UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-12

 

DELTA AIR LINES, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

(1)  Title of each class of securities to which the transaction applies:

 

 

(2)  Aggregate number of securities to which the transaction applies:

 

 

Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and

state how it was determined):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DELTA AIR LINES, INC.

 

Notice of Annual Meeting

 

Dear Stockholder:

 

On behalf of the Board of Directors, it is a pleasure to invite you to attend the 2010 Annual Meeting of Stockholders of Delta Air Lines, Inc. The meeting will be held at 8:00 a.m. Eastern Daylight Time on Wednesday, June 30, 2010, at the Auditorium at AXA Equitable Center, 787 Seventh Avenue, New York, New York 10019. At the meeting, stockholders will vote on the following matters:

 

 

If you were a holder of record of Delta common stock at the close of business on May 3, 2010, you will be entitled to vote at the meeting. A list of stockholders entitled to vote at the meeting will be available for examination during normal business hours for ten days before the meeting at Delta’s Investor Relations Department, 1030 Delta Boulevard, Atlanta, Georgia 30354. The stockholder list will also be available at the meeting.

 

Because space at the meeting is limited, admission will be on a first-come, first-served basis. Stockholders without appropriate documentation may not be admitted to the meeting. If you plan to attend the meeting, please see the instructions on page 4 of the attached proxy statement. If you will need special assistance at the meeting because of a disability, please contact Investor Relations toll free at (866) 715-2170.

 

As permitted by Securities and Exchange Commission rules, we are providing our proxy materials on the Internet. As a result, we are sending our stockholders a Notice Regarding the Availability of Proxy Materials instead of paper copies of our proxy materials.

 

We encourage stockholders to sign up to receive electronically future proxy materials, including the Notice Regarding the Availability of Proxy Materials. Using electronic communication significantly reduces our printing and postage costs, and helps protect the environment. To sign up, please visit

http://www.delta.com/about_delta/investor_relations/annual_report_proxy_statement/index.jsp.

 

Please read our attached proxy statement carefully and submit your vote as soon as possible. Your vote is important. You can ensure that your shares are voted at the meeting by using our Internet or telephone voting system, or by completing, signing and returning a proxy card.

 

Sincerely,

 

Richard H. Anderson

Chief Executive Officer

Atlanta, Georgia

May 17, 2010

 

TABLE OF CONTENTS

 

DELTA AIR LINES, INC.
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 30, 2010

 

This proxy statement is being provided to you in connection with the solicitation of proxies by the Board of Directors of Delta Air Lines, Inc. The proxies will be voted at Delta’s 2010 Annual Meeting of Stockholders and at any adjournment of the meeting. The annual meeting will be held at 8:00 a.m. Eastern Daylight Time (“EDT”) on Wednesday, June 30, 2010, at the Auditorium at AXA Equitable Center, 787 Seventh Avenue, New York, New York 10019. The AXA Equitable Center is located in Midtown Manhattan between 51st and 52nd Streets.

 

Under rules adopted by the Securities and Exchange Commission (“SEC”), we are furnishing proxy materials (including our Annual Report on Form 10-K for the year ended December 31, 2009 (“2009 Form 10-K”)) to our stockholders on the Internet, rather than mailing paper copies to each stockholder. If you received a Notice Regarding the Availability of Proxy Materials (the “Notice”) by U.S. or electronic mail, you will not receive a paper copy of these proxy materials unless you request one. Instead, the Notice tells you how to access and review the proxy materials and vote your shares on the Internet. If you would like to receive a paper copy of our proxy materials free of charge, please follow the instructions in the Notice. The Notice will be distributed to our stockholders beginning on or about May 17, 2010.

 

The Board of Directors set May 3, 2010 as the record date for determining the stockholders entitled to notice of and to vote at the annual meeting. On April 28, 2010, 789,817,357 shares of Delta common stock, par value $0.0001 per share, were outstanding. Delta expects the number of outstanding shares will not materially change as of the record date. The common stock is the only class of securities entitled to vote at the meeting. Each outstanding share entitles its holder to one vote.

 

The control number you receive in your Notice covers shares of common stock in any of the following forms:

 

 

Your submission of voting instructions for registered shares results in the appointment of a proxy to vote those shares. In contrast, your submission of voting instructions for common stock held in your Pilot Plan account or allocated to your Northwest Plan account or for unvested restricted common stock granted under the Delta 2007 Performance Compensation Plan instructs the applicable plan trustee or administrator how to vote those shares, but does not result in the appointment of a proxy. You may submit your voting instructions regarding all shares covered by the same control number before the meeting by using our Internet or telephone system or by completing and returning a proxy card, as described below:

 

 

 

To be effective, instructions regarding shares held in your Pilot Plan account or allocated to your Northwest Plan account must be received by 5:00 p.m. EDT on June 28, 2010. Instructions regarding registered shares or unvested restricted common stock must be received by 5:00 p.m. EDT on June 29, 2010.

 

You may also vote registered shares by attending the annual meeting and voting in person by ballot; this will revoke any proxy you previously submitted.

 

Please note that you may not vote your shares of unvested restricted common stock, or shares held in your Pilot Plan account or allocated to your Northwest Plan account, in person at the meeting.

 

 

All properly submitted voting instructions, whether submitted by the Internet, telephone or U.S. mail, will be voted at the annual meeting according to the instructions given, provided they are received prior to the applicable deadlines described above. All properly submitted proxy cards not containing specific instructions will be voted in accordance with the Board of Directors’ recommendations set forth on page 4. The members of Delta’s Board of Directors designated to vote the proxies returned pursuant to this solicitation are Richard H. Anderson, Roy J. Bostock and Daniel A. Carp.

 

If you hold registered shares, unvested restricted common stock, or shares in your Pilot Plan account or allocated to your Northwest Plan account, you may revoke your proxy or voting instructions prior to the meeting by:

 

 

To be effective, revocation of instructions regarding shares held in your Pilot Plan account or allocated to your Northwest Plan account must be received by 5:00 p.m. EDT on June 28, 2010. Revocation of instructions regarding registered shares or unvested restricted common stock must be received by 5:00 p.m. EDT on June 29, 2010.

