June 2021 Quarter Financial Overview
Our pre-tax income for the June 2021 quarter was $776 million, including the $1.5 billion benefit related to recognition of payroll support program grants during the quarter. This represents a $1.1 billion decrease compared to the June 2019 quarter primarily resulting from a 43% reduction in operating revenue. Pre-tax loss, adjusted (a non-GAAP financial measure) was $881 million, a decrease of $2.9 billion compared to the June 2019 quarter.
Revenue. Compared to the June 2019 quarter, our operating revenue decreased $5.4 billion, or 43%, due to reduced demand resulting from the COVID-19 pandemic.
Operating Expense. Total operating expense in the June 2021 quarter decreased $4.1 billion, or 39%, compared to the June 2019 quarter, primarily resulting from lower volume-related expenses, mainly fuel and passenger commissions and other selling expenses, lower salaries and related costs and profit sharing, recognition of payroll support program grants and significant cost reduction measures taken across all aspects of our operation in response to the COVID-19 pandemic. Total operating expense, adjusted (a non-GAAP financial measure) for the June 2021 quarter decreased $3.3 billion, or 32%, compared to the June 2019 quarter.
Non-Operating Results. Total non-operating expense was $40 million in the June 2021 quarter, $181 million lower than the June 2019 quarter, primarily due to mark-to-market gains on certain of our equity investments partially offset by higher interest expense as a result of our increased debt due to financing arrangements entered into during 2020.
Cash Flow. Our cash, cash equivalents, short-term investments and aggregate principal amount committed and available to be drawn under our revolving credit facilities ("liquidity") as of June 30, 2021 was $17.8 billion. During the June 2021 quarter, operating activities provided $1.9 billion, including $2.5 billion from the payroll support program grants, which was partially offset by $1.5 billion in contributions we made to our defined benefit pension plans. Also during the quarter, investing activities provided $26 million, primarily generated by the net redemption of short-term investments and offset by capital expenditures related to our airport redevelopment projects and the purchase of aircraft and fleet modifications. These results generated $1.5 billion of free cash flow (a non-GAAP financial measure) in the June 2021 quarter. Also, during the June 2021 quarter we repaid $1.4 billion on our debt and finance leases, of which approximately $450 million was early repayment of various EETCs, and we issued approximately $1.0 billion of debt, primarily in connection with the payroll support program agreements.
The non-GAAP financial measures referenced above for pre-tax loss, adjusted, operating expense, adjusted, and free cash flow are defined and reconciled in "Supplemental Information" below.
Environmental Sustainability. In February 2020, we announced plans to invest $1.0 billion over the next 10 years in our effort to achieve carbon neutrality from March 1, 2020 forward, a commitment we have reiterated despite the challenges faced during the COVID-19 pandemic. Our carbon neutrality plan seeks to balance immediate actions (such as carbon offset credits from projects that maintain, protect and expand forests) and long-term solutions (such as sustainable aviation fuel and carbon sequestration technologies). We have spent approximately $40 million in 2021 related to these plans. This amount includes approximately $30 million to address 13 million metric tons of carbon emissions generated by our airline segment from March 1 to December 31, 2020 through carbon offset credits, as well as an additional $10 million in carbon offset credits related to our airline segment's 2021 carbon emissions.
Delta Air Lines, Inc. June 2021 Form 10-Q 20
Item 2. MD&A - Results of Operations
Results of Operations - Three Months Ended June 30, 2021, 2020 and 2019
Operating Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
2021 vs. 2020
% Increase (Decrease)(2)
|
2021 vs. 2019
% Increase (Decrease)(2)
|
|
(in millions)(1)
|
2021
|
2020
|
2019
|
|
Ticket - Main cabin
|
$
|
2,797
|
|
$
|
378
|
|
$
|
5,938
|
|
|
NM
|
(53)
|
%
|
|
Ticket - Business cabin and premium products
|
1,756
|
|
190
|
|
4,031
|
|
|
NM
|
(56)
|
%
|
|
Loyalty travel awards
|
428
|
|
45
|
|
751
|
|
|
NM
|
(43)
|
%
|
|
Travel-related services
|
358
|
|
65
|
|
648
|
|
|
NM
|
(45)
|
%
|
|
Total passenger revenue
|
$
|
5,339
|
|
$
|
678
|
|
$
|
11,368
|
|
|
NM
|
(53)
|
%
|
|
Cargo
|
251
|
|
108
|
|
186
|
|
|
NM
|
35
|
%
|
|
Other
|
1,536
|
|
682
|
|
982
|
|
|
NM
|
56
|
%
|
|
Total operating revenue
|
$
|
7,126
|
|
$
|
1,468
|
|
$
|
12,536
|
|
|
NM
|
(43)
|
%
|
|
|
|
|
|
|
|
|
|
TRASM (cents)
|
14.68
|
¢
|
13.85
|
¢
|
17.47
|
¢
|
|
6
|
%
|
(16)
|
%
|
|
Third-party refinery sales(3)
|
(1.60)
|
|
(2.76)
|
|
(0.06)
|
|
|
(42)
|
%
|
NM
|
|
Delta Private Jets adjustment(3)
|
—
|
|
—
|
|
(0.07)
|
|
|
—
|
%
|
(100)
|
%
|
|
TRASM, adjusted
|
13.08
|
¢
|
11.10
|
¢
|
17.35
|
¢
|
|
18
|
%
|
(25)
|
%
|
(1)This reconciliation may not calculate exactly due to rounding.
(2)Variances greater than 100% on an absolute basis are labeled as not meaningful ("NM") throughout management's discussion and analysis.
(3)For additional information on adjustments to TRASM, see "Supplemental Information" below.
Operating Revenue
Compared to the June 2019 quarter, our operating revenue decreased $5.4 billion, or 43%, due to reduced demand resulting from the COVID-19 pandemic. The decline in operating revenue, on a 32% decrease in capacity, resulted in a 16% reduction in total revenue per available seat mile ("TRASM") and a 25% decrease in TRASM, adjusted compared to the June 2019 quarter.
Our operating revenue increased $5.7 billion compared to the June 2020 quarter due to the recovery in demand since the depth of the COVID-19 pandemic impact that occurred during the June 2020 quarter. The increase in operating revenue, which outpaced the increase in capacity, resulted in a 6% increase in TRASM and an 18% increase in TRASM, adjusted.
See "Refinery Segment" below for additional details on the refinery's operations, including third-party refinery sales recorded in other revenue, during each period.
The length and severity of the reduction in travel demand due to the COVID-19 pandemic remains uncertain; however, with continued distribution of effective vaccines and easing of travel advisories and restrictions, we believe customer confidence will continue to grow, leading to increased demand for the remainder of 2021. Passenger revenue steadily increased over each month of the June 2021 quarter at a higher rate than our historical seasonality-based growth, and the monthly increases in passenger revenue are indicative of this increasing demand. We continue to expect domestic demand recovery to precede international demand recovery. We believe international demand recovery will continue to be uneven in the second half of 2021, and we continue to monitor risks to the pace of recovery from new COVID-19 variants.
We have historically generated cargo revenue in domestic and international markets through the use of cargo space on regularly scheduled passenger aircraft. Reduced industry capacity as a result of the COVID-19 pandemic drove a significant increase in our cargo yield and our cargo revenue, in the June 2021 quarter compared to the June 2020 and June 2019 quarters.
Delta Air Lines, Inc. June 2021 Form 10-Q 21
Item 2. MD&A - Results of Operations
Passenger Revenue by Geographic Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
vs. Three Months Ended June 30, 2020(1)
|
|
(in millions)
|
Three Months Ended June 30, 2021
|
Passenger Revenue
|
RPMs (Traffic)
|
ASMs (Capacity)
|
Passenger Mile Yield
|
PRASM
|
Load Factor
|
|
Domestic
|
$
|
4,478
|
|
NM
|
NM
|
NM
|
(11)
|
%
|
96
|
%
|
41
|
|
pts
|
|
Atlantic
|
288
|
|
NM
|
NM
|
NM
|
(35)
|
%
|
(23)
|
%
|
7
|
|
pts
|
|
Latin America
|
485
|
|
NM
|
NM
|
NM
|
(41)
|
%
|
(1)
|
%
|
28
|
|
pts
|
|
Pacific
|
88
|
|
NM
|
87
|
%
|
NM
|
48
|
%
|
(17)
|
%
|
(15)
|
|
pts
|
|
Total
|
$
|
5,339
|
|
NM
|
NM
|
NM
|
(14)
|
%
|
72
|
%
|
35
|
|
pts
|
(1)Variances marked as not meaningful ("NM") represent increases above 100%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
vs. Three Months Ended June 30, 2019
|
|
(in millions)
|
Three Months Ended June 30, 2021
|
Passenger Revenue
|
RPMs (Traffic)
|
ASMs (Capacity)
|
Passenger Mile Yield
|
PRASM
|
Load Factor
|
|
Domestic
|
$
|
4,478
|
|
(45)
|
%
|
(32)
|
%
|
(19)
|
%
|
(19)
|
%
|
(32)
|
%
|
(14)
|
|
pts
|
|
Atlantic
|
288
|
|
(85)
|
%
|
(84)
|
%
|
(68)
|
%
|
(4)
|
%
|
(52)
|
%
|
(43)
|
|
pts
|
|
Latin America
|
485
|
|
(36)
|
%
|
(26)
|
%
|
(6)
|
%
|
(12)
|
%
|
(31)
|
%
|
(19)
|
|
pts
|
|
Pacific
|
88
|
|
(87)
|
%
|
(93)
|
%
|
(67)
|
%
|
90
|
%
|
(59)
|
%
|
(67)
|
|
pts
|
|
Total
|
$
|
5,339
|
|
(53)
|
%
|
(47)
|
%
|
(32)
|
%
|
(11)
|
%
|
(31)
|
%
|
(19)
|
|
pts
|
In the March 2021 quarter, we announced the extension of the validity of all passenger tickets and travel credits purchased or expiring in 2021 to December 2022. In addition, we waived change fees for all tickets purchased through April 30, 2021, as well as eliminated change fees for domestic and international tickets originating from North America with the exception of Basic Economy tickets. We do not expect these policy changes to materially affect our revenue in future periods.
Domestic
Domestic passenger unit revenue for the June 2021 quarter decreased 32% with capacity down 19% compared to the June 2019 quarter as a result of reduced demand due to the COVID-19 pandemic and our policy to block middle seats on flights through April 30, 2021. The revenue increase compared to the June 2020 quarter is attributable to the low levels of capacity and demand during the June 2020 quarter due to the COVID-19 pandemic and the ongoing recovery in the June 2021 quarter.
