General Information

On October 29, 2008 (the "Closing Date"), we completed our merger (the "Merger") with Northwest, creating the world's largest airline. We now offer service to 378 worldwide destinations in 66 countries and expect to serve more than 170 million passengers each year. Combined with the reach of SkyTeam, our global airline alliance, and our codeshare partners, our customers can fly to 570 destinations in 111 countries. 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.

Year in Review

For 2008, we reported a consolidated net loss of $8.9 billion, which reflects
(1) a $7.3 billion non-cash charge from an impairment of goodwill and other intangible assets, (2) $1.1 billion in primarily non-cash Merger-related charges, (3) significantly increased fuel costs and (4) weakened demand due to the onset of a global recession.

During 2008, fuel prices fluctuated dramatically. Fuel is one of our most significant costs. At the beginning of the year, crude oil prices hovered around $100 per barrel, escalating to $145 per barrel by mid-summer. We were not able to increase revenues through ticket prices, fuel surcharges or other passenger service fees to cover all of our higher fuel costs. Accordingly, we reduced capacity by 5% in the second half of the year compared to our 2008 plan. As part of this capacity reduction, we removed 31 aircraft from our operating fleet, of which 22 have been sold or returned to the lessors and nine remain temporarily grounded or held for sale. We also offered voluntary workforce reduction programs to our U.S. based non-pilot employees during the year. These programs helped us right-size our workforce to the capacity reductions. Approximately 4,200 employees, or 8% of our pre-Merger workforce, elected to participate in these programs.

Throughout the summer months, fuel prices remained at record high levels and were forecasted to continue to rise. Based on this outlook, we added fuel hedges to protect against further escalating fuel costs. However, fuel prices fell dramatically during the third and fourth quarters, creating sizable losses on our fuel hedge contracts in the fourth quarter. Losses on our derivative contracts that relate to jet fuel purchases in 2009 are deferred on our Consolidated Balance Sheet for 2008 and will be recognized in 2009 when the hedged jet fuel is purchased and consumed.

Northwest Merger

We believe the Merger will generate approximately $2 billion in annual revenue and cost synergies by 2012 from more effective aircraft utilization, a more comprehensive and diversified route system and cost synergies from reduced overhead and improved operational efficiency. We expect to realize the following benefits from integrating the operations of Delta and Northwest:

• As a globally-balanced airline, we are better positioned to compete in the Open Skies environment by combining Delta's strengths in the south, mountain west and northeast United States, Europe and Latin America with Northwest's presence in the midwest and northwest United States and Asia;

• We expect the combined company to have the financial strength and flexibility to weather cyclical conditions in the airline industry; and

• Delta's and Northwest's complementary networks and common membership in the SkyTeam alliance are expected to ease the combination of operations that have complicated past mergers within the airline industry.

In connection with the closing of the Merger, we awarded to substantially all U.S. based Delta and Northwest employees an aggregate of 101 million shares of common stock. This award recognizes the critical role of our employees in assisting us achieve our financial, operational and customer service goals. As a result of this award, we recorded $791 million in one-time primarily non-cash charges to restructuring and Merger-related items.

We expect to incur one-time cash costs of approximately $500 million over approximately three years to integrate the two airlines. We plan to integrate the operations of Northwest into Delta as promptly as is feasible, which we anticipate we will substantially complete in 2010.

Outlook

We believe a combination of lower fuel prices, capacity reductions, and merger synergies better positions us to effectively manage our business through the current economic crisis. Nevertheless, we expect to report a significant loss in the March 2009 quarter primarily due to fuel hedge losses coupled with the impact of the global recession, which has weakened demand for air travel, and the first quarter traditionally being our weakest quarter due to seasonality.

Fuel Prices and Other Costs

In 2009, we expect to use approximately four billion gallons of jet fuel. At that level of consumption, a $1 change in the average annual per barrel price of crude oil can impact our financial results by approximately $100 million. Accordingly, the volatility of fuel prices will continue to have a major impact on our financial results.