 

You may also revoke your proxy covering registered shares by attending the annual meeting and voting in person by ballot. Attending the meeting will not, by itself, revoke a proxy. Please note that you may not vote your shares of unvested restricted common stock, or shares held in your Pilot Plan account or allocated to your Northwest Plan account, in person at the meeting.

 

If your shares are held in the name of a broker, bank or other record holder (that is, in street name), please refer to the instructions provided by the record holder regarding how to vote your shares or to revoke your voting instructions. You may also obtain a proxy from the record holder permitting you to vote in person at the annual meeting. Without a proxy from the record holder, you may not vote shares held in street name by returning a proxy card or by voting in person at the annual meeting. If you hold your shares in street name it is critical that you provide instructions to, or obtain a proxy from, the record holder if you want your shares to count in the election of directors (Proposal 1 of this Proxy Statement). As described in the next section of this proxy statement, recent changes in regulation prohibit your bank or broker from voting your shares in the election of directors if you do not provide voting instructions.

 

Under New York Stock Exchange (“NYSE”) rules, brokerage firms may vote in their discretion on certain matters on behalf of clients who do not provide voting instructions at least 15 days before the date of the annual meeting. Generally, brokerage firms may vote to ratify the appointment of independent auditors and on other “discretionary” items. In contrast to prior practice, beginning this year, brokers are no longer permitted to vote your shares for the election of directors unless you provide voting instructions. Brokerage firms also may not vote on stockholder proposals because those proposals are considered “non-discretionary” items. Accordingly, if your shares are held in a brokerage account and you do not return voting instructions to your broker by its deadline, your shares may be voted by your broker on some, but not all, of the proposals described in this proxy statement. Broker non-votes will not be considered in determining the number of votes cast in connection with non-discretionary items. Therefore, we urge you to give voting instructions to your broker on all three proposals.

 

The quorum at the annual meeting will consist of a majority of the votes entitled to be cast by the holders of all shares of common stock that are outstanding and entitled to vote. Abstentions from voting and broker non-votes, if any, will be counted in determining whether a quorum is present. The meeting will not commence if a quorum is not present.

 

At an annual meeting at which a quorum is present, the following votes will be necessary to elect directors, to ratify the appointment of the independent auditors and to approve the stockholder proposal described in this proxy statement:

 

 

Broker non-votes, if any, will be handled as described under “Limitation on Brokers’ Authority to Vote Shares.”

 

The Board of Directors recommends that you vote:

 

 

All properly submitted proxy cards not containing specific instructions will be voted in accordance with the Board’s recommendations.

 

Delta is not aware of any business to be transacted at the annual meeting other than as described in this proxy statement. If any other item or proposal properly comes before the meeting (including, but not limited to, a proposal to adjourn the meeting in order to solicit votes in favor of any proposal contained in this proxy statement), the proxies received will be voted at the discretion of the directors designated to vote the proxies.

 

To attend the annual meeting, you will need to show you are either a Delta stockholder as of the record date, or hold a valid proxy from such a Delta stockholder.

 

 

All stockholders should also bring valid picture identification; employees may use their company-issued identification card. If you do not have valid picture identification and proof that you own Delta stock, you may not be admitted to the meeting.

 

Delta believes that sound corporate governance practices are essential to enhance long term value for our stockholders. We operate under governance practices that are transparent and consistent with best practices.

 

You may view the charters of the Audit, Corporate Governance, Finance and Personnel & Compensation Committees, the Certificate of Incorporation, the Bylaws, Delta’s corporate governance principles, our codes of ethics and business conduct and our director independence standards on our Corporate Governance website at www.delta.com/about_delta/investor_relations/corporate_governance/index.jsp. Additionally, you may obtain a copy of these materials by contacting Delta’s Corporate Secretary.

 

Independence of Audit, Corporate Governance, Personnel & Compensation Committee Members

 

For many years, Delta’s Board of Directors has been composed of a substantial majority of independent directors. Delta’s Board established the Audit Committee, the Corporate Governance Committee, the Finance Committee and the Personnel & Compensation Committee to focus on particular Board responsibilities.

 

The Board of Directors has affirmatively determined that all current directors are independent under the NYSE listing standards and Delta’s director independence standards, except Messrs. Anderson and Bastian are not independent because each is an executive officer of Delta, and Mr. Rogers is not independent because he is a Delta pilot. In making these independence determinations, the Board of Directors considered information submitted by the directors in response to questionnaires, information obtained from Delta’s internal records and advice from counsel.

 

The Audit, Corporate Governance, Finance and Personnel & Compensation Committees each operates under a written charter. The Audit, Corporate Governance and Personnel & Compensation Committees consist entirely of non-employee directors who are independent, as defined in the NYSE listing standards and Delta’s director independence standards. The members of the Audit Committee also satisfy the additional independence requirements set forth in rules under the Securities Exchange Act of 1934.

 

Certificate of Incorporation and Bylaws; Majority Voting for Directors

 

Delta’s Certificate of Incorporation and Bylaws provide that all directors are elected annually. Under the Bylaws, a director in an uncontested election is elected by a majority of votes cast (excluding abstentions) at a stockholder meeting at which a quorum is present. In an election for directors where the number of nominees exceeds the number of directors to be elected — a contested election — the directors would be elected by the vote of a plurality of the shares represented at the meeting and entitled to vote on the matter.

 

The Corporate Governance Committee recommends to the Board of Directors nominees for election to the Board who have the skills and experience to assist management in the operation of Delta’s business. In accordance with Delta’s corporate governance principles, the Corporate Governance Committee and the Board of Directors assess potential nominees (including incumbent directors) based on factors such as the individual’s business experience, character, judgment, diversity of experience, international background and other matters relevant to the Board’s needs and objectives at the particular time. Independence, financial literacy and the ability to devote significant time to Board activities and to the enhancement of the nominee’s knowledge of Delta’s business are also factors considered for Board membership. The Corporate Governance Committee

evaluates potential nominees suggested by stockholders on the same basis as all other potential nominees. To recommend a potential nominee, you may:

 

 

Each potential nominee is reviewed and screened by the Corporate Governance Committee, which decides whether to recommend a candidate for consideration by the full Board.

 

 

The Board of Directors has designated Mr. Brinzo as an Audit Committee Financial Expert.