We are planning for the improvement to the demand environment, primarily from leisure customers, to continue throughout 2021. Through the June 2021 quarter we have seen leisure customer bookings continue to improve, with June 2021 domestic leisure bookings approaching June 2019 levels. We remain optimistic about the ultimate recovery of business travel and expect this demand to accelerate in the September 2021 quarter as more corporate offices reopen; we are, however, unable to predict the timing or extent of that recovery. As a result, we are planning for our domestic capacity to be approximately 15% lower in the September 2021 quarter than the September 2019 quarter.
International
International passenger revenue for the June 2021 quarter decreased 74% with capacity down 55% compared to the June 2019 quarter. Compared to the June 2020 quarter passenger revenue has increased as travel to certain destinations has resumed or increased; however, this is still well below June 2019 quarter levels. The decreases in revenue and capacity compared to the June 2019 quarter presented in the table above were a result of continued reduced demand, including from government travel directives and quarantines significantly limiting or suspending air travel due to the COVID-19 pandemic. Additionally, while some countries have removed or otherwise eased travel restrictions, many countries maintain international testing requirements and travel restrictions, which have restrained demand in the short-term but are expected to enable the long-term recovery of international air travel.
We expect this significantly lower international demand environment to continue at least into early 2022, with improvement anticipated after the recovery in domestic travel. As a result, we are planning for our international capacity to be approximately 50% lower in the September 2021 quarter than the September 2019 quarter. In each of the international regions, we continue to monitor government travel directives and customer demand and will continue to adjust flight schedules accordingly.
Delta Air Lines, Inc. June 2021 Form 10-Q 22
Item 2. MD&A - Results of Operations
The Atlantic and Pacific regions continue to be the most impacted by the restrictions described above. However, we have recently begun, or have announced plans to increase, service to certain countries in the Atlantic region based on their lifting or loosening of travel restrictions. The countries where we have begun or recently increased service include Croatia, France, Germany, Greece, Iceland, Italy, the Netherlands, Portugal and Spain. Travel in the Pacific region is largely limited to essential travel, and we expect only small demand improvements until vaccine distribution improves and government restrictions ease.
The Latin America region has shown the most recovery of the international regions, with improving demand for leisure destinations in the Caribbean, Mexico and Central America. Capacity in the Latin America region in the June 2021 quarter has increased to near June 2019 quarter levels and as demand continues to return we expect revenue to return to those levels as well. We expect this trend to continue through the remainder of 2021 with the recovery in the Atlantic and Pacific regions lagging behind Latin America.
Other Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
2021 vs. 2020
% Increase (Decrease)
|
2021 vs. 2019
% Increase (Decrease)
|
|
(in millions)
|
2021
|
2020
|
2019
|
|
Ancillary businesses and refinery
|
$
|
962
|
|
$
|
390
|
|
$
|
330
|
|
|
NM
|
NM
|
|
Loyalty program
|
439
|
|
269
|
|
484
|
|
|
63
|
%
|
(9)
|
%
|
|
Miscellaneous
|
135
|
|
23
|
|
168
|
|
|
NM
|
(20)
|
%
|
|
Total other revenue
|
$
|
1,536
|
|
$
|
682
|
|
$
|
982
|
|
|
NM
|
56
|
%
|
|
|
|
|
|
|
|
|
Ancillary Businesses and Refinery. Ancillary businesses and refinery includes refinery sales to third parties, aircraft maintenance services we provide to third parties and our vacation wholesale operations. Refinery sales to third parties, which are at or near cost, increased $485 million and $736 million compared to the June 2020 and June 2019 quarters, respectively. The increase in third-party refinery sales compared to the June 2019 quarter resulted from the refinery's shift to producing more non-jet fuel products due to the decline in demand for jet fuel compared to pre-pandemic levels. The increase compared to the June 2020 quarter was driven by higher pricing during the June 2021 quarter, with lower production and demand for both jet and non-jet fuel products in the June 2020 quarter during the depth of the COVID-19 pandemic impact. Compared to the June 2019 quarter, revenue from aircraft maintenance services we provide to third parties decreased due to the reduction in flights operated worldwide, however compared to the June 2020 quarter these revenues increased due to higher levels of flying. The June 2019 quarter results also included $49 million of revenue from Delta Private Jets, which was combined with Wheels Up in January 2020 and is no longer reflected in ancillary businesses and refinery.
Loyalty Program. Loyalty program revenues relate to brand usage by third parties and other performance obligations embedded in miles sold, including redemption of miles for non-travel awards. These revenues are mainly driven by customer spend on American Express cards and new cardholder acquisitions. Revenues from our relationship with American Express increased in the June 2021 quarter compared to the June 2020 period and declined at a less severe rate than air travel compared to the June 2019 period. During the June 2021 quarter, co-brand card spend surpassed June 2019 levels while co-brand card acquisitions were nearly fully restored.
Miscellaneous. Miscellaneous revenue is primarily composed of lounge access and codeshare revenues. The volume of these transactions has fallen compared to the June 2019 quarter due to the impact of, and our response to, the COVID-19 pandemic, including reduced capacity and the temporary closure of certain lounges. However, compared to the June 2020 quarter these transactions have increased due to the general recovery in our business that continued to materialize in the June 2021 quarter. We will have reopened our full network of lounges by the end of July 2021.
Delta Air Lines, Inc. June 2021 Form 10-Q 23
Item 2. MD&A - Results of Operations
Operating Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
2021 vs. 2020
% Increase (Decrease)
|
2021 vs. 2019
% Increase (Decrease)
|
|
(in millions)
|
2021
|
2020
|
2019
|
|
Salaries and related costs
|
$
|
2,328
|
|
$
|
2,127
|
|
$
|
2,847
|
|
|
9
|
%
|
(18)
|
%
|
|
Aircraft fuel and related taxes
|
1,487
|
|
372
|
|
2,291
|
|
|
NM
|
(35)
|
%
|
|
Ancillary businesses and refinery
|
939
|
|
401
|
|
316
|
|
|
NM
|
NM
|
|
Contracted services
|
570
|
|
369
|
|
731
|
|
|
54
|
%
|
(22)
|
%
|
|
Depreciation and amortization
|
501
|
|
591
|
|
713
|
|
|
(15)
|
%
|
(30)
|
%
|
|
Landing fees and other rents
|
460
|
|
422
|
|
548
|
|
|
9
|
%
|
(16)
|
%
|
|
Regional carrier expense
|
403
|
|
338
|
|
542
|
|
|
19
|
%
|
(26)
|
%
|
|
Aircraft maintenance materials and outside repairs
|
287
|
|
43
|
|
434
|
|
|
NM
|
(34)
|
%
|
|
Passenger commissions and other selling expenses
|
222
|
|
50
|
|
597
|
|
|
NM
|
(63)
|
%
|
|
Passenger service
|
175
|
|
91
|
|
340
|
|
|
92
|
%
|
(49)
|
%
|
|
Aircraft rent
|
104
|
|
96
|
|
107
|
|
|
8
|
%
|
(3)
|
%
|
|
Restructuring charges
|
8
|
|
2,454
|
|
—
|
|
|
(100)
|
%
|
NM
|
|
Government grant recognition
|
(1,504)
|
|
(1,280)
|
|
—
|
|
|
18
|
%
|
NM
|
|
Profit sharing
|
—
|
|
—
|
|
518
|
|
|
—
|
%
|
(100)
|
%
|
|
Other
|
330
|
|
209
|
|
424
|
|
|
58
|
%
|
(22)
|
%
|
|
Total operating expense
|
$
|
6,310
|
|
$
|
6,283
|
|
$
|
10,408
|
|
|
—
|
%
|
(39)
|
%
|
In response to the reduced demand and related reduction in revenue following the onset of the COVID-19 pandemic in early 2020, we quickly reduced capacity to more closely align with demand, implemented cost saving initiatives related to our fleet and operations, offered employees voluntary separation programs and delayed or eliminated nearly all discretionary spending.
As a result, most operating expense line items remain significantly lower in the June 2021 quarter than in the June 2019 quarter. Operating expense decreased primarily due to the voluntary separation programs described below, the many cost reduction measures and programs implemented in response to the COVID-19 pandemic, recognition of payroll support program grants and the reduction in volume and selling-related costs. During the June 2021 quarter, as distribution of effective vaccines continued, travel restrictions and advisories eased and customer confidence continued to grow, we saw revenue and capacity return and related operating expense increase. However, we believe that a portion of the cost savings achieved during 2020 was structural in nature, which we expect to contribute to a lower non-fuel unit cost in the future as capacity is restored.
The discussion below is focused largely on the changes in certain operating expense line items compared to the June 2020 and June 2019 quarters that were not primarily driven by the change in capacity or revenue. These include many of what are expected to be structural cost reduction measures and programs we implemented in response to the COVID-19 pandemic.
Salaries and Related Costs. Actions taken as a result of decreased demand for air travel due to the COVID-19 pandemic had a significant impact on salaries and related costs, leading to a decrease compared to the June 2019 quarter. In the second half of 2020, approximately 18,000 employees elected to participate in voluntary separation programs, reducing our workforce by approximately 20%.
Beginning in March 2020 and continuing through December 2020, salaries were reduced by 100% for our CEO and 50% for our other officers. In addition, work hours were reduced by 25% for all other management and most front-line employee work groups. On January 1, 2021, employees were restored to full work hours and we have recalled approximately 1,700 pilots on inactive status to active service. Additionally, approximately 8,000 employees took voluntary unpaid leaves of absence during the June 2021 quarter, compared to approximately 45,000 in the June 2020 quarter. We also have begun to add additional employees in certain areas, including flight operations and reservations and customer care, in order to support our operations as demand and capacity return. These actions resulted in an increase in salaries and related costs compared to the June 2020 quarter.
Delta Air Lines, Inc. June 2021 Form 10-Q 24
Item 2. MD&A - Results of Operations
Aircraft Fuel and Related Taxes. Fuel expense decreased $805 million compared to the June 2019 quarter primarily due to a 37% decrease in consumption and a 11% decrease in the market price of jet fuel. Consumption decreased on a combination of reduced capacity and improved fuel efficiency on an available seat mile basis.
Fuel expense increased $1.1 billion compared to the June 2020 quarter primarily due to more than a 300% increase in consumption on a comparable increase in capacity, and a 27% increase in the market price of jet fuel. These impacts were partially mitigated by improved fuel efficiency on an available seat mile basis.
