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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-5424
DAL-20210630_G1.JPG
DELTA AIR LINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 58-0218548
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
Post Office Box 20706
Atlanta, Georgia
30320-6001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 715-2600

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $0.0001 per share DAL New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer  Non-accelerated filer 
Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
Number of shares outstanding by each class of common stock, as of June 30, 2021:
Common Stock, $0.0001 par value - 639,914,878 shares outstanding
This document is also available through our website at http://ir.delta.com/.




Table of Contents
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Forward Looking Statements
Unless otherwise indicated or the context otherwise requires, the terms "Delta," "we," "us" and "our" refer to Delta Air Lines, Inc. and its subsidiaries.

FORWARD-LOOKING STATEMENTS

Statements in this Form 10-Q (or otherwise made by us or on our behalf) that are not historical facts, including statements about our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations. Known material risk factors applicable to Delta are described in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 ("Form 10-K"), other than risks that could apply to any issuer or offering. All forward-looking statements speak only as of the date made, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report except as required by law.

Delta Air Lines, Inc. June 2021 Form 10-Q                                 1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Delta Air Lines, Inc.

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of Delta Air Lines, Inc. (the Company) as of June 30, 2021, the related condensed consolidated statements of operations and comprehensive income/(loss) and consolidated statements of stockholders' equity for the three-month and six-month periods ended June 30, 2021 and 2020, the condensed consolidated statements of cash flows for the six-month periods ended June 30, 2021 and 2020 and the related notes (collectively referred to as the "condensed consolidated interim financial statements"). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, the related consolidated statements of operations, comprehensive loss, cash flows, and stockholders' equity for the year then ended, and the related notes (not presented herein); and in our report dated February 12, 2021, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


/s/ Ernst & Young LLP
Atlanta, Georgia
July 14, 2021

Delta Air Lines, Inc. June 2021 Form 10-Q                                 2

Financial Statements

DELTA AIR LINES, INC.
Consolidated Balance Sheets
(Unaudited)
(in millions, except share data) June 30,
2021
December 31,
2020
ASSETS
Current Assets:
Cash and cash equivalents $ 10,357  $ 8,307 
Short-term investments 4,873  5,789 
Accounts receivable, net of an allowance for uncollectible accounts of $80 and $89
2,258  1,396 
Fuel inventory 641  377 
Expendable parts and supplies inventories, net of an allowance for obsolescence of $178 and $188
364  355 
Prepaid expenses and other 1,173  1,180 
Total current assets 19,666  17,404 
Noncurrent Assets:
Property and equipment, net of accumulated depreciation and amortization of $18,477 and $17,511
27,508  26,529 
Operating lease right-of-use assets 5,653  5,733 
Goodwill 9,753  9,753 
Identifiable intangibles, net of accumulated amortization of $888 and $883
6,006  6,011 
Cash restricted for airport construction 929  1,556 
Equity investments 2,143  1,665 
Deferred income taxes, net 2,158  1,988 
Other noncurrent assets 1,493  1,357 
Total noncurrent assets 55,643  54,592 
Total assets $ 75,309  $ 71,996 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of debt and finance leases $ 2,372  $ 1,732 
Current maturities of operating leases 638  678 
Air traffic liability 6,798  4,044 
Accounts payable 3,930  2,840 
Accrued salaries and related benefits 2,215  2,086 
Loyalty program deferred revenue 2,757  1,777 
Fuel card obligation 1,100  1,100 
Other accrued liabilities 3,763  1,670 
Total current liabilities 23,573  15,927 
Noncurrent Liabilities:
Debt and finance leases 26,679  27,425 
Noncurrent air traffic liability 140  500 
Pension, postretirement and related benefits 8,644  10,630 
Loyalty program deferred revenue 4,644  5,405 
Noncurrent operating leases 5,633  5,713 
Other noncurrent liabilities 4,715  4,862 
Total noncurrent liabilities 50,455  54,535 
Commitments and Contingencies
Stockholders' Equity:
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 649,637,387 and 647,352,203
shares issued
—  — 
Additional paid-in capital 11,396  11,259 
Accumulated deficit (953) (428)
Accumulated other comprehensive loss (8,882) (9,038)
Treasury stock, at cost, 9,722,509 and 9,169,683 shares
(280) (259)
Total stockholders' equity 1,281  1,534 
Total liabilities and stockholders' equity $ 75,309  $ 71,996 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Delta Air Lines, Inc. June 2021 Form 10-Q                                 3