 

 

None of the members of the Personnel & Compensation Committee is a former or current officer or employee of Delta or has any interlocking relationships as set forth in applicable SEC rules.

 

 

Stockholders and other interested parties may communicate with our non-management directors by sending an e-mail to nonmgmt.directors@delta.com. We have established a link to this address on our Investor Relations website. All communications will be sent directly to the non-executive Chairman of the Board, as representative of the non-management directors, other than communications pertaining to customer service, human resources and accounting, auditing, internal control and financial reporting matters. Communications regarding customer service and human resources matters will be forwarded for handling by the appropriate Delta department. Communications regarding accounting, auditing, internal control and financial reporting matters will be brought to the attention of the Chairman of the Audit Committee.

 

 

During 2009, the Board of Directors met 12 times. Each current director who served on the Board during 2009 attended at least 75% of the meetings of the Board of Directors and the committees on which he or she served. It is the Board’s policy that directors should attend the annual meeting. All of Delta’s directors attended the annual meeting in 2009 except two directors were unable to attend.

 

The Board of Directors met 6 times in executive session without management in 2009. Mr. Carp, who serves as the non-executive Chairman of the Board, presides at these executive sessions. In his role as Chairman of the Board, Mr. Carp’s responsibilities also include, among other things, (1) providing leadership to the Board and facilitating communications among directors; (2) determining the Board meeting agendas in consultation with the Chief Executive Officer; and (3) facilitating regular communications between management and the Board.

 

The Board of Directors does not have a formal policy on whether the same person should serve as the Chairman of the Board and the Chief Executive Officer. Since 2003, however, Delta has separated these roles between two individuals. The Board of Directors believes this leadership structure is currently appropriate because it generally strengthens the Board’s independence and enables the Chief Executive Officer to focus on the management of Delta’s business.

 

The Board of Directors has established the following committees to assist it in discharging its responsibilities:

Audit Committee

 

The Audit Committee members are Mr. Brinzo, Chairman, Mr. Bostock, Mr. Engler and Ms. Reynolds. The Committee met 11 times in 2009. Among other matters, the Committee:

 

 

 

 

 

 

Corporate Governance Committee

 

The Corporate Governance Committee members are Mr. Carp, Chairman, Mr. Bostock, Mr. Engler, Mr. Foret, Ms. Reynolds and Mr. Slater. The Committee met five times in 2009. Among other matters, the Committee:

 

 

 

Finance Committee

 

The Finance Committee members are Mr. Woodrow, Chairman, Mr. Foret, Mr. Goode, Mr. Rogers and Mr. Steenland. The Committee met 10 times in 2009. Among other matters, the Committee:

 

 

 

 

 

Personnel & Compensation Committee

 

The Personnel & Compensation Committee members are Mr. Goode, Chairman, Mr. Brinzo and Mr. Woodrow. The Committee met five times in 2009. Among other matters, the Committee:

 

 

 

The Board of Directors has ultimate responsibility to oversee Delta’s enterprise risk management program (“ERM”). Depending on the nature of the risk, the responsibility for oversight of selected risks may be delegated to appropriate committees of the Board of Directors, with material findings reported to the full Board. Delegations of risk oversight by the Board include, among other matters, (1) the Audit Committee coordinates the oversight of ERM by the Board and also provides oversight of risks related to the integrity of the consolidated financial statements, internal control over financial reporting and the internal audit function; (2) the Finance Committee oversees the management of risks related to aircraft fuel price and fuel hedging, Delta’s financial condition and its financing transactions; and (3) the Personnel & Compensation Committee oversees the management of risks related to management succession planning and the Company’s executive compensation program. The Board receives reports from the Committee Chairs at each regularly scheduled quarterly Board meeting. Management provides reports where appropriate to the Board, and the Committees with oversight of specific risks, concerning matters such as compliance with regulations, business strategies, proposed changes in laws and regulations and any other matter deemed appropriate by the Board or the Committees. The Vice President — Corporate Audit and Enterprise Risk Management reports to the Audit Committee quarterly and to the full Board twice per year regarding ERM matters.

 

Under Delta’s ERM process, management has the responsibility for (1) setting up organizational responsibilities for risk management; (2) determining the significant risks to Delta, (3) monitoring the business environment for changes in and emergence of significant risks; and (4) developing risk mitigation and management strategies, based on Delta’s risk tolerance levels.

 

Delta’s internal audit function, which is headed by the Vice President — Corporate Audit and Enterprise Risk Management, has responsibility for (1) providing independent assessments of the effectiveness of risk mitigation activities developed by management, and (2) developing recommendations to improve current processes.

 

Managing risk is an ongoing process inherent in all decisions made by management. The Board of Directors discusses risk throughout the year, particularly at Board and Committee meetings when specific actions are considered for approval.

 

A Board of thirteen directors will be elected at the annual meeting. Each director will be elected by the vote of a majority of the votes cast. This means the number of votes cast “for” a director must exceed 50% of the votes with respect to that director (excluding abstentions). Each director elected will hold office until the next annual meeting of stockholders and the election of his or her successor.

 

Delta’s Bylaws provide that any director not elected by a majority of the votes cast at the annual meeting must offer to tender his or her resignation to the Board of Directors. The Corporate Governance Committee will make a recommendation to the Board of Directors whether to accept the resignation. The Board of Directors will consider the recommendation and publicly disclose its decision within 90 days after the certification of the election results.

 

The Board of Directors recommends a vote FOR the following nominees:

 

 

All of the nominees are currently serving on the Board of Directors. The Board of Directors believes each nominee for director will be able to stand for election. If any nominee becomes unable to stand for election, the Board may name a substitute nominee or reduce the number of directors. If a substitute nominee is chosen, the directors designated to vote the proxies will vote FOR the substitute nominee.