Additionally, during the June 2021 quarter, we purchased and retired approximately $20 million of carbon offset credits, which relate to a portion of the carbon emissions generated by our airline segment since March 1, 2020. In the table below, these costs are shown in environmental sustainability impact.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel expense and average price per gallon
|
|
|
Average Price Per Gallon
|
|
|
Three Months Ended June 30,
|
2021 vs. 2019 Increase (Decrease)
|
Three Months Ended June 30,
|
2021 vs. 2019 Increase (Decrease)
|
|
(in millions, except per gallon data)
|
2021
|
2020
|
2019
|
2021
|
2020
|
2019
|
|
Fuel purchase cost(1)
|
$
|
1,286
|
|
$
|
244
|
|
$
|
2,318
|
|
$
|
(1,032)
|
|
$
|
1.87
|
|
$
|
1.47
|
|
$
|
2.11
|
|
$
|
(0.24)
|
|
|
Environmental sustainability impact
|
20
|
|
—
|
|
—
|
|
20
|
|
0.03
|
|
—
|
|
—
|
|
0.03
|
|
|
Fuel hedge impact
|
24
|
|
14
|
|
10
|
|
14
|
|
0.03
|
|
0.09
|
|
—
|
|
0.03
|
|
|
Refinery segment impact
|
157
|
|
114
|
|
(37)
|
|
194
|
|
0.23
|
|
0.69
|
|
(0.03)
|
|
0.26
|
|
|
Total fuel expense
|
$
|
1,487
|
|
$
|
372
|
|
$
|
2,291
|
|
$
|
(804)
|
|
$
|
2.16
|
|
$
|
2.25
|
|
$
|
2.08
|
|
$
|
0.08
|
|
(1)Market price for jet fuel at airport locations, including related taxes and transportation costs.
Ancillary Businesses and Refinery. Ancillary businesses and refinery includes expenses associated with refinery sales to third parties, aircraft maintenance services we provide to third parties and our vacation wholesale operations. Increased expenses were primarily related to refinery sales to third parties, which are at or near cost. The refinery cost of sales increased $485 million and $736 million compared to the June 2020 and June 2019 quarters, respectively. The increase in third-party refinery sales compared to the June 2019 quarter resulted from the refinery's shift to producing more non-jet fuel products due to the decline in demand for jet fuel compared to pre-pandemic levels. The increase compared to the June 2020 quarter was driven by higher pricing during the June 2021 quarter, with lower production and demand for both jet and non-jet fuel products in the June 2020 quarter during the depth of the COVID-19 pandemic impact. Compared to the June 2019 quarter expenses related to aircraft maintenance services we provide to third parties decreased due to the reduction in flights operated worldwide, however compared to the June 2020 quarter these expenses increased due to higher levels of flying. In addition, $44 million of costs related to services performed by Delta Private Jets in the June 2019 quarter were recorded in ancillary businesses and refinery prior to the combination of that business with Wheels Up in January 2020.
Depreciation and Amortization. Depreciation and amortization decreased primarily due to the aircraft that were retired or impaired during 2020.
Regional Carrier Expense. Regional carrier expense decreased compared to the June 2019 quarter due to lower utilization of these carriers as a result of the overall reduced capacity and increased compared to the June 2020 quarter due to an increase in utilization as a result of the increased demand discussed above.
We previously allocated certain costs (such as landing fees and other rents, salaries and related costs and contracted services) to regional carrier expense in our income statement based on relevant statistics (such as passenger counts). Beginning in the March 2021 quarter we ceased performing this allocation and have reclassified the costs presented in prior periods to align with this presentation. This reclassification better reflects the nature of, and how management views, these regional carrier related expenses. This allocation was approximately $900 million in 2020, including approximately $160 million in the June 2020 quarter, and $1.4 billion in 2019, including approximately $360 million in the June 2019 quarter. The remaining amounts in regional carrier expense represent payments to our regional carriers under capacity purchase agreements and the expenses of our wholly owned regional subsidiary, Endeavor Air, Inc.
Aircraft Rent. Most aircraft operating lease expenses are recorded in aircraft rent and are contractually fixed. Therefore, the change in aircraft rent was more muted than our other operating expense line items, when compared to the June 2019 and June 2020 quarters.
Delta Air Lines, Inc. June 2021 Form 10-Q 25
Item 2. MD&A - Results of Operations
Restructuring Charges. During 2020, we recorded restructuring charges, including certain accruals, following strategic business decisions in response to the COVID-19 pandemic. In the June 2021 quarter, we recognized $8 million of adjustments to certain of those restructuring charges, representing changes in our estimates.
Government Grant Recognition. During the six months ended June 30, 2021, we received a total of $6.4 billion under payroll support program extension agreements with the U.S. Department of the Treasury, which must be used exclusively for the payment of employee wages, salaries and benefits. The support payments included grants totaling $4.5 billion that are being recognized as contra-expense in 2021 over the period that the funds are expected to benefit. Following the recognition of $1.2 billion during the three months ended March 31, 2021, we recognized an additional $1.5 billion of these grants during the three months ended June 30, 2021. We expect to fully recognize the remaining grant proceeds in the second half of 2021. See Note 5 of the Notes to the Condensed Consolidated Financial Statements for additional information on the payroll support program extensions.
Delta Air Lines, Inc. June 2021 Form 10-Q 26
Item 2. MD&A - Results of Operations
Results of Operations - Six Months Ended June 30, 2021, 2020 and 2019
Operating Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2021 vs. 2020
% Increase (Decrease)
|
2021 vs. 2019
% Increase (Decrease)
|
|
(in millions)(1)
|
2021
|
2020
|
2019
|
|
Ticket - Main cabin
|
$
|
4,197
|
|
$
|
4,173
|
|
$
|
10,659
|
|
|
1
|
%
|
(61)
|
%
|
|
Ticket - Business cabin and premium products
|
2,633
|
|
2,905
|
|
7,298
|
|
|
(9)
|
%
|
(64)
|
%
|
|
Loyalty travel awards
|
669
|
|
588
|
|
1,442
|
|
|
14
|
%
|
(54)
|
%
|
|
Travel-related services
|
588
|
|
581
|
|
1,223
|
|
|
1
|
%
|
(52)
|
%
|
|
Total passenger revenue
|
$
|
8,087
|
|
$
|
8,247
|
|
$
|
20,622
|
|
|
(2)
|
%
|
(61)
|
%
|
|
Cargo
|
466
|
|
261
|
|
378
|
|
|
79
|
%
|
23
|
%
|
|
Other
|
2,723
|
|
1,552
|
|
2,008
|
|
|
75
|
%
|
36
|
%
|
|
Total operating revenue
|
$
|
11,276
|
|
$
|
10,060
|
|
$
|
23,008
|
|
|
12
|
%
|
(51)
|
%
|
|
|
|
|
|
|
|
|
|
TRASM (cents)
|
12.72
|
¢
|
14.48
|
¢
|
17.15
|
¢
|
|
(12)
|
%
|
(26)
|
%
|
|
Third-party refinery sales(2)
|
(1.49)
|
|
(0.42)
|
|
(0.07)
|
|
|
NM
|
NM
|
|
Delta Private Jets Adjustment
|
—
|
|
—
|
|
(0.07)
|
|
|
—
|
%
|
(100)
|
%
|
|
TRASM, adjusted
|
11.23
|
¢
|
14.06
|
¢
|
17.01
|
¢
|
|
(20)
|
%
|
(34)
|
%
|
(1)The reconciliation above may not calculate exactly due to rounding.
(2)For additional information on adjustments to TRASM, see "Supplemental Information" below.
Unless otherwise discussed below, the changes in operating revenue line items, as well as the underlying reasons for these changes, compared to the six months ended June 30, 2020 and June 30, 2019, respectively, are consistent with the discussion above under Results of Operations - Three Months Ended June 30, 2021, 2020 and 2019.
Operating Revenue
Compared to the six months ended June 30, 2019, our operating revenue decreased $11.7 billion, or 51%, due to reduced demand resulting from the COVID-19 pandemic. The decrease in operating revenue, on a 34% decrease in capacity, resulted in a 26% decrease in TRASM and a 34% decrease in TRASM, adjusted compared to the six months ended June 30, 2019.
Compared to the six months ended June 30, 2020, our operating revenue increased $1.2 billion, or 12%, due to increased demand in 2021 compared to 2020. The increase in operating revenue, on a 28% increase in capacity, generated a 12% decrease in TRASM and a 20% decrease in TRASM, adjusted compared to the six months ended June 30, 2020.
See "Refinery Segment" below for additional details on the refinery's operations, including third-party refinery sales recorded in other revenue, during each period.
Passenger Revenue by Geographic Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
vs. Six Months Ended June 30, 2020
|
|
(in millions)
|
Six Months Ended June 30, 2021
|
Passenger Revenue
|
RPMs (Traffic)
|
ASMs (Capacity)
|
Passenger Mile Yield
|
PRASM
|
Load Factor
|
|
Domestic
|
$
|
6,758
|
|
10
|
%
|
31
|
%
|
34
|
%
|
(16)
|
%
|
(18)
|
%
|
(2)
|
|
pts
|
|
Atlantic
|
430
|
|
(51)
|
%
|
(52)
|
%
|
(15)
|
%
|
2
|
%
|
(43)
|
%
|
(30)
|
|
pts
|
|
Latin America
|
749
|
|
(4)
|
%
|
17
|
%
|
71
|
%
|
(18)
|
%
|
(44)
|
%
|
(25)
|
|
pts
|
|
Pacific
|
150
|
|
(64)
|
%
|
(80)
|
%
|
(20)
|
%
|
79
|
%
|
(55)
|
%
|
(53)
|
|
pts
|
|
Total
|
$
|
8,087
|
|
(2)
|
%
|
10
|
%
|
28
|
%
|
(11)
|
%
|
(23)
|
%
|
(9)
|
|
pts
|
Delta Air Lines, Inc. June 2021 Form 10-Q 27
Item 2. MD&A - Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
vs. Six Months Ended June 30, 2019
|
|
(in millions)
|
Six Months Ended June 30, 2021
|
Passenger Revenue
|
RPMs (Traffic)
|
ASMs (Capacity)
|
Passenger Mile Yield
|
PRASM
|
Load Factor
|
|
Domestic
|
$
|
6,758
|
|
(54)
|
%
|
(43)
|
%
|
(23)
|
%
|
(20)
|
%
|
(41)
|
%
|
(23)
|
|
pts
|
|
Atlantic
|
430
|
|
(85)
|
%
|
(85)
|
%
|
(68)
|
%
|
(2)
|
%
|
(55)
|
%
|
(45)
|
|
pts
|
|
Latin America
|
749
|
|
(54)
|
%
|
(44)
|
%
|
(9)
|
%
|
(17)
|
%
|
(49)
|
%
|
(33)
|
|
pts
|
|
Pacific
|
150
|
|
(88)
|
%
|
(93)
|
%
|
(68)
|
%
|
84
|
%
|
(61)
|
%
|
(67)
|
|
pts
|
|
Total
|
$
|
8,087
|
|
(61)
|
%
|
(55)
|
%
|
(34)
|
%
|
(12)
|
%
|
(41)
|
%
|
(28)
|
|
pts
|
Domestic
Domestic passenger unit revenue for the six months ended June 30, 2021 decreased 41% with capacity down 23% compared to the six months ended June 30, 2019 as a result of reduced demand due to the COVID-19 pandemic and our policy to block middle seats on flights through April 30, 2021. The passenger unit revenue decline compared to the six months ended June 30, 2020 is due to these same factors; total domestic passenger revenue however, has increased 10% compared to the prior year period due to the increase in demand discussed above.