As discussed above, at current market prices we will recognize losses on hedge contracts that we entered into in 2008 when fuel prices were much higher. The majority of these losses will be recognized in the first half of 2009, as the hedged fuel is purchased and consumed. In January 2009, we have added new hedges that reflect current market prices, approximating 16% of our estimated 2009 consumption. Should fuel prices remain at their current levels, we will realize significant savings in fuel costs compared to 2008.

We expect higher pension expense in 2009 compared to 2008 from a decline in the value of our defined benefit plan assets driven by market conditions and increases in certain other operating expenses in 2009 compared to 2008 due to timing delays between the reduction in capacity and our ability to remove certain capacity-related costs. We also expect to record approximately $260 million of higher interest expense related to increased amortization of debt discount, reflecting lower fair value of Northwest debt as of the Closing Date.

Demand and Capacity

The global economic recession has resulted in weaker demand for air travel. Our demand began to slow during the December 2008 quarter and we believe worsening global economic conditions in 2009 will substantially reduce U.S. airline industry revenues in 2009 compared to 2008. As a result, we have announced plans to further reduce capacity by 6-8% in 2009 compared to 2008 (which reflect planned reductions in domestic capacity of 8-10% and international capacity of 3-5%). If economic conditions continue to worsen, we expect to make additional reductions to our capacity. We believe we have flexibility in our network and fleet to remove additional capacity if the environment warrants.

In December 2008, we announced additional voluntary workforce reduction programs for U.S. based non-pilot employees to align staffing with the planned capacity reductions. Approximately 2,100 employees elected to participate. We expect to record between $40 million and $50 million in restructuring charges during the March 2009 quarter for these programs.

Merger Synergies

As discussed above, we expect to generate significant synergies from the Merger. Our key early integration efforts will focus on (1) technology, (2) employees,
(3) standardizing our fleet across the two airlines and (4) achieving a single operating certificate.

We believe that we will recognize $500 million in synergy benefits in 2009, primarily in the second half of the year. Our ability to realize the synergies will depend, among other things, on our successfully aligning technologies of the two airlines, receiving a single operating certificate and resolving labor representation differences while maintaining productive employee relations.

We have made significant progress regarding integration of our workgroups, including reaching joint collective bargaining agreements and integrated seniority lists with our pilots and flight dispatchers and reaching agreement on a seniority list with our meteorologists. Recently, the NMB accepted a request by the Aircraft Mechanics Fraternal Association ("AMFA") to terminate AMFA's certification to represent pre-merger NWA aircraft maintenance technicians and related employees, which will allow us to integrate these workgroups promptly. In addition, the Delta flight attendant seniority committee has reached a position on a combined seniority list that we believe is consistent with the position of the Association of Flight Attendants ("AFA"), which was certified to represent the NWA flight attendants prior to the merger. The integration of some portions of the rest of the Delta and NWA workforces may be challenging in part because representation and seniority integration issues must be resolved and two of the unions, the AFA and the International Association of Machinists and Aerospace Workers, which represents NWA's airport employees and other categories of ground employees, have not said when they will seek to proceed to resolve those issues.

Background and Combined Financial Results of the Predecessor and Successor

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 "Effective Date"), the Delta Debtors emerged from bankruptcy. References in this Form 10-K to "Successor" refer to Delta on or after May 1, 2007, after giving effect to
(1) the cancellation of Delta common stock issued prior to the Effective Date;
(2) the issuance of new Delta common stock and certain debt securities in accordance with the Delta Debtors' Joint Plan of Reorganization ("Delta's Plan of Reorganization"); and (3) the application of fresh start reporting. References to "Predecessor" refer to Delta prior to May 1, 2007.