Financial Statements
DELTA AIR LINES, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss)
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
(in millions, except per share data) 2021 2020 2021 2020
Operating Revenue:
Passenger $ 5,339  $ 678  $ 8,087  $ 8,247 
Cargo 251  108  466  261 
Other 1,536  682  2,723  1,552 
  Total operating revenue 7,126  1,468  11,276  10,060 
Operating Expense:
Salaries and related costs 2,328  2,127  4,530  4,989 
Aircraft fuel and related taxes 1,487  372  2,504  1,967 
Ancillary businesses and refinery 939  401  1,645  620 
Contracted services 570  369  1,089  1,117 
Depreciation and amortization 501  591  993  1,268 
Landing fees and other rents 460  422  953  972 
Regional carrier expense 403  338  804  914 
Aircraft maintenance materials and outside repairs 287  43  581  512 
Passenger commissions and other selling expenses 222  50  332  448 
Passenger service 175  91  294  364 
Aircraft rent 104  96  208  196 
Restructuring charges 2,454  (36) 2,454 
Government grant recognition (1,504) (1,280) (2,689) (1,280)
Other 330  209  650  744 
Total operating expense 6,310  6,283  11,858  15,285 
Operating Income/(Loss) 816  (4,815) (582) (5,225)
Non-Operating Expense:
Interest expense, net (338) (194) (700) (273)
Impairments and equity method losses —  (2,058) (54) (2,318)
Gain/(loss) on investments, net 211  473  (104)
Miscellaneous, net 87  45  124  299 
Total non-operating expense, net (40) (2,199) (157) (2,396)
Income/(Loss) Before Income Taxes 776  (7,014) (739) (7,621)
Income Tax (Provision)/Benefit (124) 1,297  214  1,370 
Net Income/(Loss) $ 652  $ (5,717) $ (525) $ (6,251)
Basic Earnings/(Loss) Per Share $ 1.02  $ (9.01) $ (0.82) $ (9.83)
Diluted Earnings/(Loss) Per Share $ 1.02  $ (9.01) $ (0.82) $ (9.83)
Cash Dividends Declared Per Share $ —  $ —  $ —  $ 0.40 
Comprehensive Income/(Loss) $ 730  $ (5,756) $ (369) $ (6,199)
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Delta Air Lines, Inc. June 2021 Form 10-Q                                 4

Financial Statements
DELTA AIR LINES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
(in millions) 2021 2020
Net Cash Provided by Operating Activities $ 2,557  $ 68 
Cash Flows from Investing Activities:
Property and equipment additions:
Flight equipment, including advance payments (527) (659)
Ground property and equipment, including technology (672) (559)
Proceeds from sale-leaseback transactions —  465 
Purchase of short-term investments (5,587) (4,955)
Redemption of short-term investments 6,494  654 
Purchase of equity investments —  (2,099)
Other, net 258  107 
Net cash used in investing activities (34) (7,046)
Cash Flows from Financing Activities:
Proceeds from short-term obligations —  3,261 
Proceeds from long-term obligations 1,902  11,747 
Proceeds from sale-leaseback transactions —  2,306 
Payments on debt and finance lease obligations (3,133) (1,712)
Repurchase of common stock —  (344)
Cash dividends —  (260)
Fuel card obligation —  103 
Other, net 111  (35)
Net cash (used in)/provided by financing activities (1,120) 15,066 
Net Increase in Cash, Cash Equivalents and Restricted Cash Equivalents 1,403  8,088 
Cash, cash equivalents and restricted cash equivalents at beginning of period 10,055  3,730 
Cash, cash equivalents and restricted cash equivalents at end of period $ 11,458  $ 11,818 
Non-Cash Transactions:
Flight and ground equipment acquired under finance leases $ 779  $ 213 
Right-of-use assets acquired under operating leases 259  393 
Other financings 240  — 
The following table provides a reconciliation of cash, cash equivalents and restricted cash equivalents reported within the Consolidated Balance Sheets to the total of the same such amounts shown above:
June 30,
(in millions) 2021 2020
Current assets:
Cash and cash equivalents $ 10,357  $ 11,366 
Restricted cash included in prepaid expenses and other 172  113 
Noncurrent assets:
Cash restricted for airport construction 929  339 
Total cash, cash equivalents and restricted cash equivalents $ 11,458  $ 11,818 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Delta Air Lines, Inc. June 2021 Form 10-Q                                 5