International
International passenger revenue for the six months ended June 30, 2021 decreased 77% with capacity down 53% compared to the six months ended June 30, 2019 with similar declines compared to the six months ended June 30, 2020. The underlying reasons for these decreases are consistent with the discussion above under Results of Operations - Three Months Ended June 30, 2021, 2020 and 2019.
Other Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2021 vs. 2020
% Increase (Decrease)
|
2021 vs. 2019
% Increase (Decrease)
|
|
(in millions)
|
2021
|
2020
|
2019
|
|
Ancillary businesses and refinery
|
$
|
1,688
|
|
$
|
613
|
|
$
|
699
|
|
|
NM
|
NM
|
|
Loyalty program
|
807
|
|
743
|
|
958
|
|
|
9
|
%
|
(16)
|
%
|
|
Miscellaneous
|
228
|
|
196
|
|
351
|
|
|
16
|
%
|
(35)
|
%
|
|
Total other revenue
|
$
|
2,723
|
|
$
|
1,552
|
|
$
|
2,008
|
|
|
75
|
%
|
36
|
%
|
Ancillary Businesses and Refinery. The changes in ancillary business and refinery revenues were primarily related to refinery sales to third parties, which increased $1.0 billion and $1.2 billion compared to the six months ended June 30, 2020 and June 30, 2019, respectively. Results for the six months ended June 30, 2019 also included $100 million of revenue from Delta Private Jets, which was combined with Wheels Up in January 2020 and is no longer reflected in ancillary businesses and refinery.
Delta Air Lines, Inc. June 2021 Form 10-Q 28
Item 2. MD&A - Results of Operations
Operating Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2021 vs. 2020
% Increase (Decrease)
|
2021 vs. 2019
% Increase (Decrease)
|
|
(in millions)
|
2021
|
2020
|
2019
|
|
Salaries and related costs
|
$
|
4,530
|
|
$
|
4,989
|
|
$
|
5,579
|
|
|
(9)
|
%
|
(19)
|
%
|
|
Aircraft fuel and related taxes
|
2,504
|
|
1,967
|
|
4,269
|
|
|
27
|
%
|
(41)
|
%
|
|
Ancillary businesses and refinery
|
1,645
|
|
620
|
|
667
|
|
|
NM
|
NM
|
|
Contracted services
|
1,089
|
|
1,117
|
|
1,440
|
|
|
(3)
|
%
|
(24)
|
%
|
|
Depreciation and amortization
|
993
|
|
1,268
|
|
1,328
|
|
|
(22)
|
%
|
(25)
|
%
|
|
Landing fees and other rents
|
953
|
|
972
|
|
1,072
|
|
|
(2)
|
%
|
(11)
|
%
|
|
Regional carrier expense
|
804
|
|
914
|
|
1,079
|
|
|
(12)
|
%
|
(25)
|
%
|
|
Aircraft maintenance materials and outside repairs
|
581
|
|
512
|
|
910
|
|
|
13
|
%
|
(36)
|
%
|
|
Passenger commissions and other selling expenses
|
332
|
|
448
|
|
1,071
|
|
|
(26)
|
%
|
(69)
|
%
|
|
Passenger service
|
294
|
|
364
|
|
628
|
|
|
(19)
|
%
|
(53)
|
%
|
|
Aircraft rent
|
208
|
|
196
|
|
209
|
|
|
6
|
%
|
—
|
%
|
|
Restructuring charges
|
(36)
|
|
2,454
|
|
—
|
|
|
NM
|
NM
|
|
Government grant recognition
|
(2,689)
|
|
(1,280)
|
|
—
|
|
|
NM
|
NM
|
|
Profit sharing
|
—
|
|
—
|
|
739
|
|
|
—
|
%
|
(100)
|
%
|
|
Other
|
650
|
|
744
|
|
869
|
|
|
(13)
|
%
|
(25)
|
%
|
|
Total operating expense
|
$
|
11,858
|
|
$
|
15,285
|
|
$
|
19,860
|
|
|
(22)
|
%
|
(40)
|
%
|
Unless otherwise discussed below, the changes in operating expense line items, as well as the underlying reasons for these changes, compared to the six months ended June 30, 2020 and June 30, 2019, respectively, are consistent with the discussion above under Results of Operations - Three Months Ended June 30, 2021, 2020 and 2019.
Aircraft Fuel and Related Taxes. Fuel expense decreased $1.8 billion compared to the six months ended June 30, 2019 primarily due to a 40% decrease in consumption and a 14% decrease in the market price of jet fuel. Consumption decreased on a combination of reduced capacity and improved fuel efficiency on an available seat mile basis.
Fuel expense increased $538 million compared to the six months ended June 30, 2020 due to a 18% increase in consumption, partially offset by a 1% decrease in the market price per gallon of jet fuel. Consumption increased with capacity during the six months ended June 30, 2021 as described above; however, the impact was partially mitigated by improved fuel efficiency on an available seat mile basis.
Additionally, during the six months ended June 30, 2021, we purchased and retired approximately $40 million of carbon offset credits, which relate to 13 million metric tons of carbon emissions generated by our airline segment from March 1 to December 31, 2020 as well as a portion of our 2021 carbon emissions. In the table below, these costs are shown in environmental sustainability impact.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel expense and average price per gallon
|
|
|
Average Price Per Gallon
|
|
|
Six Months Ended June 30,
|
2021 vs. 2019 Increase (Decrease)
|
Six Months Ended June 30,
|
2021 vs. 2019 Increase (Decrease)
|
|
(in millions, except per gallon data)
|
2021
|
2020
|
2019
|
2021
|
2020
|
2019
|
|
Fuel purchase cost(1)
|
$
|
2,180
|
|
$
|
1,875
|
|
$
|
4,255
|
|
$
|
(2,075)
|
|
$
|
1.77
|
|
$
|
1.79
|
|
$
|
2.06
|
|
$
|
(0.29)
|
|
|
Environmental sustainability impact
|
40
|
|
—
|
|
—
|
|
40
|
|
0.03
|
|
—
|
|
—
|
|
0.03
|
|
|
Fuel hedge impact
|
1
|
|
7
|
|
17
|
|
(16)
|
|
—
|
|
0.01
|
|
0.01
|
|
(0.01)
|
|
|
Refinery segment impact
|
283
|
|
85
|
|
(3)
|
|
286
|
|
0.23
|
|
0.08
|
|
—
|
|
0.23
|
|
|
Total fuel expense
|
$
|
2,504
|
|
$
|
1,967
|
|
$
|
4,269
|
|
$
|
(1,765)
|
|
$
|
2.03
|
|
$
|
1.88
|
|
$
|
2.07
|
|
$
|
(0.04)
|
|
(1)Market price for jet fuel at airport locations, including related taxes and transportation costs.
Regional Carrier Expense. The decreases in regional carrier expense are due to the lower utilization of these carriers as a result of the overall reduced capacity during the six months ended June 30, 2021, as described above.
Delta Air Lines, Inc. June 2021 Form 10-Q 29
Item 2. MD&A - Results of Operations
Ancillary Businesses and Refinery. The changes in ancillary business and refinery expenses were primarily related to refinery sales to third parties, which increased $1.0 billion and $1.2 billion compared to the six months ended June 30, 2020 and June 30, 2019, respectively. In addition, $88 million of costs related to services performed by Delta Private Jets in the six months ended June 30, 2019 were recorded in ancillary businesses and refinery prior to the combination of that business with Wheels Up in January 2020.
Restructuring Charges. During 2020, we recorded restructuring charges, including certain accruals, following strategic business decisions in response to the COVID-19 pandemic. In the six months ended June 30, 2021, we recognized $36 million of adjustments to certain of those restructuring charges, representing changes in our estimates.
Non-Operating Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
2021 vs. 2020
|
2021 vs. 2019
|
|
|
|
(in millions)
|
2021
|
2020
|
2019
|
Favorable (Unfavorable)
|
Favorable (Unfavorable)
|
|
|
|
|
Interest expense, net
|
$
|
(338)
|
|
$
|
(194)
|
|
$
|
(75)
|
|
$
|
(144)
|
|
$
|
(263)
|
|
|
|
|
|
Impairments and equity method losses
|
—
|
|
(2,058)
|
|
(17)
|
|
2,058
|
|
17
|
|
|
|
|
|
Gain/(loss) on investments, net
|
211
|
|
8
|
|
(82)
|
|
203
|
|
293
|
|
|
|
|
|
Miscellaneous, net
|
87
|
|
45
|
|
(47)
|
|
42
|
|
134
|
|
|
|
|
|
Total non-operating expense, net
|
$
|
(40)
|
|
$
|
(2,199)
|
|
$
|
(221)
|
|
$
|
2,159
|
|
$
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
2021 vs. 2020
|
2021 vs. 2019
|
|
(in millions)
|
2021
|
2020
|
2019
|
Favorable (Unfavorable)
|
Favorable (Unfavorable)
|
|
Interest expense, net
|
$
|
(700)
|
|
$
|
(273)
|
|
$
|
(158)
|
|
$
|
(427)
|
|
$
|
(542)
|
|
|
Impairments and equity method losses
|
(54)
|
|
(2,318)
|
|
(71)
|
|
2,264
|
|
17
|
|
|
Gain/(loss) on investments, net
|
473
|
|
(104)
|
|
18
|
|
577
|
|
455
|
|
|
Miscellaneous, net
|
124
|
|
299
|
|
(84)
|
|
(175)
|
|
208
|
|
|
Total non-operating expense, net
|
$
|
(157)
|
|
$
|
(2,396)
|
|
$
|
(295)
|
|
$
|
2,239
|
|
$
|
138
|
|
Interest expense, net. Interest expense increased compared to the prior year periods as a result of financing arrangements entered into during 2020. See Note 5 of the Notes to the Condensed Consolidated Financial Statements for additional information on recent financings. As a result of the increase in our outstanding debt since the onset of the COVID-19 pandemic, interest expense, net was $338 million in the June 2021 quarter and $700 million in the six months ended June 30, 2021. However, we have begun reducing the total amount of interest expense by pre-paying our debt in addition to periodic amortization payments and scheduled maturities. This began with early repayments made during the December 2020 quarter and continued with the early repayment of our $1.5 billion secured term loan in the March 2021 quarter and approximately $450 million of various EETCs in the June 2021 quarter. Interest expense, net on our outstanding debt as of June 30, 2021 is expected to be approximately $325 million during the September 2021 quarter. We plan to seek opportunities to pre-pay our debt, in addition to periodic amortization and scheduled maturities, during the remainder of 2021.
