefits			1,280				1,037
Taxes payable			592				525
Other accrued liabilities			608				765
Total current liabilities			11,820				9,797
Noncurrent Liabilities:
Long-term debt and capital leases			13,063				15,665
Pension, postretirement and related benefits			11,383				11,745
Frequent flyer deferred revenue			2,916				3,198
Deferred income taxes, net			1,734				1,667
Other noncurrent liabilities			1,522				1,222
Total noncurrent liabilities			30,618				33,497
Commitments and Contingencies
Stockholders’ Equity:
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 801,847,705 and 794,873,058 shares issued at September 30, 2010 and December 31, 2009, respectively			—				—
Additional paid-in capital			13,900				13,827
Accumulated deficit			(9,271	)			(9,845	)
Accumulated other comprehensive loss			(3,716	)			(3,563	)
Treasury stock, at cost, 12,927,211 and 10,918,274 shares at September 30, 2010 and December 31, 2009, respectively			(198	)			(174	)
Total stockholders’ equity			715				245
Total liabilities and stockholders’ equity		$	43,153			$	43,539

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)		2010				2009				2010				2009
Operating Revenue:
Passenger:
Mainline		$	6,204			$	5,122			$	16,170			$	14,053
Regional carriers			1,571				1,402				4,420				3,975
Total passenger revenue			7,775				6,524				20,590				18,028
Cargo			227				177				614				535
Other, net			948				873				2,762				2,695
Total operating revenue			8,950				7,574				23,966				21,258
Operating Expense:
Aircraft fuel and related taxes			2,023				1,973				5,666				5,678
Salaries and related costs			1,669				1,722				5,043				5,151
Contract carrier arrangements			1,236				1,009				3,125				2,882
Aircraft maintenance materials and outside repairs			405				334				1,174				1,150
Contracted services			398				390				1,156				1,176
Passenger commissions and other selling expenses			404				384				1,145				1,069
Depreciation and amortization			375				385				1,139				1,152
Landing fees and other rents			331				340				968				971
Passenger service			190				181				493				477
Aircraft rent			92				123				305				363
Profit sharing			185				—				275				—
Restructuring and merger-related items			206				129				342				286
Other			433				400				1,212				1,181
Total operating expense			7,947				7,370				22,043				21,536
Operating Income (Loss)			1,003				204				1,923				(278	)
Other (Expense) Income:
Interest expense			(256	)			(217	)			(780	)			(647	)
Amortization of debt discount, net			(53	)			(102	)			(170	)			(304	)
Interest income			7				4				30				23
Loss on extinguishment of debt			(360	)			(83	)			(360	)			(83	)
Miscellaneous, net			25				15				(55	)			63
Total other expense, net			(637	)			(383	)			(1,335	)			(948	)
Income (Loss) Before Income Taxes			366				(179	)			588				(1,226	)
Income Tax (Provision) Benefit			(3	)			18				(14	)			14
Net Income (Loss)		$	363			$	(161	)		$	574			$	(1,212	)
Basic Earnings (Loss) per Share		$	0.43			$	(0.19	)		$	0.69			$	(1.47	)
Diluted Earnings (Loss) per Share		$	0.43			$	(0.19	)		$	0.68			$	(1.47	)

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

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

		Nine Months Ended September 30,
(in millions)		2010				2009
Net cash provided by operating activities		$	2,514			$	1,452
Cash Flows From Investing Activities:
Property and equipment additions:
Flight equipment, including advance payments			(753	)			(547	)
Ground property and equipment, including technology			(168	)			(185	)
(Purchase) redemption of investments			(353	)			121
Proceeds from sales of flight equipment			28				86
Proceeds from sale of subsidiary			21				—
Increase in restricted cash, cash equivalents and short-term investments			(18	)			(124	)
Other investments			(98	)			—
Other, net			(16	)			—
Net cash used in investing activities			(1,357	)			(649	)
Cash Flows From Financing Activities:
Payments on long-term debt and capital lease obligations			(2,546	)			(2,056	)
Proceeds from long-term obligations			223				2,472
Other, net			(5	)			(78	)
Net cash (used in) provided by financing activities			(2,328	)			338
Net (Decrease) Increase in Cash and Cash Equivalents			(1,171	)			1,141
Cash and cash equivalents at beginning of period			4,607				4,255
Cash and cash equivalents at end of period		$	3,436			$	5,396
Non-cash transactions:
Flight equipment under capital leases		$	203			$	—
Debt relief through vendor negotiations			160				—
Debt discount on American Express Agreement			110				—
Flight equipment			56				43
Aircraft delivered under seller financing			20				408

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

DELTA AIR LINES, INC.

Notes to the Condensed Consolidated Financial Statements
September 30, 2010
(Unaudited)

NOTE 1. BACKGROUND AND BASIS OF PRESENTATION

Background

     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, Northwest Airlines Corporation and its wholly-owned subsidiaries, including Northwest Airlines, Inc. (collectively, “Northwest”), became wholly-owned subsidiaries of Delta.

     On December 31, 2009, Northwest Airlines, Inc. merged with and into Delta. As a result of this merger, Northwest Airlines, Inc. ceased to exist as a separate entity.

Basis of Presentation

     The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Delta Air Lines, Inc. and our wholly-owned subsidiaries. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“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.

     Management believes the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including 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, 2010 are not necessarily indicative of operating results for the entire year.

     Based upon adjustments recorded at December 31, 2009, certain immaterial prior period amounts have been reclassified in the Consolidated Statements of Operations to conform to our current period presentation. The adjustments do not impact total operating expense or net income for any period presented in this Form 10-Q.

     We reclassified travel and incidental expenses, primarily crew meals and lodging expenses, from salaries and related costs to other operating expense. These expenses totaled $117 million and $352 million for the three and nine months ended September 30, 2009, respectively. We also adjusted our Consolidated Statements of Operations for certain costs incurred to provide services to our contract carriers, excluding Comair, Inc. (“Comair”), Compass Airlines, Inc. (“Compass”) and Mesaba Aviation, Inc. (“Mesaba”); these costs are recorded as a reduction to salaries and related costs and contracted services, as appropriate, rather than as a reduction to other operating expense. These costs totaled $80 million and $222 million for the three and nine months ended September 30, 2009, respectively.

     In July 2010, we sold Compass and Mesaba, our wholly-owned subsidiaries, to Trans States Airlines Inc. (“Trans States”) and Pinnacle Airlines Corp. (“Pinnacle”), respectively. For additional information regarding these sales, see Note 5.