Financial Statements
DELTA AIR LINES, INC.
Consolidated Statements of Stockholders' Equity
(Unaudited)
Common Stock Additional
Paid-In Capital
Accumulated Deficit Accumulated
Other
Comprehensive Loss
Treasury Stock
(in millions, except per share data) Shares Amount Shares Amount Total
Balance at December 31, 2020
647  $ —  $ 11,259  $ (428) $ (9,038) $ (259) $ 1,534 
Net loss —  —  —  (1,177) —  —  —  (1,177)
Other comprehensive income —  —  —  —  78  —  —  78 
Common stock issued for employee equity awards(1)
—  23  —  —  (20)
Government grant warrant issuance —  —  44  —  —  —  —  44 
Balance at March 31, 2021
649  $ —  $ 11,326  $ (1,605) $ (8,960) 10  $ (279) $ 482 
Net income —  —  —  652  —  —  —  652 
Other comprehensive income —  —  —  —  78  —  —  78 
Common stock issued for employee equity awards(1)
—  28  —  —  —  (1) 27 
Government grant warrant issuance —  —  42  —  —  —  —  42 
Balance at June 30, 2021
650  $ —  $ 11,396  $ (953) $ (8,882) 10  $ (280) $ 1,281 

(1)Treasury shares were withheld for payment of taxes, at a weighted average price per share of $38.35 and $46.21 in the March 2021 quarter and June 2021 quarter, respectively.


Common Stock Additional
Paid-In Capital
 Retained
Earnings
Accumulated
Other
Comprehensive Loss
Treasury Stock
(in millions, except per share data) Shares Amount Shares Amount Total
Balance at December 31, 2019
652  $ —  $ 11,129  $ 12,454  $ (7,989) $ (236) $ 15,358 
Net loss —  —  —  (534) —  —  —  (534)
Dividends declared —  —  —  (257) —  —  —  (257)
Other comprehensive income —  —  —  —  91  —  —  91 
Common stock issued for employee equity awards(1)
—  29  —  —  (34) (5)
Stock purchased and retired (6) —  (104) (240) —  —  —  (344)
Balance at March 31, 2020
647  $ —  $ 11,054  $ 11,423  $ (7,898) 10  $ (270) $ 14,309 
Net loss —  —  —  (5,717) —  —  —  (5,717)
Other comprehensive loss —  —  —  —  (39) —  —  (39)
Common stock issued for employee equity awards(1)
—  —  38  —  —  —  (1) 37 
Government grant warrant issuance —  —  100  —  —  —  —  100 
Balance at June 30, 2020
647  $ —  $ 11,192  $ 5,706  $ (7,937) 10  $ (271) $ 8,690 

(1)Treasury shares were withheld for payment of taxes, at a weighted average price per share of $56.48 and $25.56 in the March 2020 quarter and June 2020 quarter, respectively.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Delta Air Lines, Inc. June 2021 Form 10-Q                                 6

Notes to the Consolidated Financial Statements
DELTA AIR LINES, INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Delta Air Lines, Inc. and our consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by GAAP for complete financial statements. As a result, this Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying Notes in our Form 10-K for the year ended December 31, 2020.

Management believes the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including normal recurring items, considered necessary for a fair statement of results for the interim periods presented.

Due to impacts from the COVID-19 pandemic and the uncertain pace of recovery, seasonal variations in the demand for air travel, the volatility of aircraft fuel prices and other factors, operating results for the three and six months ended June 30, 2021 are not necessarily indicative of operating results for the entire year.