Impairments and equity method losses. Impairments and equity method losses in 2020 reflected our share of LATAM's and Grupo Aeroméxico's equity method results prior to their respective bankruptcy filings, our share of Virgin Atlantic's equity method results and the impairments reducing the basis of these investments to zero during the June 2020 quarter. See Note 4 of the Notes to the Condensed Consolidated Financial Statements for additional information on our equity investments.
Gain/(loss) on investments, net. Gain/(loss) on investments, net reflects the gains and losses on our equity investments measured at fair value on a recurring basis. The increase in the three and six months ended June 30, 2021 compared to the prior year periods is primarily due to the mark-to-market adjustment on our investments in Wheels Up (in the March 2021 quarter) and CLEAR (in the June 2021 quarter). See Note 4 of the Notes to the Condensed Consolidated Financial Statements for additional information on our equity investments.
Miscellaneous, net. Miscellaneous, net primarily includes pension and related benefit/(expense), foreign exchange gains/(losses) and charitable contributions. The six months ended June 30, 2020 included the $240 million gain recognized as a result of the combination of Delta Private Jets with Wheels Up in January 2020.
Delta Air Lines, Inc. June 2021 Form 10-Q 30
Item 2. MD&A - Non-Operating Results
Income Taxes
During 2021 interim periods, we will calculate our income tax expense by applying to any pre-tax income/loss an effective tax rate determined as if the year to date period is the annual period. Using this method, for the three and six months ended June 30, 2021 our effective tax rate was 16% and 29%, respectively. We believe that, at this time, this method for determining the effective tax rate is more reliable than projecting an annual effective tax rate due to the uncertainty of estimating annual pre-tax income/loss due to the impact of the COVID-19 pandemic.
Refinery Segment
The refinery operated by our subsidiaries Monroe Energy, LLC and MIPC, LLC (collectively, "Monroe") primarily produces gasoline, diesel and jet fuel. Monroe exchanges the non-jet fuel products the refinery produces with third parties for jet fuel consumed in our airline operations. Historically, the jet fuel produced and procured through exchanging gasoline and diesel fuel produced by the refinery provided approximately 200,000 barrels per day, or approximately 75%, of our pre-COVID-19 pandemic consumption, for use in our airline operations. We believe that the jet fuel supply resulting from the refinery's operation contributes to reducing the market price of jet fuel and thus lowers our cost of jet fuel compared to what it otherwise would be.
The refinery’s production has also been altered by the dramatic change in economic conditions caused by the COVID-19 pandemic. During the six months ended June 30, 2021, the refinery operated at 60% – 90% of normal production levels, and expects production levels at the high end of that range during the September 2021 quarter, subject to market conditions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refinery segment financial information
|
|
|
Three Months Ended June 30,
|
2021 vs. 2020
|
2021 vs. 2019
|
|
(in millions, except per gallon data)
|
2021
|
2020
|
2019
|
% Increase (Decrease)
|
% Increase (Decrease)
|
|
Exchange products
|
$
|
536
|
|
$
|
65
|
|
$
|
1,078
|
|
NM
|
(50)
|
%
|
|
Sales of refined products
|
13
|
|
153
|
|
76
|
|
(92)
|
%
|
(83)
|
%
|
|
Sales to airline segment
|
108
|
|
3
|
|
307
|
|
NM
|
(65)
|
%
|
|
Third party refinery sales
|
777
|
|
292
|
|
40
|
|
NM
|
NM
|
|
Operating revenue
|
$
|
1,434
|
|
$
|
513
|
|
$
|
1,501
|
|
NM
|
(4)
|
%
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
$
|
(157)
|
|
$
|
(114)
|
|
$
|
37
|
|
38
|
%
|
NM
|
|
Refinery segment impact on average price per fuel gallon
|
$
|
0.23
|
|
$
|
0.69
|
|
$
|
(0.03)
|
|
(67)
|
%
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
2021 vs. 2020
|
2021 vs. 2019
|
|
(in millions, except per gallon data)
|
2021
|
2020
|
2019
|
% Increase (Decrease)
|
% Increase (Decrease)
|
|
Exchange products
|
$
|
1,039
|
|
$
|
895
|
|
$
|
1,811
|
|
16
|
%
|
(43)
|
%
|
|
Sales of refined products
|
17
|
|
296
|
|
307
|
|
(94)
|
%
|
(94)
|
%
|
|
Sales to airline segment
|
108
|
|
214
|
|
578
|
|
(50)
|
%
|
(81)
|
%
|
|
Third party refinery sales
|
1,317
|
|
292
|
|
89
|
|
NM
|
NM
|
|
Operating revenue
|
$
|
2,481
|
|
$
|
1,697
|
|
$
|
2,785
|
|
46
|
%
|
(11)
|
%
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
$
|
(283)
|
|
$
|
(85)
|
|
$
|
3
|
|
NM
|
NM
|
|
Refinery segment impact on average price per fuel gallon
|
$
|
0.23
|
|
$
|
0.08
|
|
$
|
—
|
|
NM
|
NM
|
Refinery revenues decreased compared to the three and six months ended June 30, 2019 due to lower refinery run rates during the period, as well as lower pricing for refined products and increased compared to the three and six months ended June 30, 2020 due to higher production and demand experienced since the prior year period. The operating loss was higher in the three and six months ended June 30, 2021 as compared to the prior periods, which was mainly driven by an increase in Renewable Identification Numbers ("RINs") compliance costs discussed below, and was partially offset by cost savings resulting from decreased production levels compared to the June 2019 periods.
Delta Air Lines, Inc. June 2021 Form 10-Q 31
Item 2. MD&A - Refinery Segment
A refinery is subject to annual U.S. Environmental Protection Agency requirements to blend renewable fuels into the gasoline and on-road diesel fuel it produces. Alternatively, a refinery may purchase RINs from third parties in the secondary market. The Monroe refinery purchases the majority of its RINs requirement in the secondary market. Observable RINs prices increased throughout the six months ended June 30, 2021, with Monroe incurring $252 million and $410 million in RINs compliance costs during the three and six months ended June 30, 2021 as compared to $25 million and $52 million in the three and six months ended June 30, 2020, respectively.
For more information regarding the refinery's results, see Note 9 of the Notes to the Condensed Consolidated Financial Statements.
Operating Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
2021 vs. 2020 % Increase
(Decrease)
|
2021 vs. 2019 % Increase
(Decrease)
|
|
|
|
Consolidated(1)
|
2021
|
2020
|
2019
|
|
|
|
Revenue passenger miles (in millions)
|
33,285
|
|
3,621
|
|
63,173
|
|
NM
|
|
(47)
|
|
%
|
|
|
|
|
|
Available seat miles (in millions)
|
48,529
|
|
10,596
|
|
71,754
|
|
NM
|
|
(32)
|
|
%
|
|
|
|
|
|
Passenger mile yield
|
16.04
|
¢
|
18.73
|
¢
|
18.00
|
¢
|
(14)
|
|
%
|
(11)
|
|
%
|
|
|
|
|
|
PRASM
|
11.00
|
¢
|
6.40
|
¢
|
15.84
|
¢
|
72
|
|
%
|
(31)
|
|
%
|
|
|
|
|
|
TRASM
|
14.68
|
¢
|
13.85
|
¢
|
17.47
|
¢
|
6
|
|
%
|
(16)
|
|
%
|
|
|
|
|
|
TRASM, adjusted(2)
|
13.08
|
¢
|
11.10
|
¢
|
17.35
|
¢
|
18
|
|
%
|
(25)
|
|
%
|
|
|
|
|
|
CASM
|
13.00
|
¢
|
59.30
|
¢
|
14.51
|
¢
|
(78)
|
|
%
|
(10)
|
|
%
|
|
|
|
|
|
CASM-Ex(2)
|
11.42
|
¢
|
41.96
|
¢
|
10.47
|
¢
|
(73)
|
|
%
|
9
|
|
%
|
|
|
|
|
|
CASM, adjusted(2)
|
14.43
|
¢
|
45.33
|
¢
|
14.37
|
¢
|
(68)
|
|
%
|
0.5
|
|
%
|
|
|
|
|
|
Passenger load factor
|
69
|
%
|
34
|
%
|
88
|
%
|
35
|
|
pts
|
(19)
|
|
pts
|
|
|
|
|
|
Fuel gallons consumed (in millions)
|
690
|
|
165
|
|
1,099
|
|
NM
|
|
(37)
|
|
%
|
|
|
|
|
|
Average price per fuel gallon(3)
|
$
|
2.16
|
|
$
|
2.25
|
|
$
|
2.08
|
|
(4)
|
|
%
|
4
|
|
%
|
|
|
|
|
|
Average price per fuel gallon, adjusted(2)(3)
|
$
|
2.12
|
|
$
|
2.16
|
|
$
|
2.07
|
|
(2)
|
|
%
|
2
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
2021 vs. 2020 % Increase
(Decrease)
|
2021 vs. 2019 % Increase
(Decrease)
|
|
Consolidated(1)
|
2021
|
2020
|
2019
|
|
Revenue passenger miles (in millions)
|
51,233
|
|
46,684
|
|
114,790
|
|
10
|
|
%
|
(55)
|
|
%
|
|
Available seat miles (in millions)
|
88,647
|
|
69,481
|
|
134,169
|
|
28
|
|
%
|
(34)
|
|
%
|
|
Passenger mile yield
|
15.79
|
¢
|
17.67
|
¢
|
17.96
|
¢
|
(11)
|
|
%
|
(12)
|
|
%
|
|
PRASM
|
9.12
|
¢
|
11.87
|
¢
|
15.37
|
¢
|
(23)
|
|
%
|
(41)
|
|
%
|
|
TRASM
|
12.72
|
¢
|
14.48
|
¢
|
17.15
|
¢
|
(12)
|
|
%
|
(26)
|
|
%
|
|
TRASM, adjusted(2)
|
11.23
|
¢
|
14.06
|
¢
|
17.01
|
¢
|
(20)
|
|
%
|
(34)
|
|
%
|
|
CASM
|
13.38
|
¢
|
22.00
|
¢
|
14.80
|
¢
|
(39)
|
|
%
|
(10)
|
|
%
|
|
CASM-Ex(2)
|
12.14
|
¢
|
17.06
|
¢
|
10.95
|
¢
|
(29)
|
|
%
|
11
|
|
%
|
|
CASM, adjusted(2)
|
14.96
|
¢
|
19.88
|
¢
|
14.65
|
¢
|
(25)
|
|
%
|
2
|
|
%
|
|
Passenger load factor
|
58
|
%
|
67
|
%
|
86
|
%
|
(9)
|
|
pts
|
(28)
|
|
pts
|
|
Fuel gallons consumed (in millions)
|
1,235
|
|
1,046
|
|
2,061
|
|
18
|
|
%
|
(40)
|
|
%
|
|
Average price per fuel gallon(3)
|
$
|
2.03
|
|
$
|
1.88
|
|
$
|
2.07
|
|
8
|
|
%
|
(2)
|
|
%
|
|
Average price per fuel gallon, adjusted(2)(3)
|
$
|
2.03
|
|
$
|
1.87
|
|
$
|
2.06
|
|
9
|
|
%
|
(1)
|
|
%
|
(1)Includes the operations of our regional carriers under capacity purchase agreements.