     We evaluated the financial statements for subsequent events through the date of the filing of this Form 10-Q, which is the date the financial statements were issued.

Recently Issued Accounting Pronouncements

     In October 2009, the Financial Accounting Standards Board issued “Revenue Arrangements with Multiple Deliverables.” The standard revises guidance on (1) the determination of when individual deliverables may be treated as separate units of accounting and (2) the allocation of consideration among separately identified deliverables. It also expands disclosure requirements regarding an entity’s multiple element revenue arrangements. The standard is effective for fiscal years beginning on or after June 15, 2010 and may be adopted on a prospective or retrospective basis. We are currently evaluating the impact of this standard on our Consolidated Financial Statements.

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. 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 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 are based on one or more of three valuation techniques identified in the tables below. The valuation techniques are as follows:

	(a)		Market approach. Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;
	(b)		Cost approach. Amount that would be required to replace the service capacity of an asset (replacement cost); and
	(c)		Income approach. Techniques to convert future amounts to a single present amount based on market expectations (including present value techniques, option-pricing and excess earnings models).

Assets (Liabilities) Measured at Fair Value on a Recurring Basis

										Significant Other				Significant
						Quoted Prices In				Observable				Unobservable
		September 30,				Active Markets				Inputs				Inputs				Valuation
(in millions)		2010				(Level 1)				(Level 2)				(Level 3)				Technique
Cash equivalents		$	3,174			$	3,174			$	—			$	—				(a	)
Short-term investments			439				439				—				—				(a	)
Restricted cash equivalents and short-term investments			449				449				—				—				(a	)
Long-term investments			119				—				—				119				(c	)
Hedge derivatives, net
Aircraft fuel derivatives			301				—				301				—				(a	)(c)
Interest rate derivatives			(100	)			—				(100	)			—				(a	)(c)
Foreign currency derivatives			(56	)			—				(56	)			—				(a	)

										Significant Other				Significant
						Quoted Prices In				Observable				Unobservable
		December 31,				Active Markets				Inputs				Inputs				Valuation
(in millions)		2009				(Level 1)				(Level 2)				(Level 3)				Technique
Cash equivalents		$	4,335			$	4,335			$	—			$	—				(a	)
Short-term investments			71				—				—				71				(c	)
Restricted cash equivalents and short-term investments			435				435				—				—				(a	)
Long-term investments			129				—				—				129				(c	)
Hedge derivatives, net
Aircraft fuel derivatives			176				—				176				—				(a	)(c)
Interest rate derivatives			(45	)			—				(45	)			—				(a	)(c)
Foreign currency derivatives			(23	)			—				(23	)			—				(a	)

     Cash Equivalents. Short-term, highly liquid investments with maturities of three months or less when purchased, which primarily consist of money market funds and treasury bills, are classified as cash equivalents. These investments are recorded in cash and cash equivalents on our Consolidated Balance Sheets at cost, which approximates fair value.

     Short-term Investments. As of September 30, 2010, short-term investments on our Consolidated Balance Sheet consist of treasury bills with maturities of greater than three months and less than one year when purchased. These investments are recorded at cost, which approximates fair value.

     During the nine months ended September 30, 2010, we received $77 million in proceeds from an investment in a money market fund undergoing an orderly liquidation, $71 million of which was recorded in short-term investments on our Consolidated Balance Sheet at December 31, 2009. This investment was classified in Level 3 of the three-tier fair value hierarchy due to uncertainty regarding the timing and expected amount of our distribution.

     Restricted Cash Equivalents and Short-term Investments. Restricted investments with maturities of less than one year when purchased, which primarily consist of money market funds and time deposits, are classified as restricted cash equivalents and short-term investments. At September 30, 2010 and December 31, 2009, we recorded $416 million and $419 million, respectively, in restricted cash, cash equivalents and short-term investments and $33 million and $16 million, respectively, in other noncurrent assets on our Consolidated Balance Sheets. These investments are recorded at cost, which approximates fair value.

     Long-Term Investments. Our long-term investments are comprised of student loan backed and insured auction rate securities, which are recorded at fair value. At September 30, 2010 and December 31, 2009, the fair value of our auction rate securities was $119 million and $128 million, respectively. The cost of these investments was $143 million and $155 million, respectively. These investments are classified as long-term in other noncurrent assets on our Consolidated Balance Sheets due to the protracted failure in the auction process and long-term nature of these contractual maturities.

     Because auction rate securities are not actively traded, fair values were estimated by discounting the cash flows expected to be received over the remaining maturities of the underlying securities. We based the valuations on our assessment of observable yields on instruments bearing comparable risks and consider the creditworthiness of the underlying debt issuer. Changes in market conditions could result in further adjustments to the fair value of these securities.

     Hedge Derivatives. Our derivative instruments are comprised of contracts that are privately negotiated with counterparties without going through a public exchange. Accordingly, our fair value assessments give consideration to the risk of counterparty default, including our own credit risk.

	•		Aircraft Fuel Derivatives. Our aircraft fuel derivative instruments generally consist of crude oil, heating oil and jet fuel swap, collar, and call option contracts and are valued under the income approach using a discounted cash flow model or an option pricing model based on data either readily observable or derived from public markets.
	•		Interest Rate Derivatives. Our interest rate derivative instruments consist of swap and call option contracts and are valued primarily based on data readily observable in public markets.
	•		Foreign Currency Derivatives. Our foreign currency derivative instruments consist of Japanese yen and Canadian dollar forward contracts and are valued based on data readily observable in public markets.

     For additional information regarding the classification of our derivative instruments on our Consolidated Balance Sheets, see Note 3.

Assets Measured at Fair Value on a Nonrecurring Basis

     In September 2010, we recorded a $146 million impairment charge primarily related to our decision to substantially reduce Comair’s fleet over the next two years by retiring older, less-efficient CRJ-100/200 50-seat aircraft. In evaluating these aircraft for impairment, we estimated their fair value by utilizing a market approach considering (1) published market data generally accepted in the airline industry, (2) recent market transactions, where available, (3) the current and projected supply and demand of these aircraft and (4) the overall condition and age of the aircraft. Based on our fair value assessments, these aircraft have an estimated fair value of $97 million and are classified in Level 3 of the three-tier fair value hierarchy. For additional information regarding the Comair fleet reduction initiative, see Note 8.