We reclassified certain prior period amounts to conform to the current period presentation. Unless otherwise noted, all amounts disclosed are stated before consideration of income taxes.

Regional Carrier Expense

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 Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss) ("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.


Delta Air Lines, Inc. June 2021 Form 10-Q                                 7

Notes to the Consolidated Financial Statements
NOTE 2. REVENUE RECOGNITION

Passenger Revenue
Three Months Ended June 30,
Six Months Ended June 30,
(in millions) 2021 2020 2021 2020
Ticket $ 4,553  $ 568  $ 6,830  $ 7,078 
Loyalty travel awards 428  45  669  588 
Travel-related services 358  65  588  581 
Total passenger revenue $ 5,339  $ 678  $ 8,087  $ 8,247 

We recognized approximately $1.4 billion and $2.9 billion in passenger revenue during the six months ended June 30, 2021 and 2020, respectively, that had been recorded in our air traffic liability balance at the beginning of those periods.

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.

Other Revenue
Three Months Ended June 30,
Six Months Ended June 30,
(in millions) 2021 2020 2021 2020
Ancillary businesses and refinery $ 962  $ 390  $ 1,688  $ 613 
Loyalty program 439  269  807  743 
Miscellaneous 135  23  228  196 
Total other revenue $ 1,536  $ 682  $ 2,723  $ 1,552 

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.

Loyalty Program. Our SkyMiles loyalty program allows customers to earn mileage credits ("miles") by flying on Delta, Delta Connection and other airlines that participate in the loyalty program. Customers can also earn miles through participating companies, such as credit card companies, hotels, car rental agencies and ridesharing companies, who purchase miles from us. Our most significant contract to sell miles relates to our co-brand credit card relationship with American Express. During the six months ended June 30, 2021 and 2020, total cash sales from marketing agreements related to our loyalty program were $1.8 billion and $1.5 billion, respectively, which are allocated to travel and other performance obligations.

Current Activity of the Loyalty Program. Miles are combined in one homogeneous pool and are not separately identifiable. Therefore, the revenue is comprised of miles that were part of the loyalty program deferred revenue balance at the beginning of the period as well as miles that were issued during the period.

The table below presents the activity of the current and noncurrent loyalty program deferred revenue and includes miles earned through travel and miles sold to participating companies, which are primarily through marketing agreements.

Loyalty program activity
(in millions) 2021 2020
Balance at January 1 $ 7,182  $ 6,728 
Miles earned 915  872 
Travel miles redeemed (669) (588)
Non-travel miles redeemed (27) (31)
Balance at June 30
$ 7,401  $ 6,981 

The timing of mile redemptions can vary widely; however, the majority of miles have historically been redeemed within two years of being earned.
Delta Air Lines, Inc. June 2021 Form 10-Q                                 8

Notes to the Consolidated Financial Statements
Revenue by Geographic Region

Operating revenue for the airline segment is recognized in a specific geographic region based on the origin, flight path and destination of each flight segment. A significant portion of the refinery segment's revenues typically consists of fuel sales to support the airline, which is eliminated in the Condensed Consolidated Financial Statements. The remaining operating revenue for the refinery segment is included in the domestic region. Our passenger and operating revenue by geographic region is summarized in the following tables:

Passenger revenue by geographic region
Passenger Revenue
Three Months Ended June 30,
Six Months Ended June 30,
(in millions) 2021 2020 2021 2020
Domestic $ 4,478  $ 564  $ 6,758  $ 6,165 
Atlantic 288  64  430  882 
Latin America 485  18  749  783 
Pacific 88  32  150  417 
Total $ 5,339  $ 678  $ 8,087  $ 8,247 

Operating revenue by geographic region
Operating Revenue
Three Months Ended June 30,
Six Months Ended June 30,
(in millions) 2021 2020 2021 2020
Domestic $ 5,894  $ 1,264  $ 9,262  $ 7,531 
Atlantic 467  119  734  1,113 
Latin America 586  26  967  889 
Pacific 179  59  313  527 
Total $ 7,126  $ 1,468  $ 11,276  $ 10,060 