 

In 2008, in connection with the then proposed merger between a Delta subsidiary and Northwest Airlines Corporation (“Northwest”), Delta, the Air Line Pilots Association, International, the collective bargaining representative for Delta pilots (“ALPA”), and the Delta Master Executive Council, the governing body of the Delta unit of ALPA (“Delta MEC”), entered into an agreement whereby Delta agreed (1) to cause the election to the Board of Directors of a Delta pilot designated by the Delta MEC who is not a member or officer of the Delta MEC or an officer of ALPA (“Pilot Nominee”); (2) at any meeting of stockholders at which the Pilot Nominee is subject to election, to re-nominate the Pilot Nominee, or nominate another qualified Delta pilot designated by the Delta MEC, to be elected to the Board of Directors, and to use its reasonable best efforts to cause such person to be elected to the Board; and (3) in the event of the death, disability, resignation, removal or failure to be elected of the Pilot Nominee, to elect promptly to the Board a replacement Pilot Nominee designated by the Delta MEC to fill the resulting vacancy. Pursuant to this provision, Mr. Rogers was elected to the Board of Directors by the Board on April 14, 2008, and by the stockholders on June 22, 2009.

 

Mr. Rogers’ compensation as a Delta pilot is determined under the collective bargaining agreement between Delta and ALPA. The Audit Committee approved Mr. Rogers’ compensation as a pilot. During 2009, Mr. Rogers received $224,055 in compensation as a Delta pilot. Mr. Rogers is not separately compensated for his service as a director.

 

Delta believes each nominee has a reputation for integrity, honesty and adherence to high ethical standards; demonstrated business acumen and the exercise of sound judgment; and a track record of service as a leader in business or governmental settings. Delta also believes it is important for directors and nominees for director to have experience in one or more of the following areas:

 

 

 

 

The following section provides information about each nominee for director, including the experience that led the Board of Directors to conclude the nominee should serve as a director of Delta.

 

 

Mr. Anderson has been Chief Executive Officer of Delta since September 1, 2007. He was Executive Vice President of UnitedHealth Group from November 2004 to August 2007. Mr. Anderson was Chief Executive Officer of Northwest and its principal subsidiary, Northwest Airlines, from February 2001 to November 2004. Northwest filed a voluntary petition for reorganization under Chapter 11 in September 2005.

 

 

 

Mr. Bastian has been President of Delta since September 2007. He was President of Delta and Chief Executive Officer of Northwest Airlines from October 2008 to December 2009. Mr. Bastian was President and Chief Financial Officer of Delta from September 2007 to October 2008; Executive Vice President and Chief Financial Officer of Delta from July 2005 to September 2007; Chief Financial Officer of Acuity Brands from June 2005 to July 2005; Senior Vice President — Finance and Controller of Delta from 2000 to April 2005 and Vice President and Controller of Delta from 1998 to 2000. Delta filed a voluntary petition for reorganization under Chapter 11 in September 2005.

 

 

Mr. Bostock has served as non-executive Vice Chairman of Delta’s Board of Directors since October 29, 2008. He has been Chairman of the Board of Yahoo! Inc. since January 2008. He has also served as a principal of Sealedge Investments, LLC, a diversified private investment company, since 2002. Mr. Bostock was Chairman of B/Com3 from 2000 to 2002, and Chairman and Chief Executive Officer of the McManus Group from 1996 to 2000. Prior to 1996, Mr. Bostock served in a variety of senior executive positions in the advertising agency business, including Chairman and Chief Executive Officer of D’Arcy Masius Benton & Bowles, Inc. from 1990 to 1996.

 

 

 

Mr. Brinzo was Chairman of the Board of Directors of Cliffs Natural Resources, Inc. (f/k/a Cleveland-Cliffs Inc), from January 2000 until his retirement in May 2007. He also served as President and Chief Executive Officer of Cliffs Natural Resources, Inc. from July 2003 until April 2005, and as Chairman and Chief Executive Officer from January 2000 until his retirement as Chief Executive Officer in September 2006, and as Chairman in May, 2007.

 

 

Mr. Carp has served as non-executive Chairman of Delta’s Board of Directors since April 30, 2007. He was Chief Executive Officer and Chairman of the Board of Eastman Kodak Company from 2000 to June 2005, and continued to serve as Chairman of the Board until his retirement in December 2005. Mr. Carp was President of Eastman Kodak Company from 1997 to 2003.

 

 

 

Mr. Engler has served as President and Chief Executive Officer of the National Association of Manufacturers since 2004. He was President of State and Local Government and Vice President of Government Solutions for North America for Electronic Data Systems Corporation from 2003 to 2004. Mr. Engler served as Michigan’s 46th governor for three terms from 1991 to 2003.

 

 

 

Mr. Foret has served as President of Aviation Consultants LLC since 2002. He was Executive Vice President and Chief Financial Officer of Northwest Airlines from 1998 to 2002, and also served as Chairman and Chief Executive Officer of Northwest Cargo from 1999 to 2002. Mr. Foret served as President and Chief Operating Officer of Atlas Air, Inc. from 1996 to 1997, and as Executive Vice President and Chief Financial Officer of Northwest Airlines from 1993 to 1996.

 

 

Mr. Goode was Chairman of the Board of Norfolk Southern Corporation from 1992 until his retirement in 2006; Chairman and Chief Executive Officer of that company from 2004 through 2005; and Chairman, President and Chief Executive Officer of that company from 1992 to 2005. He held other executive officer positions with Norfolk Southern Corporation from 1985 to 1992.

 

 

 

Ms. Reynolds has been President and Chief Executive Officer of PreferWest, LLC, a business advisory group, since October 1, 2009. She was Vice Chairman and Chief Restructuring Officer of American International Group, Inc. from October 2008 to September 2009, the period that followed the U.S. government’s acquisition of ownership of that company. She served as President and Chief Executive Officer of Safeco Corporation from 2006 to October 2008 when Safeco was acquired by another company. Ms. Reynolds was Chairman of AGL Resources from 2002 to 2005, and President and Chief Executive Officer from 2000 to 2005. She was President and Chief Operating Officer of Atlanta Gas Light Company, a wholly-owned subsidiary of AGL Resources, from 1998 to 2000.

 

 

 

Mr. Rogers has been a Delta pilot since 1990, and is currently a Boeing 737-800 First Officer. He served as a nonvoting associate member of Delta’s Board of Directors, designated by the Delta MEC, from 2005 to April 2008. Mr. Rogers was a pilot in the United States Air Force from 1983 to 1990. Mr. Rogers was designated by the Delta MEC as the Pilot Nominee and was elected to the Board in 2008 and 2009.