(2)Non-GAAP financial measure defined and reconciled to TRASM, CASM and average fuel price per gallon, respectively, in "Supplemental Information" below.
(3)Includes the impact of fuel hedge activity, refinery segment results and environmental sustainability activity.
Delta Air Lines, Inc. June 2021 Form 10-Q 32
Item 2. MD&A - Fleet Information
Fleet Information
Our operating aircraft fleet, purchase commitments and options at June 30, 2021 are summarized in the following table. As of June 30, 2021, less than 10% of our mainline and regional aircraft were temporarily parked compared to 50% as of June 30, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline aircraft information by fleet type
|
|
|
Current Fleet(1)
|
|
|
Commitments(2)
|
|
Fleet Type
|
Owned
|
Finance Lease
|
Operating Lease
|
Total
|
Average Age (Years)
|
|
Purchase
|
Options
|
|
B-717-200
|
9
|
|
33
|
|
11
|
|
53
|
|
20.2
|
|
|
|
|
B-737-800
|
73
|
|
4
|
|
—
|
|
77
|
|
19.8
|
|
|
|
|
B-737-900ER
|
81
|
|
—
|
|
49
|
|
130
|
|
4.8
|
|
29
|
|
|
|
B-757-200
|
93
|
|
7
|
|
—
|
|
100
|
|
23.9
|
|
|
|
|
B-757-300
|
16
|
|
—
|
|
—
|
|
16
|
|
18.4
|
|
|
|
|
B-767-300ER
|
39
|
|
—
|
|
—
|
|
39
|
|
24.8
|
|
|
|
|
B-767-400ER
|
21
|
|
—
|
|
—
|
|
21
|
|
20.5
|
|
|
|
|
A220-100
|
37
|
|
4
|
|
—
|
|
41
|
|
1.8
|
|
4
|
|
|
|
A220-300
|
9
|
|
—
|
|
—
|
|
9
|
|
0.5
|
|
41
|
|
50
|
|
|
A319-100
|
55
|
|
2
|
|
—
|
|
57
|
|
19.4
|
|
|
|
|
A320-200
|
51
|
|
4
|
|
—
|
|
55
|
|
25.4
|
|
|
|
|
A321-200
|
62
|
|
22
|
|
36
|
|
120
|
|
2.7
|
|
7
|
|
|
|
A321-200neo
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
125
|
|
100
|
|
|
A330-200
|
11
|
|
—
|
|
—
|
|
11
|
|
16.3
|
|
|
|
|
A330-300
|
28
|
|
—
|
|
3
|
|
31
|
|
12.5
|
|
|
|
|
A330-900neo
|
3
|
|
3
|
|
5
|
|
11
|
|
1.1
|
|
26
|
|
|
|
A350-900
|
13
|
|
—
|
|
2
|
|
15
|
|
3.0
|
|
27
|
|
|
|
Total
|
601
|
|
79
|
|
106
|
|
786
|
|
13.8
|
|
259
|
|
150
|
|
(1)Excludes certain aircraft we own or lease or that are operated by regional carriers on our behalf shown in the table below.
(2)Purchase commitments include seven A350-900 lease commitments in 2021 incremental to our order book with Airbus.
The table below summarizes the aircraft operated by regional carriers on our behalf at June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regional aircraft information by fleet type and carrier
|
|
|
Fleet Type
|
|
|
Carrier
|
CRJ-200
|
CRJ-700
|
CRJ-900
|
Embraer 170
|
Embraer 175
|
Total
|
|
Endeavor Air, Inc.(1)
|
51
|
|
13
|
|
103
|
|
—
|
|
—
|
|
167
|
|
|
SkyWest Airlines, Inc.
|
—
|
|
5
|
|
40
|
|
—
|
|
68
|
|
113
|
|
|
Republic Airways, Inc.
|
—
|
|
—
|
|
—
|
|
15
|
|
46
|
|
61
|
|
|
Total
|
51
|
|
18
|
|
143
|
|
15
|
|
114
|
|
341
|
|
(1)Endeavor Air, Inc. is a wholly owned subsidiary of Delta.
Delta Air Lines, Inc. June 2021 Form 10-Q 33
Item 2. MD&A - Financial Condition and Liquidity
Financial Condition and Liquidity
As of June 30, 2021, we had $17.8 billion in cash, cash equivalents, short-term investments and aggregate principal amount committed and available to be drawn under our revolving credit facilities ("liquidity"). We expect to meet our liquidity needs for the next twelve months with cash and cash equivalents, short-term investments, restricted cash equivalents and cash flows from operations. We expect to meet our long-term liquidity needs with cash flows from operations and financing arrangements. We are continuing to evaluate the appropriate level of liquidity to maintain following the COVID-19 pandemic though, at least in the near term, we expect this level to be higher than the liquidity maintained prior to the pandemic.
Sources and Uses of Liquidity
Operating Activities
Operating activities in the six months ended June 30, 2021 provided $2.6 billion compared to providing $68 million and $5.2 billion in the six months ended June 30, 2020 and 2019, respectively. As described above, we are experiencing a domestic demand recovery and expect this to continue throughout 2021. If the demand environment continues to evolve in this manner, we expect to generate positive cash flows from operations, including funds received from the government support programs described in "Financing Activities" below, during 2021.
Our operating cash flow is impacted by the following factors:
Seasonality of Advance Ticket Sales. We sell tickets for air travel in advance of the customer's travel date. When we receive a cash payment at the time of sale, we record the cash received on advance sales as deferred revenue in air traffic liability. The air traffic liability typically increases during the winter and spring months as advanced ticket sales grow prior to the summer peak travel season and decreases during the summer and fall months. However, the reduction in demand for air travel due to the COVID-19 pandemic resulted in a lower level of advance bookings and the associated cash received than we have historically experienced, which has impacted the typical seasonal trend of the air traffic liability.
Domestic demand improved steadily since the latter half of the March 2021 quarter as consumers have gained confidence to travel and increased ticket purchases for travel further in advance. In June 2021, domestic leisure bookings approached June 2019 levels and our air traffic liability increased during the June 2021 quarter more than our historical seasonality-based growth. Travel credits represented approximately 35% of the air traffic liability as of June 30, 2021.
Fuel. Fuel expense represented approximately 21% of our total operating expense for the six months ended June 30, 2021. The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations. As demand continues to increase and capacity returns, we expect fuel consumption to increase compared to the comparable period of 2020, although we still expect it to be lower than the comparable period in 2019.
Employee Benefit Obligations. We sponsor defined benefit pension plans for eligible employees and retirees. These plans are closed to new entrants and are frozen for future benefit accruals. Our funding obligations for these plans are governed by the Employee Retirement Income Security Act, as modified by the Pension Protection Act of 2006. We have no minimum funding requirements for our defined benefit pension plans in 2021. However, we voluntarily contributed $1.5 billion to these plans during the June 2021 quarter. At this level of funding, investment returns are expected to satisfy future benefit payments, which we believe would eliminate further material voluntary or required cash contributions to the plans, under the terms of the Pension Protection Act of 2006. Further, based on this level of funding, we are modifying the asset allocation mix in an effort to reduce the investment risk of the portfolio and protect the plans' funded status. Estimates of future funding requirements are based on various assumptions and could vary materially from actual funding requirements. Assumptions include, among other things, the actual and projected market performance of assets, statutory requirements and demographic data for participants.
Voluntary Separation Programs. In 2020, we recorded a $3.4 billion charge associated with voluntary early retirement and separation programs and other employee benefit charges. Approximately $300 million of this charge was disbursed in cash payments to participants in the six months ended June 30, 2021 in addition to $720 million disbursed in 2020. We anticipate that a total of approximately $600 million in cash payments will be made to participants in 2021 with the remaining payments in 2022 and beyond.
Government Support Programs. See "Financing Activities" below for discussion of the impact to our liquidity from the payroll support program extensions. The $4.5 billion of grants received during the six months ended June 30, 2021 are included in our operating cash flow.
Delta Air Lines, Inc. June 2021 Form 10-Q 34
Item 2. MD&A - Financial Condition and Liquidity
Investing Activities
Short-Term Investments. During the six months ended June 30, 2021, we redeemed a net of $907 million in short-term investments. See Note 3 of the Notes to the Condensed Consolidated Financial Statements for further information on these investments.
