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Delta airlines

Delta airlines. Module 11: Adjusting enterprise operations Laura conti. Delta airlines. Delta has 18.6% of the market share in the domestic airline industry Headquarters: Atlanta, Georgia Annual passengers: greater than 160 million. Inventory method. Only inventory is fuel inventory

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Delta airlines

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  1. Delta airlines Module 11: Adjusting enterprise operations Laura conti

  2. Delta airlines • Delta has 18.6% of the market share in the domestic airline industry • Headquarters: Atlanta, Georgia • Annual passengers: greater than 160 million

  3. Inventory method • Only inventory is fuel inventory • Fuel inventory is carried at various airport locations to fuel planes • Additionally, Delta’s Trainer refinery has fuel inventory • Inventory recorded at FIFO

  4. leases • With operating leases not on the balance sheet, NEA appears lower (missing assets) • EPAT is lower with operating leases because rent expense is included in EPAT (depreciation included for capital leases) • Capital lease: lease asset and lease liability on balance sheet • Operating lease: neither lease asset nor lease liability on balance sheet

  5. Capital leases

  6. Operating leases

  7. IRR Present value of future minimum capital lease payments: $497 Total minimum lease payments: $694 IRR function on excel

  8. Present value of operating lease payments

  9. Adjustments to the balance sheet from capitalization of operating leases Present value of total operating leases: $6,255

  10. Adjustments to Income statement from capitalization of operating leases EPAT: 1,429 x (6,555/11.82) (1-.38) = $558 FEAT: (6,555 x .1274) (1-.38) = $494 NI: 558-494 = $64

  11. Ratio effects of adjustments from Capitalization of Operating leases Sales: $37,773 EPAT: $15,132 NEA: $39,065 FEAT: $1,081 Equity: $11,643 NI: $14,051

  12. Accounting for the adjustment: Operating Leases

  13. Share-Based Compensation

  14. Value of Options Exercisable at the beginning of the year

  15. Value of options exercisable at beginning of year using end of year share price

  16. Value of ESOs exercised during the current year using an estimate of the average share price Estimated value of exercised options

  17. Value of esos cancelled during the current year • None – no information given to believe otherwise

  18. Value of options exercisable at end of year using end of year share price

  19. Estimate of additional share-based compensation from information Effect of change in exercisable options Liability has decreased

  20. Adjustments • Increase beginning NFL : $0 (options not in the money) • Increase ending NFL : $109.34 • Decrease CSE: $109.34 • Decrease EPAT: $40.89 • Increase FEAT: $203.06 – 52.83 – 0 = $150.23

  21. Accounting for the Adjustment: Share-based compensation

  22. New Figures • EPAT: 15,132 – 40.89 = 15,091.11 • FEAT: 1,081 + 150.23 = 1,231.23 • NFL : 21,166 + 109.34 = 21,275.34 • CSE : 11,643 – 109.34 = 11,533.66

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