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:

		September 30,				December 31,
(in millions)		2010				2009
Total debt at par value		$	15,715			$	18,068
Unamortized discount, net			(1,001	)			(1,403	)
Net carrying amount		$	14,714			$	16,665
Fair value(1)		$	15,000			$	15,400

NOTE 3. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

     Our results of operations are significantly 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 derivative instruments, including fuel, interest rate and foreign currency hedges.

     We perform, at least quarterly, both a prospective and retrospective assessment of the effectiveness of our derivative instruments designated as hedges, 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, 2010, we believe our derivative instruments designated as hedges will continue to be highly effective in offsetting changes in cash flow attributable to the hedged risk.

Hedge Position

     The following tables reflect the estimated fair value asset (liability) positions of our hedge contracts:

		September 30, 2010
										Prepaid																Hedge
										Expenses				Other				Other				Other				Margin
(in millions, unless		Notional				Maturity				and Other				Noncurrent				Accrued				Noncurrent				Receivable,
otherwise stated)		Balance				Date				Assets				Assets				Liabilities				Liabilities				net
Fuel hedge swaps, collars and call options		2.2 billion gallons — crude oil, jet fuel				October 2010 — March 2012				$	238			$	67			$	(4	)		$	—
Interest rate swaps and call options		$	1,216			August 2011 — May 2019					—				—				(35	)			(65	)
Foreign currency exchange forwards		85 billion Japanese yen; 282 million Canadian dollars				October 2010 — September 2013					1				1				(39	)			(19	)
Total designated as hedges										$	239			$	68			$	(78	)		$	(84	)		$	11

		December 31, 2009
																		Other				Other				Hedge
(in millions, unless		Notional				Maturity												Accrued				Noncurrent				Margin
otherwise stated)		Balance				Date								Assets				Liabilities				Liabilities				Payable, net
Fuel hedge swaps, collars and call options		795 million gallons — crude oil, heating oil, jet fuel				January 2010 — December 2010								$	180			$	(89	)		$	—
Interest rate swaps and call options		$	1,478			September 2010 — May 2019									2				(38	)			(9	)
Foreign currency exchange forwards		55.8 billion Japanese yen; 295 million Canadian dollars				January 2010 — September 2012									1				(12	)			(12	)
Total designated as hedges														$	183			$	(139	)		$	(21	)		$	(10	)

     As of September 30, 2010, our open fuel hedge position is as follows:

		Percentage of
		Projected
		Fuel				Fair Value at
		Requirements				September 30,
(in millions, unless otherwise stated)		Hedged				2010
Three months ending December 31, 2010			64	%			$   52
Year ending December 31, 2011			39				228
Year ending December 31, 2012			2				21
Total							$ 301

Hedge Gains (Losses)

     Gains (losses) recorded on our Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2010 and 2009 related to our hedge contracts are as follows:

										Effective Portion
		Effective Portion								Reclassified from
		Recognized in								Accumulated Other								Ineffective Portion
		Accumulated Other								Comprehensive Loss to								Recognized in Other
		Comprehensive Loss								Earnings								(Expense) Income
		Three Months Ended September 30,
(in millions)		2010				2009				2010				2009				2010				2009
Fuel hedge swaps, collars and call options(1)		$	165			$	140			$	(66	)		$	(226	)		$	12			$	8
Interest rate swaps and call options(2)			(16	)			(16	)			(1	)			1				—				—
Foreign currency exchange forwards and collars(3)			(25	)			(52	)			(12	)			—				—				—
Total designated as hedges		$	124			$	72			$	(79	)		$	(225	)		$	12			$	8

										Effective Portion
		Effective Portion								Reclassified from
		Recognized in								Accumulated Other								Ineffective Portion
		Accumulated Other								Comprehensive Loss to								Recognized in Other
		Comprehensive Loss								Earnings								(Expense) Income
		Nine Months Ended September 30,
(in millions)		2010				2009				2010				2009				2010				2009
Fuel hedge swaps, collars and call options(1)		$	(61	)		$	1,154			$	(92	)		$	(1,287	)		$	(25	)		$	45
Interest rate swaps and call options(2)			(55	)			31				(1	)			—				—				—
Foreign currency exchange forwards and collars(3)			(33	)			(16	)			(21	)			2				—				—
Total designated as hedges		$	(149	)		$	1,169			$	(114	)		$	(1,285	)		$	(25	)		$	45

     We recorded a loss of $15 million in aircraft fuel and related taxes on our Consolidated Statement 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, 2010, we recorded in accumulated other comprehensive loss on our Consolidated Balance Sheet $76 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 fuel and interest rate hedge agreements, (1) we may require counterparties to fund the margin associated with our gain position on hedge contracts and/or (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.

     Due to the estimated fair value position of our hedge contracts as of September 30, 2010, the hedge margin received from and provided to counterparties was not significant.

NOTE 4. DEBT

     The following table summarizes our debt at September 30, 2010 and December 31, 2009:

		September 30,				December 31,
(in millions)		2010				2009
Senior Secured Exit Financing Facilities due 2012 and 2014		$	1,461			$	2,444
Senior Secured Credit Facilities due 2013			248				249
Senior Secured Notes due 2014			675				750
Senior Second Lien Notes due 2015			397				600
Bank Revolving Credit Facilities due 2010 and 2012			—				—
Other Financing Arrangements
Certificates due in installments from 2010 to 2023			5,312				5,709
Aircraft financings due in installments from 2010 to 2025			5,481				6,005
Other secured financings due in installments from 2010 to 2031			753				911
Total secured debt			14,327				16,668
American Express Agreement			1,000				1,000
Clayton County Bonds, Series 2009 due in installments from 2014 to 2035			150				150
Other unsecured debt due in installments from 2011 to 2030			238				250
Total unsecured debt			1,388				1,400
Total secured and unsecured debt			15,715				18,068
Unamortized discount, net			(1,001	)			(1,403	)
Total debt			14,714				16,665
Less: current maturities			(2,197	)			(1,445	)
Total long-term debt		$	12,517			$	15,220

     Significant debt related events during the nine months ended September 30, 2010 included the following:

     Senior Secured Exit Financing Facilities due 2012 and 2014. During the June 2010 quarter, we amended our $1.0 billion first-lien revolving credit facility (the “Exit Revolving Facility”) to convert the $86 million revolving commitment of Lehman Commercial Paper, Inc. to a fully funded, non-revolving loan due April 2012. In addition, we prepaid the remaining $914 million of the Exit Revolving Facility. Borrowings under the Exit Revolving Facility can be prepaid without penalty and amounts prepaid can be reborrowed. As of September 30, 2010, the $914 million Exit Revolving Facility was undrawn.