Upon emergence from Chapter 11, we adopted fresh start reporting in accordance with American Institute of Certified Public Accountants' Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7"). The adoption of fresh start reporting resulted in our becoming a new entity for financial reporting purposes. Due to our adoption of fresh start reporting on April 30, 2007, the accompanying Consolidated Statements of Operations include the results of operations for (1) the year ended December 31, 2008 of the Successor, (2) the eight months ended December 31, 2007 of the Successor, (3) the four months ended April 30, 2007 of the Predecessor and (4) the year ended December 31, 2006 of the Predecessor.

For purposes of management's discussion and analysis of the results of operations in this Form 10-K, we combined the results of operations for the four months ended April 30, 2007 of the Predecessor with the eight months ended December 31, 2007 of the Successor. We then compare (1) Delta's results of operations for the year ended December 31, 2008 with the 2007 combined results and (2) the 2007 combined results with the Predecessor's results of operations for the year ended December 31, 2006. We also discuss significant fresh start reporting adjustments ("Fresh Start Adjustments"), which impacted comparability.

We believe the 2007 combined results of operations provide management and investors with a more meaningful perspective on Delta's financial and operational performance than if we did not combine the results of operations of the Predecessor and the Successor in this manner. Similarly, we combine the financial results of the Predecessor and the Successor when discussing our sources and uses of cash for the year ended December 31, 2007.

Results of Operations-2008 Compared to 2007 Combined

Operating Revenue




                                                  Combined                        Increase due
                                                                                  to Northwest          Increase
                                                                                   Operations          (Decrease)
                               Year Ended        Year Ended                       October 30 to        Excluding
                              December 31,      December 31,                      December 31,         Northwest
(in millions)                     2008              2007           Increase           2008             Operations
Operating Revenue:
Passenger:
Mainline                     $       15,137     $      12,758     $    2,379     $         1,396      $        983
Regional affiliates                   4,446             4,170            276                 334               (58 )

Total passenger revenue              19,583            16,928          2,655               1,730               925
Cargo                                   686               482            204                  96               108
Other, net                            2,428             1,744            684                 199               485

Total operating revenue      $       22,697     $      19,154     $    3,543     $         2,025      $      1,518

Northwest Operations. As a result of the Merger, our results of operations for 2008 include Northwest's operations for the period from October 30 to December 31, 2008, increasing our operating revenue $2.0 billion. The addition of Northwest to our operations for that period increased available seat miles ("ASMs"), or capacity, 10% for the full year.

                                                       Increase (Decrease)
                                                     Year Ended December 31,
                                                      2008 vs. 2007 Combined
                                   Year Ended     Passenger
                                  December 31,      Mile                   Load
       (in millions)                  2008          Yield       PRASM     Factor
       Passenger Revenue:
       North America             $        8,707           4 %       6 %      2.1  pts
       Atlantic                           4,390           9 %       7 %     (1.2 )pts
       Latin America                      1,362          13 %      16 %      2.1  pts
       Pacific                              678           4 %       4 %      0.2  pts

       Total Mainline                    15,137           6 %       7 %      1.0  pts
       Regional carriers                  4,446           5 %       6 %      0.8  pts

       Total passenger revenue   $       19,583           5 %       6 %      1.0  pts

Mainline Passenger Revenue. Mainline passenger revenue increased primarily due to (1) the inclusion of Northwest's operations, (2) fare increases in response to increased fuel charges, (3) pricing and scheduling initiatives and (4) our increased service to international destinations. The increase in passenger revenue reflects a rise of 6% and 7% in passenger mile yield and passenger revenue per available seat mile ("PRASM"), respectively.

• North American Passenger Revenue. North American passenger revenue increased 8%, driven by a 2.1 point increase in load factor and a 6% increase in PRASM on a 1% increase in capacity. The passenger mile yield increased 4%. The increases in passenger revenue and PRASM reflect (1) the inclusion of Northwest's operations and (2) fare increases, higher yields and our reduction of domestic flights in response to high fuel prices and the slowing economy. Excluding Northwest's operations, we reduced domestic capacity by 7% for the year.