 

 

Mr. Slater has served as a partner in the law firm of Patton Boggs LLP since 2001, and is a leader of the firm’s Public Policy and Transportation Practice Group. He served as U.S. Secretary of Transportation from 1997 to 2001, and as Administrator of the U.S. Highway Administration from 1993 to 1996.

 

 

 

Mr. Steenland was President and Chief Executive Officer of Northwest and its principal subsidiary, Northwest Airlines, from 2004 until its merger with a subsidiary of Delta on October 29, 2008. Mr. Steenland also served in a number of executive positions after joining Northwest in 1991, including President from 2001 to 2004 and Executive Vice President and Chief Corporate Officer from 1999 to 2001. Northwest filed a voluntary petition for reorganization under Chapter 11 in September 2005.

 

 

 

Mr. Woodrow was Vice Chairman of Target Corporation from 1999 until his retirement in December 2000. He served as President of Target Corporation from 1994 until 1999 and held other management positions in that company from 1971 until 1994.

 

 

The following table sets forth the number of shares of Delta common stock beneficially owned as of April 28, 2010, by each director and director-nominee, each person named in the Summary Compensation Table in this proxy statement, and all directors and executive officers as a group. Unless otherwise indicated by footnote, the owner exercises sole voting and investment power over the shares.

 

 

 

 

 

The following table provides information about each entity known to Delta to be the beneficial owner of more than five percent of Delta’s outstanding common stock.

 

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

The Personnel & Compensation Committee of the Board of Directors (the “P&C Committee”) is responsible for developing, reviewing and approving Delta’s executive compensation program. The following discussion provides an overview and analysis of our executive compensation program, including our philosophy and objectives; the administration of the program; and the material elements of the program. It also discusses the actions taken by the P&C Committee in 2009 and the compensation of our named executive officers.

 

Executive Summary

 

Our executive compensation program closely aligns the interests of management and frontline employees, places a substantial portion of total compensation at risk and uses financial and operational performance measures that provide incentives to deliver value to our stockholders, customers and employees. During 2009, our executive compensation program focused on:

 

 

 

 

 

Our Employee Commitment

 

The hard work and dedication of the employees of Delta and Northwest have been instrumental in achieving the successful integration of these two airline industry leaders. During 2009, we continued our commitment to making Delta a great place to work and creating an environment that promotes employee engagement. Key actions in 2009 included:

 

 

These actions are in addition to the over $2 billion Delta invested in its employees since emerging from bankruptcy in 2007 through special stock awards in connection with emergence and the merger, pay raises, contributions to broad-based retirement plans, and payments under the shared rewards program.

 

Executive Compensation Philosophy and Objectives

 

Our executive compensation philosophy and objectives are directly related to our business strategy. Our 2009 business goals included integrating Delta and Northwest into one great airline while continuing to position ourselves as the global airline of choice, building a financially strong airline which delivers industry-leading financial results, implementing the premier trans-Atlantic joint venture with Air France KLM, and enhancing a world-class employee-friendly airline.

 

During 2009, the P&C Committee continued the compensation philosophy and objectives from the previous year, concluding this approach remained important to deliver value to stockholders. Our objectives were to:

 

 

The P&C Committee considered these objectives in structuring the executive compensation program after the merger, determining the program should reflect the expanded responsibilities of executive officers in managing the world’s largest airline and provide incentives to promote the successful integration of Delta and Northwest.

 

Administration of the Executive Compensation Program

 

Role of the P&C Committee. The P&C Committee is responsible for developing, reviewing and approving our executive compensation program. The P&C Committee approves the compensation of the CEO and our other executive officers. The P&C Committee operates under a written charter that requires the Committee to be composed of three or more directors. Each member of the P&C Committee must be independent under NYSE rules and Delta’s director independence standards; qualify as a “non-employee director” under SEC rules; and be an “outside director” under Section 162(m) of the Internal Revenue Code. The P&C Committee regularly meets in executive session without management.

 

Role of Compensation Consultant. Since August 2007, the P&C Committee has retained Frederic W. Cook & Co. (“Cook”) as its independent executive compensation consultant. Cook provides advice regarding Delta’s executive compensation strategy and programs, including the compensation of the CEO and other executive officers; general compensation program design; the impact of regulatory, tax, and legislative changes on our compensation program; the compensation practices of competitors; and executive compensation trends. The P&C Committee considered Cook’s advice when determining executive compensation plan design and award levels in 2009. Consistent with its role as independent consultant to the P&C Committee, Cook provides no other services to Delta. Cook may work directly with management on behalf of the P&C Committee, but such work is always under the control and supervision of the Committee. The P&C Committee regularly meets with the compensation consultant in executive session without management.

 

Role of Management. Under the supervision of the P&C Committee, our human resources department is responsible for the ongoing management of our executive compensation program. The Executive Vice President — HR & Labor Relations and his staff serve as the primary management liaison to the P&C Committee; they propose compensation programs and policies to the P&C Committee at the request of the Committee and the CEO. The CEO makes recommendations to the P&C Committee regarding the compensation of executive officers other than himself. The Chief Financial Officer (“CFO”) and his staff evaluate the financial implications of executive compensation proposals and financial performance measures in incentive compensation arrangements.

 

Peer Group

 

We strive to provide competitive compensation to our executives in accordance with our overall philosophy of treating frontline employees fairly and consistently. A key element of our compensation philosophy is to ensure our compensation programs for management and frontline employees align all Delta people to achieve our business goals. When making compensation decisions, the P&C Committee compares the actual and proposed compensation of our executive officers to compensation paid to similarly situated executives at companies in our airline industry peer group. We believe peer group data should be used as a point of reference, not as the determining factor in our executive officers’ compensation. The P&C Committee also considers general industry data, as well as business and industry conditions, our strategic business objectives, the Delta culture, and the officer’s performance and experience.