Delta Air Lines, Inc. June 2021 Form 10-Q                                 9

Notes to the Consolidated Financial Statements
NOTE 3. FAIR VALUE MEASUREMENTS

Assets Measured at Fair Value on a Recurring Basis
(in millions) June 30,
2021
Level 1 Level 2 Level 3
Cash equivalents $ 7,887  $ 7,887  $ —  $ — 
Restricted cash equivalents 1,101  1,101  —  — 
Short-term investments 4,873  2,807  2,066  — 
Long-term investments 1,888  1,230  557  101 
(in millions) December 31,
2020
Level 1 Level 2 Level 3
Cash equivalents $ 5,755  $ 5,755  $ —  $ — 
Restricted cash equivalents 1,747  1,747  —  — 
Short-term investments 5,789  3,919  1,870  — 
Long-term investments 1,417  948  38  431 

Cash Equivalents and Restricted Cash Equivalents. Cash equivalents generally consist of money market funds. Restricted cash equivalents are recorded in prepaid expenses and other and cash restricted for airport construction on our Consolidated Balance Sheet ("balance sheet"). Restricted cash equivalents generally consist of money market funds, time deposits, commercial paper and negotiable certificates of deposit, which primarily relate to proceeds from debt issued to finance, among other things, a portion of the construction costs for our new terminal facilities at New York's LaGuardia Airport. The fair value of these cash equivalents is based on a market approach using prices generated by market transactions involving identical or comparable assets.

Short-Term Investments. Short-term investments consist of U.S. government and agency securities. The fair values of these investments are based on a market approach using industry standard valuation techniques that incorporate observable inputs such as quoted market prices, interest rates, benchmark curves, credit ratings of the security and other observable information.

As of June 30, 2021, the estimated fair value of our short-term investments was $4.9 billion. Of these investments, $4.2 billion are expected to mature in one year or less, with the remainder maturing by the end of 2022. Investments with maturities beyond one year when purchased are classified as short-term investments if they are expected to be available to support our short-term liquidity needs.

Long-Term Investments. Our long-term investments measured at fair value primarily consist of equity investments, which are valued based on market prices or other observable transactions and inputs, and are recorded in equity investments on our balance sheet. In the March 2021 quarter, Wheels Up entered into an agreement to merge with Aspirational Consumer Lifestyle Corp ("Aspirational"), a publicly-traded special purpose acquisition company. As of June 30, 2021, our investment in Wheels Up continues to be classified as Level 2. Consistent with our other equity investments that are traded on a public exchange, when Wheels Up shares are actively traded, this investment will be recharacterized as Level 1. In the June 2021 quarter, shares of Clear Secure, Inc. ("CLEAR") became publicly traded and as of June 30, 2021 our investment is classified as Level 1. In addition, our equity investments in other private companies are classified as Level 3 in the fair value hierarchy as their equity is not traded on a public exchange and our valuations incorporate certain unobservable inputs, including non-public equity issuances and forecasts provided by our investees. Fair value measurement using unobservable inputs is inherently uncertain, and a change in significant inputs could result in different fair values. See Note 4, "Investments," for further information on our equity investments.


Delta Air Lines, Inc. June 2021 Form 10-Q                                 10

Notes to the Consolidated Financial Statements
NOTE 4. INVESTMENTS

We have developed strategic relationships with a number of airlines and airline services companies through joint ventures and other forms of cooperation and support, including equity investments. Our equity investments reinforce our commitment to these relationships and generally enhance our ability to offer input to the investee on strategic issues and direction, in some cases through representation on the board of directors.

Changes in the valuation of investments accounted for at fair value are recorded in gain/(loss) on investments in our income statement within non-operating expense and are driven by changes in stock prices, other valuation techniques for investments in companies without publicly-traded shares and foreign currency fluctuations. We recorded gains of $211 million and $473 million on our fair value investments during the three and six months ended June 30, 2021 and gains of $8 million and losses of $104 million during the three and six months ended June 30, 2020, respectively.