Capital Expenditures. Our capital expenditures were $1.2 billion and $2.9 billion for the six months ended June 30, 2021 and 2019, respectively. Our capital expenditures during the six months ended June 30, 2021 were primarily related to our airport redevelopment projects, purchases of aircraft, fleet modifications and technology enhancements.
We have committed to future aircraft purchases and have obtained, but are under no obligation to use, long-term financing commitments for a substantial portion of the purchase price of the aircraft. Excluding the airport project discussed below, our expected 2021 capital expenditures of approximately $3.2 billion, which may vary depending on financing decisions, will be primarily for aircraft, including deliveries and advance deposit payments, as well as aircraft modifications and technology enhancements.
New York-LaGuardia Redevelopment. As part of the terminal redevelopment project at LaGuardia Airport, we are partnering with the Port Authority of New York and New Jersey (“Port Authority”) to replace Terminals C and D with a new state-of-the-art terminal facility. Construction is underway and will be phased to limit passenger inconvenience. Due to an acceleration effort that commenced in 2020, completion is now expected by 2025.
We currently expect our project costs to be approximately $3.5 billion and we bear the risks of project construction, including any potential cost over-runs. Using funding primarily provided by existing financing arrangements, we expect to spend approximately $900 million on this project during 2021, of which $477 million was incurred in the six months ended June 30, 2021.
Financing Activities
Debt and Finance Leases. In the six months ended June 30, 2021, we repaid approximately $3.1 billion on our debt and finance leases, of which approximately $2.0 billion was the early repayment of the term loan secured by certain of our slots, gates and routes and various EETCs. We plan to seek opportunities to pre-pay our debt, in addition to periodic amortization and scheduled maturities, during the remainder of 2021.
The principal amount of our debt and finance leases was $29.3 billion at June 30, 2021.
Government Support Programs. The Consolidated Appropriations Act, 2021 was enacted on December 27, 2020, and included an extension of the payroll support program created under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") providing an additional $15 billion in grants and loans to the airline industry to be used for airline employee wages, salaries and benefits. In January 2021, we entered into a payroll support program extension agreement with the U.S. Department of the Treasury. During the six months ended June 30, 2021, we received a total of $3.3 billion in payroll support payments under this extension agreement, which must be used exclusively for the payment of employee wages, salaries and benefits and were conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs from the date of the extension agreement through March 2021.
These support payments consisted of $2.3 billion in a grant and $957 million in an unsecured 10-year low interest loan and, in return, we entered into a promissory note for the loan and issued warrants to the U.S. Department of the Treasury to acquire approximately 2.4 million shares of Delta common stock. The loan bears interest at an annual rate of 1.00% for the first five years and the applicable Secured Overnight Financing Rate ("SOFR") plus 2.00% in the final five years. The warrants have an initial exercise price of $39.73 per share, subject to adjustment in certain cases, and a five-year term. We have recorded the value of the promissory note and warrants on a relative fair value basis as $905 million of noncurrent debt, net of discount, and $52 million in additional paid in capital, respectively.
The American Rescue Plan Act of 2021 was enacted on March 11, 2021, and included a further extension of the payroll support program providing an additional $14 billion in grants and loans to the industry to be used for airline employee wages, salaries and benefits. In April 2021, we entered into a Payroll Support Program 3 Agreement with the U.S. Department of the Treasury. During the June 2021 quarter we received a total of $3.1 billion in payroll support payments under this agreement, which must be used exclusively for the payment of employee wages, salaries and benefits and is conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs from the date of the agreement through September 30, 2021 or the date on which we have expended all of the payroll support, whichever is later.
Delta Air Lines, Inc. June 2021 Form 10-Q 35
Item 2. MD&A - Financial Condition and Liquidity
These support payments consisted of $2.2 billion in a grant and $891 million in an unsecured 10-year low interest loan and, in return, we entered into a promissory note for the loan and issued warrants to the U.S. Department of the Treasury to acquire approximately 1.9 million shares of Delta common stock. The loan bears interest at an annual rate of 1.00% for the first five years and the applicable SOFR plus 2.00% in the final five years. The warrants have an initial exercise price of $47.80 per share, subject to adjustment in certain cases, and a five-year term. We have recorded the value of the promissory note and warrants on a relative fair value basis as $857 million of noncurrent debt, net of discount, and $34 million in additional paid in capital, respectively.
Undrawn Lines of Credit
As of June 30, 2021, we had approximately $2.6 billion undrawn and available under our revolving credit facilities. In addition, we had outstanding letters of credit as of June 30, 2021, including approximately $300 million that reduced the availability under our revolving credit facilities and approximately $300 million that did not affect the availability of our revolving credit facilities.
Covenants
We were in compliance with the covenants in our debt agreements at June 30, 2021.
Critical Accounting Estimates
For information regarding our Critical Accounting Estimates, see the "Critical Accounting Estimates" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K.
Delta Air Lines, Inc. June 2021 Form 10-Q 36
Item 2. MD&A - Supplemental Information
Supplemental Information
We sometimes use information ("non-GAAP financial measures") that is derived from the Condensed Consolidated Financial Statements but that is not presented in accordance with GAAP. Under the Securities and Exchange Commission rules, non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results. The reconciliations presented below of the non-GAAP measures used in this 10-Q may not calculate exactly due to rounding.
Pre-tax (loss)/income, adjusted
The following table shows a reconciliation of pre-tax income/(loss) (a GAAP measure) to pre-tax (loss)/income, adjusted (a non-GAAP financial measure). Pre-tax (loss)/income, adjusted excludes the following items directly related to the impact of COVID-19 and our response for comparability with the prior period:
•Restructuring charges. During 2020, we recorded restructuring charges, including certain accruals, following strategic business decisions in response to the COVID-19 pandemic. In the June 2021 quarter, we recognized $8 million of adjustments to certain of those restructuring charges, representing changes in our estimates.
•Government grant recognition. We recognized $1.5 billion of the grant proceeds from the payroll support program extensions as contra-expense during the June 2021 quarter. We are recognizing the grant proceeds as contra-expense based on the periods that the funds are intended to compensate and expect to use all proceeds from the payroll support program extensions in the second half of 2021.
•Impairments and equity method losses. In the June 2020 quarter, we recognized $2.1 billion of charges related to write-downs of our investments in LATAM and Grupo Aeroméxico following their financial losses and separate Chapter 11 bankruptcy filings, and the write-down of our investment in Virgin Atlantic based on our share of its losses.
•Loss on extinguishment of debt. This adjustment relates to early termination of a portion of our debt.
We also regularly adjust pre-tax income/(loss) for the following items to determine pre-tax (loss)/income, adjusted for the reasons described below.
•MTM adjustments and settlements on hedges. Mark-to-market ("MTM") adjustments are defined as fair value changes recorded in periods other than the settlement period. Such fair value changes are not necessarily indicative of the actual settlement value of the underlying hedge in the contract settlement period. Settlements represent cash received or paid on hedge contracts settled during the applicable period.
•Equity investment MTM adjustments. We adjust for our proportionate share of our equity method investee, Virgin Atlantic’s, hedge portfolio MTM adjustments (recorded in non-operating expense) to allow investors to understand and analyze our core operational performance in the periods shown.
•MTM adjustments on investments. Unrealized gains/losses result from our equity investments that are accounted for at fair value in non-operating expense. These gains/losses are driven by changes in stock prices, other valuation techniques for investments in companies without publicly-traded shares and foreign currency fluctuations. Adjusting for these gains/losses allows investors to better understand and analyze our core operational performance in the periods shown.
•Delta Private Jets adjustment. Because we combined Delta Private Jets with Wheels Up in January 2020, we have excluded the impact of Delta Private Jets from 2019 results for comparability.
Delta Air Lines, Inc. June 2021 Form 10-Q 37
Item 2. MD&A - Supplemental Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax (loss)/income, adjusted reconciliation
|
|
|
Three Months Ended June 30,
|
|
(in millions)
|
2021
|
2020
|
2019
|
|
Pre-tax income/(loss)
|
$
|
776
|
|
$
|
(7,014)
|
|
$
|
1,907
|
|
|
Adjusted for:
|
|
|
|
|
Restructuring charges
|
8
|
|
2,454
|
|
—
|
|
|
Government grant recognition
|
(1,504)
|
|
(1,280)
|
|
—
|
|
|
Impairments and equity method losses
|
—
|
|
2,058
|
|
—
|
|
|
Loss on extinguishment of debt
|
26
|
|
—
|
|
—
|
|
|
MTM adjustments and settlements on hedges
|
24
|
|
14
|
|
10
|
|
|
Equity investment MTM adjustments
|
—
|
|
(87)
|
|
(2)
|
|
|
MTM adjustments on investments
|
(211)
|
|
(9)
|
|
82
|
|
|
Delta Private Jets adjustment
|
—
|
|
—
|
|
1
|
|
|
Pre-tax (loss)/income, adjusted
|
$
|
(881)
|
|
$
|
(3,864)
|
|
$
|
1,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expense, adjusted
The following table shows a reconciliation of operating expense (a GAAP measure) to operating expense, adjusted (a non-GAAP financial measure). Operating expense, adjusted excludes restructuring charges and government grant recognition, which, as discussed above under the heading pre-tax (loss)/income, adjusted, are directly related to the impact of the COVID-19 pandemic and our response. We also adjust operating expense for MTM adjustments and settlements on hedges and the impact of Delta Private Jets for the same reasons described above under the heading pre-tax (loss)/income, adjusted. We also adjust operating expense for the following item for the reason described below.