• International Passenger Revenue. International passenger revenue increased 38%, driven by a 27% increase in capacity due to growth in our international operations and the inclusion of Northwest's operations, and a 9% increase in PRASM. The passenger mile yield increased 9%. These results reflect an increase in yields due to fuel surcharges and increases in service to international destinations, primarily in the Atlantic and Latin America markets, from the restructuring of our route network. Excluding Northwest's operations, we increased international capacity by 14% for the year.

Regional carriers. Passenger revenue of regional affiliates increased due to the inclusion of Northwest's operations. Excluding Northwest's operations, regional carriers revenue declined $58 million primarily due to an 8% decrease in capacity in response to high fuel prices and the slowing economy, as well as the termination of certain contract carrier agreements.

Cargo. Cargo revenue increased due to the inclusion of Northwest's operations and an increase in fuel surcharges, improved yields, and higher international volume.

Other, net. Other, net revenue increased primarily due to the inclusion of Northwest's operations. Excluding Northwest's operations, other, net revenue increased $485 million primarily due to (1) new or increased administrative service charges and baggage handling fees, (2) growth in aircraft maintenance and staffing services to third parties and (3) higher SkyMiles program revenue.

Operating Expense



                                                                                                             Increase (Decrease) due to:
                                                                                       Northwest
                                                 Combined                             Operations
                              Year Ended        Year Ended                           October 30 to       Restructuring
                             December 31,      December 31,        Increase          December 31,         and merger-                           Fuel
(in millions)                    2008              2007           (Decrease)             2008            related items       Impairments      Expense      Other
Operating Expense:
Aircraft fuel and
related taxes               $        7,346     $       4,686     $      2,660       $           718     $            -      $          -      $  1,942     $   -
Salaries and related
costs                                4,802             4,189              613                   504                  -                 -            -         109
Contract carrier
arrangements                         3,616             3,152              464                   144                  -                 -           303         17
Depreciation and
amortization                         1,266             1,164              102                    91                  -                 -            -          11
Aircraft maintenance
materials and outside
repairs                              1,169               983              186                   113                  -                 -            -          73
Contracted services                  1,153               996              157                   128                  -                 -            -          29
Passenger commissions
and other selling
expenses                             1,030               933               97                   130                  -                 -            -         (33 )
Landing fees and other
rents                                  839               725              114                   106                  -                 -            -           8
Passenger service                      440               338              102                    35                  -                 -            -          67
Aircraft rent                          307               246               61                    40                  -                 -            -          21
Profit sharing                          -                158             (158 )                  -                   -                 -            -        (158 )
Impairment of goodwill
and other intangible
assets                               7,296                -             7,296                    -                   -              7,296           -          -
Restructuring and
merger-related(1) items              1,131                -             1,131                    -                1,131                -            -          -
Other                                  616               488              128                    88                  -                 -            -          40

Total operating expense     $       31,011     $      18,058     $     12,953       $         2,097     $         1,131     $       7,296     $  2,245     $  184

(1) Restructuring and merger-related items reflects $333 million in one-time merger-related charges, as discussed below related to Northwest for the period from October 30 to December 31, 2008.

Northwest Operations. As a result of the Merger, 2008 includes Northwest's operations for the period from October 30 to December 31, 2008, increasing operating expense $2.1 billion. The addition of Northwest for that period increased capacity 10% for the full year.

Restructuring and merger-related items. Restructuring and merger-related items totaled a $1.1 billion charge, primarily consisting of the following:

• Merger-related charges. $978 million in one-time primarily non-cash charges relating to the issuance or vesting of employee equity awards in connection with the Merger.

• Severance and related costs. $114 million in restructuring and related charges in connection with two voluntary workforce reduction programs for U.S. non-pilot employees announced in March 2008 in which approximately 4,200 employees elected to participate.

• Facilities and other. $25 million in facilities charges primarily related to accruals for future lease obligations for previously announced plans to close operations in Concourse C at the Cincinnati Northern Kentucky International Airport (the "Cincinnati Airport").