 

For 2009, we compared the compensation of our executive officers and similarly situated executives at the following companies, which also serve as comparators for compensation purposes for our frontline employees:

 

 

The P&C Committee determined that, because it is important to maintain alignment between our management and frontline employees, the peer group for executive compensation purposes would continue to consist of the companies listed above. Because of Delta’s substantial increase in size following the merger (approximately $28 billion in annual operating revenue in 2009 compared to other U.S. carriers, which range from $2.3 billion

to $20 billion in annual operating revenue), the peer group used to develop the compensation comparisons for management double weights the major network carriers. The network carriers who are double weighted are: American Airlines, Continental Airlines, United Airlines and US Airways. The P&C Committee also decided to obtain a broader market context by reviewing compensation data for businesses in the transportation industry and other companies which approximate Delta’s revenue and operational scale following the merger. In 2009, these companies included: Burlington Northern Sante Fe Corporation, CSX Corporation, Du Pont, Fedex Corporation, Norfolk Southern Corporation, The Coca-Cola Company, Union Pacific Corporation and United Parcel Service, Inc. When compared to these businesses, Delta’s total executive compensation opportunities generally rank at the 25th percentile. As stated above, the P&C Committee uses this data as a point of reference, not as the determining factor in setting compensation.

 

Elements of Compensation

 

Compensation elements for our executive officers include:

 

 

As shown in the following charts, at-risk performance-based compensation is the largest portion of the total compensation opportunity for the CEO and the other named executive officers. The P&C Committee believes this is the appropriate approach for aligning the interests of our named executive officers and stockholders.

 

 

 

When making compensation decisions, the P&C Committee reviews compensation “tally sheets” which are prepared by Cook. The tally sheets present the total compensation and benefits for each of the named

executive officers, including the compensation and benefits the officer would receive under hypothetical termination of employment scenarios.

 

Base Salary. Annual merit increases for officers have been suspended since 2003 because of industry conditions. None of our executive officers received a salary increase during 2009 except for Mr. Halter who, as previously reported, received a salary increase due to his promotion to Senior Vice President and Chief Financial Officer. Neither Mr. Anderson nor Mr. Bastian received a salary increase in 2009 or 2008.

 

Our objective is to pay a base salary that allows us to attract and retain talented executive officers. Base salary is set taking into consideration the individual’s responsibilities, performance and experience, as well as internal equity, business and industry conditions and the competitive market. The base salaries of our executive officers are substantially below the base salaries of similarly situated executives at other Fortune 100 companies.

 

Annual Incentives. The 2009 Management Incentive Plan (the “2009 MIP”) is an annual incentive plan that links pay and performance by providing approximately 2,300 management employees with a compensation opportunity based on Delta’s achieving key business plan goals in 2009. It also aligns the interests of Delta management and all employees because the 2009 MIP goals include the same ones that drive payouts under Delta’s broad-based employee profit sharing program (“Profit Sharing Program”) and shared rewards program (“Shared Rewards Program”). Under the Profit Sharing Program, Delta pays employees at least 15% of its annual pre-tax income, as defined. Under the Shared Rewards Program for 2009, Delta paid employees up to $100 per month based on the on-time arrival, baggage handling and flight completion factor performance of Delta and Northwest.

 

The annual incentive opportunity under the 2009 MIP for officers at or above the executive vice president level is based (1) 33% on Delta’s financial performance; (2) 33% on its operational performance; and (3) 34% on its merger integration performance. For the CFO and other senior vice presidents, the annual incentive opportunity is based (1) 30% on Delta’s financial performance; (2) 30% on its operational performance; (3) 30% on its merger integration performance; and (4) 10% on the officer’s leadership effectiveness performance.

 

The financial performance measure is Delta’s 2009 pre-tax income, which is the same measure used in the Profit Sharing Program for all Delta employees. Even if Delta meets or exceeds its financial performance target under the 2009 MIP, no payment may be made for this performance metric unless there is a payout for 2009 under the Profit Sharing Program.

 

The operational performance measures are the number of times in 2009 the monthly (1) Shared Rewards Program goals are met (which has a 75% weighting); and (2) on-time arrival and completion factor performance goals for the Delta Connection airlines are satisfied (which has a 25% weighting).

 

The merger integration performance measure is based on the achievement of quantifiable synergies as a result of the merger. Merger synergies include items such as (1) revenue increases from more effective aircraft utilization and a more comprehensive and diversified route system; and (2) cost savings from reduced overhead and improved operational efficiency.

 

The leadership effectiveness performance measure is based on a subjective evaluation of the officer’s demonstrated leadership during 2009. It includes an assessment of the officer’s efforts in important leadership behaviors such as supporting diversity, meeting budget commitments, providing talent management and leading the merger integration.

 

Payments, if any, earned by executive officers under the 2009 MIP are made (1) in cash if there is a payout under the Profit Sharing Program for 2009; and (2) in restricted stock if there is no such payout (“MIP Restricted Stock”). The MIP Restricted Stock will vest when (1) there is a payout under the Profit Sharing Program; or (2) the executive officer’s employment is terminated by Delta without cause, by the officer for good reason, or due to the officer’s retirement, death or disability (“Qualifying Termination of Employment”). The MIP Restricted Stock will be forfeited if, prior to vesting, the executive officer’s employment is terminated by Delta for cause or the officer voluntarily resigns.

 

The following chart shows the performance measures for executive officers under the 2009 MIP and the actual performance for each measure in 2009.

 

 

 

 

The target award opportunities under the 2009 MIP are expressed as a percentage of the participant’s base salary. The P&C Committee determined the target award opportunities so the participant’s target annual compensation opportunity (base salary plus target 2009 MIP award) is competitive with the airline peer group. The target award opportunity was 150% of base salary for Mr. Anderson and Mr. Bastian; 100% of base salary for executive vice presidents; 80% of base salary for the CFO.

 

Payments under the 2009 MIP could range from zero to 200% of the target award opportunity depending on the performance achieved. The P&C Committee set performance measures at threshold, target and maximum levels for each performance measure, with (1) no payment for performance below the threshold level; and (2) a potential payment of 50% of target for threshold performance, 100% of target for target performance and 200% of target for maximum performance.

 

With respect to the 2009 MIP’s operational performance measures, Delta achieved the maximum level for the Shared Rewards Program goals, and exceeded the threshold level for the Delta Connection goals. Delta exceeded the maximum level under the merger integration performance measure, but did not meet the threshold level under the financial performance measure. Because Delta was not profitable in 2009, there was no payout under the Profit Sharing Program. Accordingly, payments earned by executive officers under the 2009 MIP were made in MIP Restricted Stock based on Delta’s operational and merger integration performance and, if applicable, the officer’s leadership performance. As discussed above, the MIP Restricted Stock (1) will vest when there is a payout under the Profit Sharing Program or the executive officer incurs a Qualifying Termination of Employment; and (2) is subject to forfeiture in certain circumstances.