Our share of Unifi Aviation's financial results is recorded in contracted services in our income statement as this entity is integral to the operations of our business, while our share of other equity method investees' financial results is recorded in impairments and equity method losses in our income statement under non-operating expense. If an investment accounted for under the equity method experiences a loss in value that is determined to be other than temporary, we will reduce our carrying value of the investment to fair value and record the loss in impairments and equity method losses in our income statement.

Equity investments ownership interest and carrying value
Accounting Treatment Ownership Interest Carrying Value
(in millions) June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020
Wheels Up Fair Value 24  % 24  % $ 520  $ 210 
Hanjin-KAL Fair Value 13  % 13  % 517  512 
Air France-KLM Fair Value % % 181  235 
China Eastern Fair Value % % 197  201 
CLEAR Fair Value % % 331  120 
Unifi Aviation Equity Method 49  % 49  % 162  154 
Other investments Various 234  233 
Equity investments $ 2,143  $ 1,665 

Wheels Up. In the March 2021 quarter, Wheels Up entered into a definitive agreement to become publicly-traded via a merger with Aspirational, and the transaction closed on July 13, 2021. Aspirational changed its name to Wheels Up Experience Inc. upon consummation of the transaction, and the Wheels Up common stock began trading on the New York Stock Exchange under the symbol UP. We account for our investment under the fair value option and will use the stock price to recognize fair value adjustments beginning in the September 2021 quarter.

Clear Secure, Inc. ("CLEAR"). In June 2021, CLEAR launched and priced an initial public offering of Class A common stock, which began trading on the New York Stock Exchange under the symbol YOU. Based on the June 30, 2021 closing price of those shares, our 6% ownership interest (on a fully exchanged and converted basis) in CLEAR is valued at $331 million.

Other Investments. This category includes various investments that are accounted for at fair value or under the equity method, depending on our ownership interest and the level of influence conveyed by our investment. Included therein are our investments in Grupo Aeroméxico, LATAM Airlines Group S.A. ("LATAM") and Virgin Atlantic, all of which are undergoing in-court or out-of-court restructurings, and the carrying values of these investments have been reduced to and remain zero at June 30, 2021. In order to support our relationships with these carriers, we have provided them with strategic and operational assistance through their restructurings. We have notes payable of approximately $530 million, which are recorded in current maturities of debt and finance leases, and receivables from those partners recorded within other noncurrent assets as of June 30, 2021, including $185 million related to our option to purchase certain obligations of a lender under Grupo Aeroméxico's restructuring process and that lender’s right to require our purchase of that portion of its obligations.

GOL. During 2020, we loaned GOL Linhas Aéreas Inteligentes, the parent company of GOL Linhas Aéreas (operating as GOL), $250 million to be used exclusively to repay the term loan we had previously guaranteed. In the June 2021 quarter, GOL repaid the outstanding balance of this loan in full.