• Contract carrier restructuring. $14 million in charges associated with the early termination of certain capacity purchase agreements with contract carriers.

Impairments. During the March 2008 quarter, we experienced a significant decline in market capitalization driven primarily by record fuel prices and overall airline industry conditions. In addition, the announcement of our intention to merge with Northwest established a stock exchange ratio based on the relative valuation of Delta and Northwest. As a result of these indicators, we determined goodwill was impaired and recorded a non-cash charge of $6.9 billion. In addition to the goodwill impairment charge, in the June 2008 quarter, we recorded a non-cash charge of $357 million to reduce the carrying value of certain intangible assets based on their revised estimated fair values.

Fuel expense. Fuel expense, including contract carriers, increased $2.2 billion, primarily due to higher average fuel prices, partially offset by fuel hedge gains and reduced consumption from lower capacity. Fuel prices averaged $3.18 per gallon, including fuel hedge gains of $134 million, for 2008, compared to $2.24 per gallon, including fuel hedge gains of $51 million, for 2007.

Salaries and related costs. A $109 million increase primarily from a 6% average increase in pilots and flight attendants to staff increased international flying, annual pay increases for all pilot and non-pilot non-management employees, and increases in group insurance rates, partially offset by a 3% average decrease in headcount primarily related to two voluntary workforce reduction programs.

Aircraft maintenance materials and outside repairs. A $73 million increase primarily due to growth in our third party maintenance and repair business.

Passenger service. A $67 million increase primarily associated with (1) the increased cost of catering on international flights, (2) product upgrades in our Business Elite cabins and (3) unfavorable foreign currency exchange rates.

Profit sharing. A $158 million charge related to our broad-based employee profit sharing plan in 2007. We did not record any profit sharing expense in 2008. This plan provides that, for each year in which we have an annual pre-tax profit (as defined), we will pay at least 15% of that profit to eligible employees.

Operating Income and Operating Margin

We reported an operating loss of $8.3 billion for 2008 and operating income of $1.1 billion for 2007. Operating margin, which is the ratio of operating (loss) income to operating revenues, was (37)% and 6% for 2008 and 2007, respectively.

Other (Expense) Income

Other expense, net for 2008 was $727 million, compared to $492 million for 2007. This change is attributable to (1) a $53 million, or 8%, increase in interest expense primarily due to a higher level of debt outstanding, including Northwest debt for the period from October 30 to December 31, 2008 and the borrowing of the entire amount of our $1.0 billion revolving credit facility (the "Revolving Facility"), partially offset by the repayment of our debtor-in-possession financing facilities (the "DIP Facility") and other higher floating rate debt in connection with our emergence from Chapter 11, (2) a $36 million decrease in interest income primarily from lower cash balances prior to the Merger and lower interest rates compared to 2007 and (3) a $146 million increase to miscellaneous, net due to the following:

                                                                         Increase
                                                                        (Decrease)
                                                                       2008 vs. 2007
(in millions)                                                            Combined
Miscellaneous, net
Unfavorable foreign currency exchange rates                           $            72
Impairments of our investments in The Reserve Primary Fund
and insured auction rate securities                                                34
Mark-to-market adjustments on the ineffective portion of our
fuel hedge contracts                                                               21
Northwest non-operating expense from October 30 to
December 31, 2008                                                                  12
Other                                                                               7

Total miscellaneous, net                                              $           146

Reorganization Items, Net

Reorganization items, net totaled a $1.2 billion gain for 2007, primarily consisting of the following:

• Emergence gain. A net $2.1 billion gain due to our emergence from bankruptcy, comprised of (1) a $4.4 billion gain related to the discharge of liabilities subject to compromise in connection with the settlement of claims, (2) a $2.6 billion charge associated with the revaluation of our SkyMiles frequent flyer obligation and (3) a $238 million gain from the revaluation of our remaining assets and liabilities to fair value.

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