 

Long Term Incentives. The 2009 Long Term Incentive Program (“2009 LTIP”) links pay and performance by providing approximately 250 management employees with a compensation opportunity based on Delta’s financial performance over a two-year period; and aligns the interests of management and stockholders. Under the 2009 LTIP, executive officers received an award opportunity consisting of restricted stock and performance awards, as follows:

 

 

The following chart shows the range of potential payments of the performance award based on the cumulative revenue growth and average annual pre-tax income margin ranking of Delta relative to the applicable peer group. These performance measures were selected because superior rankings in these areas should, over time, produce positive stockholder returns.

 

 

For additional information about the vesting and possible forfeiture of 2009 LTIP awards, see “Post Employment Compensation — Other Benefits — The 2009 Long Term Incentive Program” in this proxy statement.

 

Benefits. The named executive officers receive the same health, welfare and other benefits provided to all Delta employees, except Delta requires officers to obtain a comprehensive annual physical examination. Delta pays the cost of this examination, which is limited to a prescribed set of preventive procedures based on the person’s age and gender. Mr. Anderson is eligible to receive certain medical benefits under a 2001 agreement with Northwest Airlines, but Mr. Anderson has voluntarily waived these benefits while employed by Delta. For additional information regarding the 2001 agreement, see “Pre-existing Medical Benefits Agreement Between Northwest Airlines and Mr. Anderson” in this proxy statement.

 

The named executive officers are also eligible for supplemental life insurance, financial planning services, flight benefits and home security services. These perquisites represent a small part of the overall compensation for executives and are offered to provide competitive compensation. See the Summary Compensation Table and the related footnotes for information regarding benefits received in 2009 by the named executive officers. We do not provide any supplemental executive retirement plans, country club memberships or company cars for any named executive officer.

 

In 2009, in light of executive compensation trends, the P&C Committee reviewed the benefits Delta provides to officers. Based on this review, the P&C Committee agreed with management recommendations to eliminate (1) supplemental life insurance for officers during retirement; (2) tax reimbursement for supplemental life insurance and home security services; and (3) tax reimbursement for post-employment flight benefits for a person who is first elected an officer on or after June 8, 2009.

 

Risk Assessment

 

The P&C Committee requested Cook conduct a risk assessment of Delta’s executive compensation program. Cook concluded Delta’s executive compensation program does not incent unnecessary risk taking, and the P&C Committee agrees with this assessment. In this regard, the P&C Committee notes the executive compensation program includes a compensation clawback policy for officers; stock ownership guidelines for executive officers; an emphasis on longer-term compensation; and multiple performance measures, both short and long term, which are designed to align executives with preserving and enhancing stockholder value. The clawback policy and the stock ownership guidelines are discussed below.

 

Executive Compensation Policies

 

In 2009, the P&C Committee enhanced the corporate governance features of the executive compensation program by adopting a compensation clawback policy for officers, stock ownership guidelines for executive

officers and an equity award grant policy. Additionally, Delta’s compliance program under the federal securities laws prohibits officers from engaging in certain securities hedging transactions. A brief discussion of these policies follows.

 

Clawback Policy.  The compensation clawback policy holds officers accountable should any of them ever engage in wrongful conduct. Under this policy, if the P&C Committee determines an officer has engaged in fraud or misconduct that requires a restatement of Delta’s financial statements, the P&C Committee may recover all incentive compensation awarded to or earned by the officer for fiscal periods materially affected by the restatement. For these purposes, incentive compensation includes annual and long term incentive awards and all forms of equity compensation.

 

Stock Ownership Guidelines.  Delta’s stock ownership guidelines strengthen the alignment between executive officers and stockholders. Under these guidelines, the current executive officers are required to own the following number of shares of Delta common stock by July 24, 2012:

 

 

For these purposes, stock ownership includes shares (including restricted stock) owned directly or held in trust by the executive officer or an immediate family member who resides in the same house. It does not include shares an executive officer has the right to acquire through the exercise of stock options. Due to the high volatility of airline stocks, we do not have holding periods for equity awards in addition to the stock ownership guidelines and vesting requirements for particular awards. The stock ownership guideline for the CEO exceeds three times Mr. Anderson’s base salary based on the $11.38 closing price of Delta common stock on December 31, 2009. All of our executive officers exceed their required stock ownership level.

 

Equity Award Grant Policy.  Delta’s equity award grant policy provides objective, standardized criteria for the timing, practices and procedures used in granting equity awards. Under this policy, the P&C Committee will consider approval of annual equity awards for management employees in the first quarter of the calendar year. Once approved, the grant date of these awards will be the later of (1) the date the P&C Committee meets to approve the awards; and (2) the third business day following the date on which Delta publicly announces its financial results for the most recently completed fiscal year. Equity awards for new hires, promotions or other off-cycle grants may be approved as appropriate and, once approved, these awards will be made on the later of (1) the date on which the grant is approved; and (2) the third business day following the date on which Delta publicly announces its quarterly or annual financial results if this date is in the same month as the grant.

 

Anti-Hedging Policy.  As part of its compliance program under the federal securities laws, Delta prohibits officers from engaging in exchange-traded put and call transactions involving Delta stock, or “short sales” of Delta securities. These short-term, highly leveraged transactions are prohibited because they may create the appearance of unlawful insider trading and, in certain circumstances, present a conflict of interest.

 

Compensation for Mr. Anderson

 

The P&C Committee determines the compensation of Mr. Anderson consistent with the approach used for our other executive officers. During 2009, the vast majority of Mr. Anderson’s compensation opportunity was at risk and dependent on company and stock price performance.

 

Mr. Anderson’s base salary is $600,000, which has not changed since he joined Delta as CEO on September 1, 2007.

 

Because there was no payout under the employee Profit Sharing Program for 2009, the payment earned by Mr. Anderson under the 2009 MIP was made in MIP Restricted Stock. Based on Delta’s operational and merger integration performance during 2009, Mr. Anderson received 96,165 shares of MIP Restricted Stock.