     Senior Secured Notes due 2014. During the September 2010 quarter, we redeemed $75 million of 9.5% Senior Secured Notes due 2014.

     Senior Second Lien Notes due 2015. During the September 2010 quarter, we purchased in a cash tender offer $171 million of Senior Second Lien Notes due 2015, which have a fixed interest rate of 12.25% per annum.

     Other Financing Arrangements. During the September 2010 quarter, we (1) purchased in cash tender offers $129 million of four series of Pass-Through Trust Certificates, (2) achieved $160 million of debt relief through vendor negotiations and (3) repurchased $153 million of debt in open market transactions and private purchases. We also restructured $783 million of existing debt, including changes in applicable interest rates and other payment terms. The restructured debt has a book value of $783 million, which approximates fair value.

     In July 2010, we completed a $450 million offering of Pass Through Certificates, Series 2010-1A, through a pass through trust. We used $160 million in net proceeds to partially finance two B-777-200LR aircraft purchased in March 2010. The remaining $290 million will be used to partially refinance 22 aircraft currently supporting the 2000-1 EETC and will be held in escrow until the final maturity of the 2000-1 EETC in November 2010. The debt securities in this offering bear interest at a fixed rate of 6.2% per year and have a final maturity in July 2018. At September 30, 2010, $276 million of the $290 million principal amount of the 2000-1 EETC is classified as long-term debt.

     American Express Agreement. In March 2010, we and American Express modified our December 2008 agreement under which we received $1.0 billion from American Express for their advance purchase of SkyMiles. This advance payment is classified as long-term debt on our Consolidated Balance Sheets. Our obligations with respect to, the advance payment will be satisfied by the use of SkyMiles by American Express over a specified period (“SkyMiles Usage Period”) rather than by cash payments from us to American Express. The March 2010 modification, among other things, (1) provides that Delta-American Express co-branded credit card holders may check their first bag for free on every Delta flight through June 2013, (2) changes the SkyMiles Usage Period to a three-year period beginning in December 2011 from a two-year period beginning in December 2010, and (3) gives American Express the option to extend the December 2008 agreement for one year. The change in the SkyMiles Usage Period deferred $31 million and $480 million of debt maturities for the three months ending December 31, 2010 and year ending December 31, 2011, respectively.

     Unamortized Discount, Net. Unamortized discount, net represents a reduction in the carrying value of (1) Northwest’s debt as a result of purchase accounting related to the Merger, (2) the debt recorded in connection with our American Express Agreement and (3) fair value adjustments to our long-term debt in connection with our adoption of fresh start reporting upon emergence from bankruptcy. As described in the table below, we amortize these adjustments over the remaining maturities of the respective debt to amortization of debt discount, net on our Consolidated Statements of Operations.

     During the September 2010 quarter, we completed the transactions described under “Senior Secured Notes due 2014”, “Senior Secured Lien Notes due 2015” and “Other Financing Arrangements”. As a result of these transactions, we recorded a $360 million loss on extinguishment of debt, of which $288 million related to a non-cash write-off of debt discounts that were recorded as part of purchase accounting.

Future Maturities

     The following table summarizes scheduled maturities of our debt, including current maturities, at September 30, 2010:

Years Ending December 31,		Total Secured and				Amortization of
(in millions)		Unsecured Debt				Debt Discount, Net
Three months ending December 31, 2010		$	448			$	(50	)
2011			2,091				(206	)
2012			2,366				(206	)
2013			1,765				(168	)
2014			3,092				(110	)
Thereafter			5,953				(261	)
Total		$	15,715			$	(1,001	)		$	14,714

Covenants

     We were in compliance with all covenants in our financing agreements at September 30, 2010.

NOTE 5. PURCHASE COMMITMENTS AND CONTINGENCIES

Aircraft Commitments

     Future aircraft purchase commitments at September 30, 2010 are estimated to total approximately $2.9 billion. The following table shows the timing of these commitments:

Years Ending December 31,
(in millions)		Total
Three months ending December 31, 2010		$	190
2011			60
2020 and thereafter			2,610
Total		$	2,860

     Our aircraft commitments at September 30, 2010 relate to 18 B-787-8 aircraft, 13 previously owned MD-90 aircraft and four B-737-800 aircraft. Our aircraft purchase commitments do not include orders for five A319-100 aircraft and two A320-200 aircraft because we have the right to cancel these orders.

     During the September 2010 quarter, we entered into an agreement with The Boeing Company to reaffirm our previous orders for 18 B-787-8 aircraft and to defer delivery of those aircraft from 2008-2010 to 2020-2022.

     We have entered into definitive agreements to sell the four B-737-800 aircraft to third parties immediately following delivery of those aircraft to us by the manufacturer. We have not received any notice that these third parties have defaulted on their purchase obligations. These sales will reduce our future commitments by approximately $150 million through December 31, 2010.

Contract Carrier Agreements

     During the nine months ended September 30, 2010, we had contract carrier agreements with 10 contract carriers, including our wholly-owned subsidiary, Comair. For additional information about our contract carrier agreements, see Note 8 of the Notes to the Consolidated Financial Statements in our Form 10-K.

     In May 2010, the U.S. District Court for the Northern District of Georgia ruled that in March 2008 we properly terminated our capacity purchase agreement with Freedom Airlines, Inc. (“Freedom”) and its parent company, Mesa Air Group, Inc. Freedom ceased operating flights for us under a capacity purchase agreement on September 1, 2010.

     In July 2010, we sold Compass and Mesaba, our wholly-owned subsidiaries, to Trans States and Pinnacle, respectively. The sales of Compass and Mesaba did not have a material impact on our Consolidated Financial Statements. Upon the closing of these transactions, we entered into new or amended long-term capacity purchase agreements with Compass, Mesaba and Pinnacle, which increased our aggregate minimum fixed obligations under capacity purchase agreements by $1.1 billion over the next ten years. These obligations (1) contemplate minimum levels of flying by Compass, Mesaba, and Pinnacle and (2) reflect assumptions regarding certain associated costs such as for fuel, labor, maintenance, insurance, catering, property taxes and landing fees. Accordingly, our actual payments under these agreements could differ materially from the minimum fixed obligations.

Contingencies Related to Termination of Contract Carrier Agreements

     We may terminate the Chautauqua and Shuttle America contract carrier 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, 2010, 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 $180 million and $350 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 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 related 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.