•Third-party refinery sales. Refinery sales to third parties, and related expenses, are not related to our airline segment. Operating expense, adjusted therefore provides a more meaningful comparison of operating expenses from our airline operations to the rest of the airline industry.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense, adjusted reconciliation
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
(in millions)
|
2021
|
|
2020
|
2019
|
|
|
|
Operating expense
|
$
|
6,310
|
|
|
$
|
6,283
|
|
$
|
10,408
|
|
|
|
|
Adjusted for:
|
|
|
|
|
|
|
|
Restructuring charges
|
(8)
|
|
|
(2,454)
|
|
—
|
|
|
|
|
Government grant recognition
|
1,504
|
|
|
1,280
|
|
—
|
|
|
|
|
MTM adjustments and settlements on hedges
|
(24)
|
|
|
(14)
|
|
(10)
|
|
|
|
|
Third-party refinery sales
|
(777)
|
|
|
(292)
|
|
(40)
|
|
|
|
|
Delta Private Jets adjustment
|
—
|
|
|
—
|
|
(50)
|
|
|
|
|
Operating expense, adjusted
|
$
|
7,005
|
|
|
$
|
4,803
|
|
$
|
10,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delta Air Lines, Inc. June 2021 Form 10-Q 38
Item 2. MD&A - Supplemental Information
Fuel expense, adjusted and Average fuel price per gallon, adjusted
The following table shows a reconciliation of fuel expense (a GAAP measure) to fuel expense, adjusted (a non-GAAP financial measure). We adjust for MTM adjustments and settlements on hedges and the impact of Delta Private Jets for the same reasons described under the heading pre-tax (loss)/income, adjusted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel expense, adjusted reconciliation
|
|
|
|
|
|
Average Price Per Gallon
|
|
|
|
|
|
Three Months Ended June 30,
|
Three Months Ended June 30,
|
|
|
|
(in millions, except per gallon data)
|
2021
|
2020
|
2019
|
2021
|
2020
|
2019
|
|
|
|
|
Total fuel expense
|
$
|
1,487
|
|
$
|
372
|
|
$
|
2,291
|
|
$
|
2.16
|
|
$
|
2.25
|
|
$
|
2.08
|
|
|
|
|
|
MTM adjustments and settlements on hedges
|
(24)
|
|
(14)
|
|
(10)
|
|
(0.03)
|
|
(0.09)
|
|
(0.01)
|
|
|
|
|
|
Delta Private Jets adjustment
|
—
|
|
—
|
|
(8)
|
|
—
|
|
—
|
|
(0.01)
|
|
|
|
|
|
Total fuel expense, adjusted
|
$
|
1,463
|
|
$
|
357
|
|
$
|
2,274
|
|
$
|
2.12
|
|
$
|
2.16
|
|
$
|
2.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Price Per Gallon
|
|
|
|
|
|
Six Months Ended June 30,
|
Six Months Ended June 30,
|
|
|
|
(in millions, except per gallon data)
|
2021
|
2020
|
2019
|
2021
|
2020
|
2019
|
|
|
|
|
Total fuel expense
|
$
|
2,504
|
|
$
|
1,967
|
|
$
|
4,269
|
|
$
|
2.03
|
|
$
|
1.88
|
|
$
|
2.07
|
|
|
|
|
|
MTM adjustments and settlements on hedges
|
(1)
|
|
(7)
|
|
(17)
|
|
—
|
|
(0.01)
|
|
(0.01)
|
|
|
|
|
|
Delta Private Jets adjustment
|
—
|
|
—
|
|
(15)
|
|
—
|
|
—
|
|
(0.01)
|
|
|
|
|
|
Total fuel expense, adjusted
|
$
|
2,504
|
|
$
|
1,959
|
|
$
|
4,237
|
|
$
|
2.03
|
|
$
|
1.87
|
|
$
|
2.06
|
|
|
|
|
TRASM, adjusted
The following table shows a reconciliation of TRASM (a GAAP measure) to TRASM, adjusted (a non-GAAP financial measure). We adjust TRASM for refinery sales to third parties for the same reason described above under the heading operating expense, adjusted. We adjust for the impact of Delta Private Jets for the same reason described above under the heading pre-tax (loss)/income, adjusted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRASM, adjusted reconciliation
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
|
2021
|
2020
|
2019
|
|
2021
|
2020
|
2019
|
|
|
|
|
TRASM (cents)
|
14.68
|
¢
|
13.85
|
¢
|
17.47
|
¢
|
|
12.72
|
¢
|
14.48
|
¢
|
17.15
|
¢
|
|
|
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
|
|
|
Third-party refinery sales
|
(1.60)
|
|
(2.76)
|
|
(0.06)
|
|
|
(1.49)
|
|
(0.42)
|
|
(0.07)
|
|
|
|
|
|
Delta Private Jets adjustment
|
—
|
|
—
|
|
(0.07)
|
|
|
—
|
|
—
|
|
(0.07)
|
|
|
|
|
|
TRASM, adjusted
|
13.08
|
¢
|
11.10
|
¢
|
17.35
|
¢
|
|
11.23
|
¢
|
14.06
|
¢
|
17.01
|
¢
|
|
|
|
Delta Air Lines, Inc. June 2021 Form 10-Q 39
Item 2. MD&A - Supplemental Information
CASM-Ex
The following table shows a reconciliation of operating cost per available seat mile ("CASM") (a GAAP measure) to CASM-Ex (a non-GAAP financial measure). CASM-Ex excludes restructuring charges and government grant recognition, which, as discussed above under the heading pre-tax (loss)/income, adjusted, are directly related to the impact of the COVID-19 pandemic and our response. We adjust for refinery sales to third parties for the same reason described above under the heading operating expense, adjusted. We adjust for the impact of Delta Private Jets for the same reason described above under the heading pre-tax (loss)/income, adjusted. We also adjust CASM for the following items to determine CASM-Ex for the reasons described below.
•Aircraft fuel and related taxes. The volatility in fuel prices impacts the comparability of year-over-year financial performance. The adjustment for aircraft fuel and related taxes allows investors to better understand and analyze our non-fuel costs and year-over-year financial performance.
•Profit sharing. We adjust for profit sharing because this adjustment allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASM-Ex reconciliation
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
|
2021
|
2020
|
2019
|
|
2021
|
2020
|
2019
|
|
|
|
|
CASM (cents)
|
13.00
|
¢
|
59.30
|
¢
|
14.51
|
¢
|
|
13.38
|
¢
|
22.00
|
¢
|
14.80
|
¢
|
|
|
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges
|
(0.02)
|
|
(23.15)
|
|
—
|
|
|
0.04
|
|
(3.53)
|
|
—
|
|
|
|
|
|
Government grant recognition
|
3.10
|
|
12.08
|
|
—
|
|
|
3.03
|
|
1.84
|
|
—
|
|
|
|
|
|
Aircraft fuel and related taxes
|
(3.06)
|
|
(3.51)
|
|
(3.19)
|
|
|
(2.82)
|
|
(2.83)
|
|
(3.18)
|
|
|
|
|
|
Third-party refinery sales
|
(1.60)
|
|
(2.76)
|
|
(0.06)
|
|
|
(1.49)
|
|
(0.42)
|
|
(0.07)
|
|
|
|
|
|
Profit sharing
|
—
|
|
—
|
|
(0.72)
|
|
|
—
|
|
—
|
|
(0.55)
|
|
|
|
|
|
Delta Private Jets adjustment
|
—
|
|
—
|
|
(0.06)
|
|
|
—
|
|
—
|
|
(0.06)
|
|
|
|
|
|
CASM-Ex
|
11.42
|
¢
|
41.96
|
¢
|
10.47
|
¢
|
|
12.14
|
¢
|
17.06
|
¢
|
10.95
|
¢
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASM, adjusted
The following table shows a reconciliation of CASM (a GAAP measure) to CASM, adjusted (a non-GAAP financial measure). CASM, adjusted excludes restructuring charges and government grant recognition, which, as discussed above under the heading pre-tax (loss)/income, adjusted, are directly related to the impact of the COVID-19 pandemic and our response. We also adjust CASM for MTM adjustments and settlements on hedges and the impact of Delta Private Jets for the same reasons described above under the heading pre-tax (loss)/income, adjusted. We adjust for refinery sales to third parties for the same reason described above under the heading operating expense, adjusted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASM, adjusted reconciliation
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2021
|
2020
|
2019
|
|
2021
|
2020
|
2019
|
|
CASM (cents)
|
13.00
|
¢
|
59.30
|
¢
|
14.51
|
¢
|
|
13.38
|
¢
|
22.00
|
¢
|
14.80
|
¢
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
Restructuring charges
|
(0.02)
|
|
(23.15)
|
|
—
|
|
|
0.04
|
|
(3.53)
|
|
—
|
|
|
Government grant recognition
|
3.10
|
|
12.08
|
|
—
|
|
|
3.03
|
|
1.84
|
|
—
|
|
|
MTM adjustments and settlements on hedges
|
(0.05)
|
|
(0.14)
|
|
(0.01)
|
|
|
—
|
|
(0.01)
|
|
(0.01)
|
|
|
Third-party refinery sales
|
(1.60)
|
|
(2.76)
|
|
(0.06)
|
|
|
(1.49)
|
|
(0.42)
|
|
(0.07)
|
|
|
Delta Private Jets adjustment
|
—
|
|
—
|
|
(0.07)
|
|
|
—
|
|
—
|
|
(0.07)
|
|
|
CASM, adjusted
|
14.43
|
¢
|
45.33
|
¢
|
14.37
|
¢
|
|
14.96
|
¢
|
19.88
|
¢
|
14.65
|
¢
|
Delta Air Lines, Inc. June 2021 Form 10-Q 40
Item 2. MD&A - Supplemental Information
Free Cash Flow
We present free cash flow because management believes this metric is helpful to investors to evaluate the company's ability to generate cash that is available for use for debt service or general corporate initiatives. Adjustments include:
•Net (redemptions)/purchases of short-term investments. Net (redemptions)/purchases of short-term investments represent the net purchase and sale activity of investments and marketable securities in the period, including gains and losses. We adjust for this activity to provide investors a better understanding of the company's free cash flow generated by our operations.
•Strategic investments and related. Cash flows related to our investments in and related transactions with other airlines are included in our GAAP investing activities. We adjust for this activity because it provides a more meaningful comparison to our airline industry peers.
•Net cash flows related to certain airport construction projects and other. Cash flows related to certain airport construction projects are included in our GAAP operating activities and capital expenditures. We have adjusted for these items, which were primarily funded by cash restricted for airport construction, to provide investors a better understanding of the company's free cash flow and capital expenditures that are core to our operational performance in the periods shown.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow reconciliation
|
|
|
Three Months Ended June 30,
|
|
(in millions)
|
2021
|
2020
|
2019
|
|
Net cash provided by/(used in) operating activities
|
$
|
1,866
|
|
$
|
(290)
|
|
$
|
3,268
|
|
|
Net cash provided by/(used in) investing activities
|
26
|
|
(4,076)
|
|
(1,562)
|
|
|
Adjusted for:
|
|
|
|
|
Net (redemptions)/purchases of short-term investments
|
(697)
|
|
4,302
|
|
—
|
|
|
Strategic investments and related
|
(74)
|
|
—
|
|
89
|
|
|
Net cash flows related to certain airport construction projects and other
|
329
|
|
43
|
|
54
|
|
|
Free cash flow
|
$
|
1,450
|
|
$
|
(21)
|
|
$
|
1,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delta Air Lines, Inc. June 2021 Form 10-Q 41