Delta Air Lines, Inc. June 2021 Form 10-Q                                 11

Notes to the Consolidated Financial Statements
NOTE 5. DEBT

Summary of outstanding debt by category
Maturity Interest Rate(s) Per Annum at June 30, December 31,
(in millions) Dates June 30, 2021 2021 2020
Unsecured notes 2022 to 2029 2.90% to 7.38% $ 4,750  $ 5,350 
Unsecured Payroll Support Program Loan 2030 1.00% 1,648  1,648 
Unsecured Payroll Support Program Extension Loan 2031 1.00% 957  — 
Unsecured Payroll Support Program 3 Loan 2031 1.00% 891  — 
Financing arrangements secured by SkyMiles assets:
SkyMiles Notes(1)
2023 to 2028 4.50% and 4.75% 6,000  6,000 
SkyMiles Term Loan(1)(2)
2023 to 2027 4.75% 3,000  3,000 
Financing arrangements secured by slots, gates and/or routes:
2020 Senior Secured Notes 2025 7.00% 3,500  3,500 
2020 Term Loan n/a n/a —  1,493 
2018 Revolving Credit Facility(2)
2022 to 2023 Undrawn —  — 
Financing arrangements secured by aircraft:
Certificates(1)
2021 to 2028 2.00% to 8.00% 2,009  2,633 
Notes(1)(2)
2021 to 2033 0.71% to 5.75% 1,279  1,284 
NYTDC Special Facilities Revenue Bonds, Series 2020(1)
2026 to 2045 4.00% to 5.00% 1,511  1,511 
NYTDC Special Facilities Revenue Bonds, Series 2018(1)
2022 to 2036 4.00% to 5.00% 1,383  1,383 
Other financings(1)(2)
2021 to 2030 2.25% to 8.00% 594  412 
Other revolving credit facilities(2)
2022 Undrawn —  — 
Total secured and unsecured debt 27,522  28,214 
Unamortized (discount)/premium and debt issue cost, net and other (257) (240)
Total debt 27,265  27,974 
Less: current maturities (2,019) (1,443)
Total long-term debt $ 25,246  $ 26,531 
(1)Due in installments.
(2)Certain financings are comprised of variable rate debt. All variable rates are equal to LIBOR (generally subject to a floor) or another index rate, in each case plus a specified margin.

Unsecured Payroll Support Program Extension Loans

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. Other conditions include prohibitions on share repurchases and dividends through March 2022 and certain limitations on executive compensation until October 2022. The Department of Transportation also has the authority until March 1, 2022 to require airlines that received payroll support program funds to maintain scheduled air service deemed necessary to any point served by the airline before March 1, 2020.

Delta Air Lines, Inc. June 2021 Form 10-Q                                 12

Notes to the Consolidated Financial Statements
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. Other conditions include prohibitions on share repurchases and dividends through September 30, 2022 and certain limitations on executive compensation until April 1, 2023.

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.

A summary of the amounts received and warrants issued under the initial payroll support program under the CARES Act and the program extensions is set forth in the following table:

Summary of payroll support program activity
(in millions) Total Grant Loan Number of Warrants
Percentage of Outstanding Shares at June 30, 2021
Payroll Support Program (PSP1) $ 5,594  $ 3,946  $ 1,648  6.8  1.1  %
Payroll Support Program Extension (PSP2) (1)
3,290  2,333  957  2.4  0.4  %
Payroll Support Program 3 (PSP3) (2)
3,069  2,178  891  1.9  0.3  %
Total $ 11,953  $ 8,457  $ 3,496  11.1  1.8  %
(1)During the June 2021 quarter the remaining $1.1 billion of this grant was recognized in government grant recognition in our income statement.
(2)During the June 2021 quarter $356 million of this grant was recognized in government grant recognition in our income statement and $1.8 billion is deferred in other accrued liabilities on our balance sheet as of June 30, 2021.


2020 Term Loan

In 2020 we entered into a $1.5 billion term loan secured by certain slots, gates and routes. In the March 2021 quarter we repaid in full the term loan, which was scheduled to mature in April 2023, and incurred a $56 million loss on extinguishment of debt, which is recorded in miscellaneous, net in non-operating expense in our income statement.

Enhanced Equipment Trust Certificates ("EETCs") Prepayments

In June 2021, we repaid in full approximately $450 million of various EETCs which were scheduled to mature between 2022 and 2023, and incurred a $26 million loss on extinguishment of debt, which is recorded in miscellaneous, net in non-operating expense in our income statement.

Delta Air Lines, Inc. June 2021 Form 10-Q                                 13

Notes to the Consolidated Financial Statements
Availability Under Revolving Facilities

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.

Fair Value of Debt

Market risk associated with our fixed- and variable-rate debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates. The fair value of debt, shown below, is principally based on reported market values, recently completed market transactions and estimates based on interest rates, maturities, credit risk and where applicable, underlying collateral. Debt is primarily classified as Level 2 within the fair value hierarchy.
    
Fair value of outstanding debt
(in millions) June 30,
2021
December 31,
2020
Net carrying amount $ 27,265  $ 27,974 
Fair value $ 29,600  $ 29,800 

Covenants

Our debt agreements contain various affirmative, negative and financial covenants. We were in compliance with the covenants in our debt agreements at June 30, 2021.