Credit Card Processing Agreements

Visa/MasterCard Processing Agreement

     Our Visa/MasterCard credit card processing agreement provides that no cash reserve (“Reserve”) is required except in certain circumstances, including when we do not maintain a required level of unrestricted cash. In circumstances in which 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, 2010 or December 31, 2009.

American Express

     Our American Express credit card processing agreement provides that no withholding of payment related to receivables collected will occur except in certain circumstances, including when we do not maintain a required level of unrestricted cash. In circumstances in which American Express is permitted to withhold payment related to receivables collected, 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, 2010 or December 31, 2009.

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 use or operation of the aircraft or such other equipment.

     We believe that our insurance would cover most of our exposure to liabilities and related indemnities associated with the commercial real estate leases and aircraft and other equipment lease and financing agreements described above. While our insurance does not typically cover environmental liabilities, we have certain insurance policies in place as required by 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, 2010, we had 79,005 full-time equivalent employees. Approximately 37% of these employees were represented by unions.

     In connection with efforts to resolve union representation for employee groups where representation has not been resolved following our merger with Northwest, the National Mediation Board recently authorized and set the dates for elections for the following employee groups:

				Approximate
				Number of
		Union Seeking		Employees
Employee Group		Representation		(as of June 30, 2010)				Election Period
Flight Attendants		AFA(1)			20,100			September 29 - November 3, 2010
Fleet Service (2)		IAM(3)			14,100			October 14 - November 18, 2010
Stores Employees (4)		IAM			700			October 25 - November 22, 2010
Passenger Service (5)		IAM			16,400			November 2 - December 7, 2010

     In an election ending in September 2010, Delta’s 91 simulator technicians rejected representation by the IAM.

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 December 31, 2010, and we expect the coverage to be further extended. The withdrawal of government support of airline war-risk insurance would require us to obtain war-risk insurance coverage commercially, if available. Such commercial insurance could have substantially less desirable coverage than currently provided by the U.S. government, may not be adequate to protect our risk of loss from future acts of terrorism, may result in a material increase to our operating expense or may not be obtainable at all, resulting in an interruption to our operations.

Other

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

NOTE 6. EMPLOYEE BENEFIT PLANS

     The following tables show the components of net periodic cost:

										Other Postretirement and
		Pension Benefits								Postemployment Benefits
		Three Months Ended								Three Months Ended
		September 30,								September 30,
(in millions)		2010				2009				2010				2009
Service cost		$	—			$	—			$	14			$	14
Interest cost			245				250				49				54
Expected return on plan assets			(169	)			(153	)			(22	)			(21	)
Amortization of prior service benefit			—				—				(1	)			—
Recognized net actuarial loss (gain)			12				9				(1	)			1
Settlements			4				4				—				—
Net periodic cost		$	92			$	110			$	39			$	48

										Other Postretirement and
		Pension Benefits								Postemployment Benefits
		Nine Months Ended								Nine Months Ended
		September 30,								September 30,
(in millions)		2010				2009				2010				2009
Service cost		$	—			$	—			$	44			$	40
Interest cost			737				752				147				156
Expected return on plan assets			(508	)			(461	)			(68	)			(59	)
Amortization of prior service benefit			—				—				(3	)			—
Recognized net actuarial loss (gain)			36				25				(3	)			(1	)
Special termination and settlements			10				8				—				6
Net periodic cost		$	275			$	324			$	117			$	142

NOTE 7. ACCUMULATED OTHER COMPREHENSIVE LOSS

     The following table shows the components of accumulated other comprehensive loss:

		Pension and
		Other Benefits				Derivative				Valuation
(in millions)		Liability				Instruments				Allowance				Total
Balance at December 31, 2009		$	(2,011	)		$	(345	)		$	(1,207	)		$	(3,563	)
Pension and other benefit adjustments			11				—				—				11
Changes in fair value			—				33				—				33
Reclassification to earnings			—				17				—				17
Tax effect			(4	)			(19	)			23				—
Balance at March 31, 2010			(2,004	)			(314	)			(1,184	)			(3,502	)
Pension and other benefit adjustments			(28	)			—				—				(28	)
Changes in fair value			—				(341	)			—				(341	)
Reclassification to earnings			—				18				—				18
Tax effect			10				120				(130	)			—
Balance at June 30, 2010			(2,022	)			(517	)			(1,314	)			(3,853	)
Pension and other benefit adjustments			13				—				—				13
Changes in fair value			—				45				—				45
Reclassification to earnings			—				79				—				79
Tax effect			(5	)			(46	)			51				—
Balance at September 30, 2010		$	(2,014	)		$	(439	)		$	(1,263	)		$	(3,716	)

     Total other comprehensive income for the three and nine months ended September 30, 2010 was $500 million and $421 million, respectively. Total other comprehensive loss for the three and nine months ended September 30, 2009 was $105 million and $39 million, respectively.

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:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in millions)		2010				2009				2010				2009
Asset impairment		$	146			$	—			$	182			$	—
Merger-related items			53				70				145				177
Severance and related costs			7				51				15				101
Facilities and other			—				8				—				8
Total restructuring and merger-related items		$	206			$	129			$	342			$	286

     Asset Impairment. In September 2010, we recorded a $146 million impairment charge related to our decision to substantially reduce Comair’s fleet over the next two years by retiring older, less-efficient CRJ-100/200 50-seat aircraft. For a discussion of the techniques used to estimate the current fair values, see Note 2.

     During the March 2010 quarter, we recorded an impairment charge related to our retired B-747-200 aircraft, which we sold in the September 2010 quarter.

     Merger-Related Items. Merger-related items are costs associated with Northwest and the integration of Northwest operations into Delta.

     Severance and Related Costs. During the three and nine months ended September 30, 2010, we recorded $7 million and $15 million, respectively, in severance charges for our wholly-owned subsidiaries primarily associated with (1) the Comair fleet reduction initiative announced in the September 2010 quarter and (2) the consolidation of operations at the Cincinnati/Northern Kentucky International Airport during the March 2010 quarter. During the three and nine months ended September 30, 2009, we recorded $51 million and $101 million, respectively, primarily associated with voluntary workforce reduction programs.

     The following table shows the balances for restructuring charges as of September 30, 2010, and the activity for the nine months then ended:

		Liability												Liability
		Balance at				Additional								Balance at
		December 31,				Costs and								September 30,
(in millions)		2009				Expenses				Payments				2010
Severance and related costs		$	69			$	15			$	(51	)		$	33
Facilities and other			74				—				(18	)			56
Total		$	143			$	15			$	(69	)		$	89

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. 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, 2010, we have (1) distributed 335 million shares of common stock to holders of $14 billion of allowed general, unsecured claims, (2) issued 14 million shares of common stock to eligible non-contract, non-management employees and (3) reserved 51 million shares of common stock for issuance to holders of allowed general, unsecured claims.