The vesting, forfeiture and other terms of this award are identical to the terms of the MIP Restricted Stock earned by other executive officers.

 

Mr. Anderson received a 2009 LTIP award consisting of 398,560 shares of restricted stock and a performance award opportunity of $2.75 million at target. The restricted stock vests over a two-year period, subject to Mr. Anderson’s continued employment. The performance award is paid in common stock but the payout, if any, is based on Delta’s financial performance relative to other airlines for the two-year period ending December 31, 2010. The terms of Mr. Anderson’s award are the same as the terms of the 2009 LTIP awards received by other executive officers.

 

Mr. Anderson’s compensation varies from other executive officers because he voluntarily waived certain benefits, including:

 

 

When Mr. Anderson joined Delta in 2007 as CEO, the P&C Committee approved Delta’s agreement to reimburse Mr. Anderson for the cost of his relocation from Minneapolis to Atlanta. As previously reported, Delta agreed under the 2007 arrangement to provide Mr. Anderson with certain economic protection on the sale of his Minneapolis residence. For additional information on this subject, see footnote 7(c) to the Summary Compensation Table in this proxy statement.

 

The P&C Committee believes Mr. Anderson’s compensation arrangements create a strong pay and performance linkage, fully align Mr. Anderson’s compensation and performance expectations with other employees and closely link his compensation to stockholder interests.

 

Post-Termination Compensation and Change in Control

 

Our executive officers do not have employment contracts. They are eligible to receive certain benefits in the event of specified terminations of employment, including as a consequence of a change in control. These benefits are generally conservative compared with general industry standards, and are intended to provide our executives with a measure of financial support if their employment is terminated in certain circumstances through no fault of their own. The benefits we offer in connection with a change in control are designed to support the following business objectives:

 

 

The severance benefits for our named executive officers are described in “Post-Employment Compensation — Potential Post-Employment Benefits upon Termination or Change in Control” in this proxy statement.

 

In 2009, the P&C Committee adopted a policy eliminating Delta’s reimbursement of (1) the excise tax paid under Section 4999 of the Internal Revenue Code by an employee who receives change in control benefits that exceed a statutory safe harbor; and (2) the taxes incurred by the employee due to such reimbursement (“Excise Tax Reimbursement”). Consistent with this policy, the P&C Committee amended the 2009 Officer and Director Severance Plan to eliminate the Excise Tax Reimbursement under that plan, and agreed Delta’s future incentive awards will not provide for an Excise Tax Reimbursement. Because Excise Tax Reimbursement is

provided for in the special long term incentive awards Delta granted in connection with the merger of a Delta subsidiary and Northwest on October 29, 2008 (“Merger Awards”), the Excise Tax Reimbursement will continue to apply to the named executive officers (other than Mr. Anderson) until the Merger Awards fully vest on November 1, 2011. As discussed above, in 2009, Mr. Anderson voluntarily waived the Excise Tax Reimbursement under his existing arrangements.

 

Tax and Accounting Impact and Policy

 

The financial and tax consequences to Delta of the executive compensation program are important considerations for the P&C Committee when determining the overall design and mix of compensation. The P&C Committee seeks to balance an effective compensation program for our executive officers with an appropriate impact on reported earnings and other financial measures.

 

In making compensation decisions, the P&C Committee considered that Internal Revenue Code Section 162(m) limits deductions for certain compensation to any covered executive to $1 million per year. Under Section 162(m), compensation may be excluded from the $1 million limit if required conditions are met. The 2009 MIP for officers at or above the Executive Vice president level, and the performance award component of the 2009 LTIP, meet the conditions for exclusion, but the restricted stock component of the 2009 LTIP does not. In approving these awards, the P&C Committee considered that Delta has substantial net operating loss carryforwards (“NOLs”) to offset or reduce our future income tax obligations and, therefore, the deduction limitations imposed by Section 162(m) would not impact our financial results at this time. As our NOLs are utilized, the P&C Committee will re-evaluate whether future awards should be structured to allow for deductibility under Section 162(m).

 

Equity awards granted under our executive compensation program are expensed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation. For additional information about the accounting for our equity compensation, see Note 12 of the Notes to Consolidated Financial Statements in the 2009 Form 10-K.

 

The Personnel & Compensation Committee has reviewed and discussed with Delta management the Compensation Discussion and Analysis. Based on the review and discussion, the P&C Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

THE PERSONNEL & COMPENSATION COMMITTEE

 

David R. Goode, Chairman
John S. Brinzo
Kenneth B. Woodrow

 

The following table contains information about the compensation of (1) Mr. Anderson, Delta’s principal executive officer; (2) Mr. Halter, Delta’s principal financial officer; and (3) Mr. Bastian, Mr. Gorman and Mr. Hauenstein, who were Delta’s three other most highly compensated executive officers on December 31, 2009. These persons are referred to in this proxy statement as the “named executive officers.”

 

 

 

 

 

 

 

 

 

 

 

 

The following table provides information about annual and long term award opportunities granted to our named executive officers during 2009 under the 2009 Management Incentive Plan (“2009 MIP”) and the 2009 Long Term Incentive Program (“2009 LTIP”). These award opportunities are described in the “Compensation Discussion and Analysis” section of the proxy statement under “Elements of Compensation — Annual Incentives” and “Elements of Compensation — Long Term Incentives”.

 

The amounts in the “Grant Date Fair Value of Stock and Stock Option Awards” column below do not represent amounts the named executive officers received or are entitled to receive. Rather, these amounts represent the aggregate fair value of awards computed in accordance with FASB ASC Topic 718 on the applicable grant date or, if earlier, the service inception date. The amounts do not reflect the risk that the awards may be forfeited in the event of certain terminations of employment or, in the case of performance awards, that there is no payout if the required performance measures are not met.

 

 

 

The following table provides information regarding the outstanding equity awards on December 31, 2009 for each of the named executive officers. As required by SEC rules, the dollar values in the “Stock Awards” columns in this table (1) are based on the $11.38 closing price of Delta common stock on the NYSE on December 31, 2009; and (2) assume performance at the target level for the performance shares.