     In September 2005, Northwest Airlines Corporation 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, 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, 2010, five 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.

     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. EARNINGS (LOSS) PER SHARE

     We calculate basic earnings (loss) per share by dividing the net income (loss) 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 earnings (loss) per share. Accordingly, the calculation of basic earnings (loss) per share for the three and nine months ended September 30, 2010 and 2009 assumes there was outstanding at the beginning of each of these periods (1) all 386 million shares of Delta common stock contemplated by Delta’s Plan of Reorganization to be distributed to holders of allowed general, unsecured claims 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. Similarly, the calculation of basic loss per share for the three and nine months ended September 30, 2009 assumes there was outstanding at the beginning of the period 50 million shares of Delta common stock we agreed to issue on behalf of Delta and Northwest pilots in connection with the Merger.

     The following table shows our computation of basic and diluted earnings (loss) per share:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in millions, except per share data)		2010				2009				2010				2009
Basic:
Net income (loss)		$	363			$	(161	)		$	574			$	(1,212	)
Basic weighted average shares outstanding			835				828				834				826
Basic earnings (loss) per share		$	0.43			$	(0.19	)		$	0.69			$	(1.47	)
Diluted:
Net income (loss)		$	363			$	(161	)		$	574			$	(1,212	)
Basic weighted average shares outstanding			835				828				834				826
Dilutive effects of share based awards			7				—				8				—
Diluted weighted average shares outstanding			842				828				842				826
Diluted earnings (loss) per share		$	0.43			$	(0.19	)		$	0.68			$	(1.47	)
Antidilutive common stock equivalents excluded from diluted earnings (loss) per share			25				33				23				33

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”), a wholly-owned subsidiary of ours merged (the “Merger”) with and into Northwest Airlines Corporation. On the Closing Date, Northwest Airlines Corporation and its wholly-owned subsidiaries, including Northwest Airlines, Inc. (collectively, “Northwest”), became wholly-owned subsidiaries of Delta.

     On December 31, 2009, Northwest Airlines, Inc. merged with and into Delta. As a result of this merger, Northwest Airlines, Inc. ceased to exist as a separate entity.

     We believe the Northwest merger better positions us to manage through economic cycles and volatile fuel prices, invest in our fleet, improve services for customers and achieve our strategic objectives. We also believe the merger will generate approximately $2 billion in annual revenue and cost synergies from more effective aircraft utilization, a more comprehensive and diversified route system, reduced overhead and improved operational efficiency. We have completed substantially all customer facing merger-related milestones and the majority of our merger integration.

September 2010 Quarter Financial Highlights

     We reported net income of $363 million in the September 2010 quarter, compared to a net loss of $161 million in the September 2009 quarter. Our improved results primarily reflect a strengthening of the airline industry revenue environment, including increased demand for business travel, which as discussed below, was partially offset by a primarily non-cash loss on extinguishment of debt as well as higher fuel prices, profit sharing expense and restructuring and merger related costs.

     Total passenger revenue increased $1.3 billion, or 19%, in the September 2010 quarter while capacity, or available seat miles (“ASMs”), increased 2% compared to the September 2009 quarter. Passenger revenue per available seat mile (“PRASM”) increased over 16% driven by a 16% increase in passenger mile yield on a flat load factor, reflecting both an increase in demand for air travel and an increase in fares. Our international mainline passenger revenue increased $724 million, or 33%, due to a 29% increase in PRASM and a 2.2 point increase in load factor on a 3% increase in capacity. International mainline passenger mile yield rose 26%, reflecting an increase in business and leisure travel and an increase in fares. Domestic mainline passenger revenue increased $358 million, or 12%, on an 11% increase in passenger mile yield and 3% increase in capacity.

     Volatile fuel prices continue to represent a significant risk to our business and the airline industry as a whole. Including our contract carriers under capacity purchase agreements, our unhedged fuel price increased 17% to $2.23 per gallon compared to $1.91 per gallon in the September 2009 quarter. Our fuel price, including the impact of our fuel hedge contracts, was $2.29 per gallon for the September 2010 quarter compared to $2.13 per gallon for the September 2009 quarter. We recorded $64 million in net fuel hedge costs as operating expense in the September 2010 quarter, compared to $226 million in fuel hedge losses in the September 2009 quarter. In an on-going effort to manage fuel price risk, we enter into derivative instruments to hedge a portion of our projected aircraft fuel requirements. As of September 30, 2010, we have hedged approximately 64% and 39% of our projected fuel requirements for the December 2010 quarter and calendar year 2011, respectively.

     Our consolidated operating cost per ASM for the September 2010 quarter excluding aircraft fuel and related taxes, profit sharing and special items (“CASM excluding certain items”), (a non-GAAP financial measure as defined in “Supplemental Information” below) was $7.84 cents. The performance of this metric was flat compared to the September 2009 quarter on 2% higher capacity. Merger cost synergies and productivity improvements offset higher revenue-related expenses and pay increases for frontline employees. We continue to focus on maintaining a competitive cost structure through disciplined spending and productivity initiatives.

     Our net income for the September 2010 quarter includes (1) a $360 million charge associated with the primarily non-cash loss on extinguishment of debt, including the write-off of unamortized debt discount, as part of our debt reduction initiatives, (2) a $153 million charge related to the Comair fleet reduction initiative, and (3) a $53 million charge primarily for merger-related items associated with Northwest and the integration of Northwest operations into Delta. Our net loss for the September 2009 quarter includes (1) an $83 million non-cash loss on extinguishment of debt for the write-off of unamortized debt discount, (2) a $70 million charge for merger-related items and (3) a $51 million charge primarily associated with voluntary workforce reduction programs.

     At September 30, 2010, we had $3.9 billion in cash and cash equivalents and short-term investments, and $1.6 billion in undrawn revolving credit facilities. During the September 2010 quarter, cash provided by operating activities was $514 million. During that period, we repaid $924 million in long-term debt and capital lease obligations. We also invested $397 million in property and equipment, including the purchase of 10 leased B-767-300 aircraft, three leased MD-88 aircraft, two B-737-800 aircraft, two previously owned MD-90 aircraft and one leased B-767-300ER aircraft. In July 2010, we completed a $450 million offering of Pass Through Certificates, Series 2010-1A. For additional information, see Note 4 of the Notes to the Condensed Consolidated Financial Statements.

Recent Initiatives

     New York Strategy. Strengthening our position in New York City through increased corporate sales, improved facilities and increased and new service from New York is a key component of our network strategy. During the September 2010 quarter, we announced plans to redevelop our facilities at John F. Kennedy Airport (“JFK”). This project includes (1) the enhancement and expansion of an existing terminal which we plan to use to operate all of our international flights at JFK (“Expanded Terminal”); (2) the demolition of the aging terminal we currently use at JFK for most of our international flights; (3) the development of that site for aircraft parking positions to support our operations; and (4) the construction of a pedestrian connector between the terminal we primarily use for domestic flights and the Expanded Terminal. This project is intended to strengthen our competitive position and customer service in New York City, the largest airline market in the United States. Once our project is complete, we expect that passengers will benefit from an enhanced customer experience and improved operational performance, including reduced taxi times and better on-time performance.

     We estimate this redevelopment project will cost approximately $1.2 billion and will be completed in stages over the next three to five years. We expect a substantial majority of the project costs will be funded by special project bonds to be issued by the Port Authority of New York and New Jersey (“Port Authority”). Principal and interest on those bonds will be paid from rental payments made by the lessee of the Expanded Terminal under its lease with the Port Authority. We will sublease space in the Expanded Terminal and our payments under the sublease will be sufficient to cover (1) the payment of principal and interest on the bonds allocable to our use of the space in the Expanded Terminal and (2) other costs related to our use of that space.

     In August 2009, we announced our intention to make New York’s LaGuardia Airport a domestic hub through a slot transaction with US Airways. In May 2010, the Federal Aviation Administration and the U.S. Department of Transportation issued an order granting the waiver necessary to approve our agreement with US Airways. However, the waiver was conditioned on the parties’ agreement to a slot divestiture process which was not acceptable. In July 2010, we and US Airways appealed the order to the U.S. Court of Appeals for the District of Columbia Circuit. We cannot predict the outcome of the appeal.

     Debt Reduction Initiatives. During the September 2010 quarter, we completed several debt reduction and delevering initiatives, including the following:

•

Reducing scheduled debt maturities by $688 million principal amount by:

	-		Repurchasing $300 million of our debt in cash tender offers;
	-		Achieving $160 million of debt relief through vendor negotiations;
	-		Repurchasing $153 million of debt through open market transactions and private purchases; and
	-		Redeeming $75 million of other secured financings;

	•		Restructuring $783 million of existing debt, including changes in applicable interest rates and other payment terms;
	•		Purchasing aircraft off-lease for $108 million;

     We used $682 million during the September 2010 quarter to complete these debt reduction initiatives. These transactions resulted in a $360 million loss on extinguishment of debt, of which $288 million related to a non-cash write-off of debt discounts that were recorded as part of purchase accounting to recognize Northwest’s debt at fair value.

     Comair Fleet Reduction. In September 2010, we announced an initiative to substantially reduce Comair’s fleet over the next two years by retiring older, less-efficient CRJ-100/200 50-seat aircraft. This initiative will reduce staffing across the Comair organization through voluntary and involuntary workforce reductions.

     Other Initiatives. We believe our global network, hub structure and alliances with other airlines enables us to offer our customers an improved global reach. We continue to increase our global reach through alliance and codeshare partnerships, including Alitalia joining our transatlantic joint venture with Air France-KLM retroactive to April 2010 as well as the decisions by Aerolineas Argentinas; China Airlines; China Eastern; TAROM, Romania’s flag carrier; and Vietnam Airlines to join the SkyTeam global airline alliance.

     We plan to invest $1 billion through mid-2013 to improve the customer experience and the efficiency of our aircraft fleet. Planned enhancements include installing full flat-bed seats in BusinessElite on 90 trans-oceanic aircraft, adding in-seat audio and video throughout Economy Class on 68 widebody aircraft, adding First Class cabins to 66 CRJ-700 aircraft and installing winglets on more than 170 aircraft to extend aircraft range and increase fuel efficiency.

     Employee Matters. In connection with efforts to resolve union representation for employee groups where representation has not been resolved following our merger with Northwest, the National Mediation Board recently authorized and set the dates for elections for several employee groups. For additional information, see Note 5 of the Notes to the Condensed Consolidated Financial Statements.

Results of Operations — September 2010 and 2009 Quarters

Operating Revenue

										vs. Three Months Ended
										September 30, 2009
		Three Months				Three Months								%
		Ended				Ended				Increase				Increase
(in millions)		September 30, 2010				September 30, 2009				(Decrease)				(Decrease)
Operating Revenue:
Passenger:
Mainline		$	6,204			$	5,122			$	1,082				21	%
Regional carriers			1,571				1,402				169				12	%
Total passenger revenue			7,775				6,524				1,251				19	%
Cargo			227				177				50				28	%
Other, net			948				873				75				9	%
Total operating revenue		$	8,950			$	7,574			$	1,376				18	%

						Increase (Decrease)
						vs. Three Months Ended September 30, 2009
		Three Months
		Ended																Passenger
		September 30,				Passenger				RPMs(1)				ASMs				Mile								Load
(in millions)		2010				Revenue				(Traffic)				(Capacity)				Yield				PRASM				Factor
Passenger Revenue:
Domestic		$	3,259				12	%			1	%			3	%			11	%			9	%		(1.5) pts
Atlantic			1,698				25	%			2	%			1	%			23	%			25	%		1.2 pts
Pacific			881				54	%			13	%			6	%			36	%			45	%		5.3 pts
Latin America			366				24	%			8	%			7	%			15	%			16	%		0.6 pts
Total Mainline			6,204				21	%			3	%			3	%			18	%			18	%		0.2 pts
Regional carriers			1,571				12	%			(2	)%			(1	)%			14	%			13	%		(0.8)pts
Total passenger revenue		$	7,775				19	%			2	%			2	%			16	%			16	%		0.1 pts

(1)		Revenue passenger miles (“RPMs”)

     Mainline Passenger Revenue. Mainline passenger revenue increased 21% in the September 2010 quarter compared to the September 2009 quarter primarily due to increased business demand for air travel and an increase in fares. During the September 2009 quarter, weakened demand for air travel from the global recession and related capacity reductions had a significant negative impact on our mainline passenger revenue.

	•		Domestic Passenger Revenue. Domestic passenger revenue increased 12% from a 9% increase in PRASM on a 3% increase in capacity. The passenger mile yield increased 11%, reflecting an increase in business travel and an increase in fares.
	•		International Passenger Revenue. International passenger revenue increased 33% from a 29% increase in PRASM and a 2.2 point increase in load factor on a 3% increase in capacity. The passenger mile yield increased 26%, reflecting an increase in business and leisure travel and an increase in fares. The Atlantic and Pacific markets realized a 23% and 36% increase in passenger mile yield, respectively, due to the strengthening airline revenue environment and increased business demand.

     Regional carriers. Passenger revenue of regional carriers increased 12% from a 13% increase in PRASM on a 1% decline in capacity. The passenger mile yield increased 14%, reflecting an increase in demand for air travel and an increase in fares.

     Cargo. Cargo revenue increased $50 million due to higher cargo yield and international volume, partially offset by capacity reductions.

     Other, net. Other, net revenue increased $75 million primarily due to increased volume of checked bags.

Operating Expense

		Three Months Ended								vs. Three Months Ended
		September 30,								September 30, 2009
														%
										Increase				Increase
(in millions)		2010				2009				(Decrease)				(Decrease)
Operating Expense:
Aircraft fuel and related taxes		$	2,023			$	1,973			$	50				3	%
Salaries and related costs			1,669				1,722				(53	)			(3	)%
Contract carrier arrangements			1,236				1,009				227				22	%
Aircraft maintenance materials and outside repairs			405				334				71				21	%
Contracted services			398				390				8				2	%
Passenger commissions and other selling expenses			404				384				20				5	%
Depreciation and amortization			375				385				(10	)			(3	)%
Landing fees and other rents			331				340				(9	)			(3	)%
Passenger service			190				181				9				5	%
Aircraft rent			92				123				(31	)			(25	)%
Profit sharing			185				—				185			NM		(1)
Restructuring and merger-related items			206				129				77				60	%
Other			433				400				33				8	%
Total operating expense		$	7,947			$	7,370			$	577				8	%

(1)		NM — not meaningful

     In July 2010, we sold Compass and Mesaba to Trans States and Pinnacle, respectively. Prior to these sales, expenses related to Compass and Mesaba as our wholly-owned subsidiaries were reported in the applicable expense line items. Subsequent to these sales, expenses related to Compass and Mesaba are reported as contract carrier arrangements expense.

     Aircraft fuel and related taxes. Aircraft fuel and related taxes increased primarily due to higher average unhedged fuel prices increasing fuel costs $269 million, partially offset by (1) a $162 million reduction in fuel hedge losses and (2) $77 million as a result of the sales of Compass and Mesaba. We recorded $64 million in net fuel hedge costs in the September 2010 quarter, compared to $226 million in fuel hedge losses in the September 2009 quarter. The fuel hedge losses in the September 2009 quarter were primarily from hedge contracts purchased in 2008 when fuel prices reached record highs and were expected to continue to rise.

     Salaries and related costs. The decrease in salaries and related costs is primarily due to (1) the sales of Compass and Mesaba, (2) a 1% average decrease in staffing related to voluntary workforce reduction programs and (3) lower pension expense primarily from an increase in the value of our defined benefit plan assets. These factors were partially offset by pay increases for frontline employees.

     Contract carrier arrangements. Contract carrier arrangements expense increased primarily due to (1) the sales of Compass and Mesaba and (2) higher average fuel prices. These increases were partially offset by (1) lower overall expense from a reduction in capacity and (2) reduced contract carrier rates from the transfer of ground handling services to one of our wholly-owned subsidiaries and third party vendors.

     Aircraft maintenance materials and outside repairs. Aircraft maintenance materials and outside repairs increased primarily due to increased volume of outside airframe and engine repairs for our aircraft.

     Aircraft rent. Aircraft rent decreased due to (1) the sales of Compass and Mesaba and (2) the renegotiation of existing leases.

     Profit sharing. We recorded $185 million related to our broad-based employee profit sharing plans during the September 2010 quarter. We did not record any profit sharing expense in 2009. Our broad-based profit sharing plans provide that, for each year in which we have an annual pre-tax profit (as defined), we will pay a specified portion of that profit to eligible employees.

     Restructuring and merger-related items. Restructuring and merger-related items increased $77 million, primarily due to the following:

	•		During the September 2010 quarter, we recorded a $206 million charge primarily related to (1) the Comair fleet reduction initiative and (2) merger-related items associated with Northwest and the integration of Northwest operations into Delta.
	•		During the September 2009 quarter, we recorded (1) a $78 million charge primarily for merger-related items and (2) a $51 million charge in connection with employee workforce reduction programs.

Other (Expense) Income

     Other expense, net for the September 2010 quarter was $637 million compared to $383 million for the September 2009 quarter. This change is attributable to the following:

		(Unfavorable) Favorable vs.
		Three Months Ended
(in millions)		September 30, 2009
Loss on extinguishment of debt		$	(277	)
Net interest expense			(36	)
Foreign currency exchange rates			(5	)
Amortization of debt discount, net			49
Mark-to-market adjustments on the ineffective portion of fuel hedge contracts			4
Other			11
Total other expense, net		$	(254	)

     For additional information regarding our loss on extinguishment of debt and amortization of debt discount, net, see Note 4 of the Notes to the Condensed Consolidated Financial Statements.

Income Taxes

     We recorded an income tax provision of $3 million for the September 2010 quarter, primarily related to international and state income taxes. For U.S. federal income tax purposes, we did not record an income tax provision for the September 2010 quarter, since our deferred tax assets are fully reserved by a valuation allowance. We recorded an income tax benefit of $18 million for the September 2009 quarter, primarily related to a refund of income tax partially offset by international and state income taxes. The income tax benefit recorded was not a result of our loss in that period. The deferred tax asset resulting from such a net operating loss was fully reserved by a valuation allowance.

Results of Operations — Nine Months Ended September 30, 2010 and 2009

Operating Revenue

										vs. Nine Months Ended
										September 30, 2009
		Nine Months				Nine Months								%
		Ended				Ended				Increase				Increase
(in millions)		September 30, 2010				September 30, 2009				(Decrease)				(Decrease)
Operating Revenue:
Passenger:
Mainline		$	16,170			$	14,053			$	2,117				15	%
Regional carriers			4,420				3,975				445				11	%
Total passenger revenue			20,590				18,028				2,562				14	%
Cargo			614				535				79				15	%
Other, net			2,762				2,695				67				2	%
Total operating revenue		$	23,966			$	21,258			$	2,708				13	%