Delta Air Lines, Inc. June 2021 Form 10-Q                                 14

Notes to the Consolidated Financial Statements
NOTE 6. EMPLOYEE BENEFIT PLANS

Employee benefit plans net periodic (benefit) cost
Pension Benefits Other Postretirement and Postemployment Benefits
(in millions) 2021 2020 2021 2020
Three Months Ended June 30,
Service cost $ —  $ —  $ 21  $ 24 
Interest cost 146  175  29  28 
Expected return on plan assets (381) (343) (9) (11)
Amortization of prior service credit —  —  (2) (2)
Recognized net actuarial loss 88  74  15  10 
Settlements —  —  — 
Net periodic (benefit) cost $ (147) $ (91) $ 54  $ 49 

Employee benefit plans net periodic (benefit) cost
Pension Benefits Other Postretirement and Postemployment Benefits
(in millions) 2021 2020 2021 2020
Six Months Ended June 30,
Service cost $ —  $ —  $ 43  $ 48 
Interest cost 291  351  59  56 
Expected return on plan assets (761) (687) (17) (22)
Amortization of prior service credit —  —  (3) (4)
Recognized net actuarial loss 177  149  27  21 
Settlements —  —  — 
Net periodic (benefit) cost $ (293) $ (184) $ 109  $ 99 

Service cost is recorded in salaries and related costs in our income statement, while all other components are recorded within miscellaneous, net under non-operating expense.

We have no minimum funding requirements for our defined benefit pension plans in 2021, however we voluntarily contributed $1.5 billion to these plans in the June 2021 quarter.


Delta Air Lines, Inc. June 2021 Form 10-Q                                 15

Notes to the Consolidated Financial Statements
NOTE 7. COMMITMENTS AND CONTINGENCIES

Aircraft Purchase Commitments

Our future aircraft purchase commitments totaled approximately $15.2 billion at June 30, 2021. Also, as of June 30, 2021, we had commitments under leases that had not yet commenced of $719 million. These leases will commence between 2021 and 2024 with lease terms ranging from 7 to 12 years.

Aircraft purchase commitments
(in millions) Total
Six months ending December 31, 2021
$ 980 
2022 3,350 
2023 2,890 
2024 3,060 
2025 2,660 
Thereafter 2,220 
Total $ 15,160 

Our future aircraft purchase commitments included the following aircraft at June 30, 2021:

Aircraft purchase commitments by fleet type
Aircraft Type Purchase Commitments
A220-100
A220-300 41 
A321-200
A321-200neo 125 
A330-900neo 26 
A350-900(1)
27 
B737-900ER 29 
Total 259 
(1)Includes seven A350-900 lease commitments in 2021 incremental to our order book with Airbus.

Aircraft Orders

During the June 2021 quarter, we agreed with Airbus to add incremental aircraft to our order book by converting options for 25 A321neo aircraft into firm orders and replenishing our options. We also agreed to move up two existing A350-900 and one A330-900neo deliveries to occur in the second half of 2022. We expect to take delivery of our first A321neo in the first half of 2022.

Also during the June 2021 quarter, we agreed to acquire 29 737-900 aircraft and enter into leases for seven A350-900 aircraft. Deliveries of these pre-owned aircraft are expected to occur by the first quarter of 2022 with phased entry into service expected through the summer of 2023.

Legal Contingencies

We are involved in various legal proceedings related to employment practices, environmental issues, antitrust matters and other matters concerning our business. We record liabilities for losses from legal proceedings when we determine that it is probable that the outcome in a legal proceeding will be unfavorable and the amount of loss can be reasonably estimated. Although the outcome of the legal proceedings in which we are involved cannot be predicted with certainty, we believe that the resolution of current matters will not have a material adverse effect on our Condensed Consolidated Financial Statements.

Delta Air Lines, Inc. June 2021 Form 10-Q                                 16

Notes to the Consolidated Financial Statements
Other Contingencies

General Indemnifications

We are the lessee under many commercial real estate leases. It is common in these transactions for us, as the lessee, to agree to indemnify the lessor and the lessor's related parties for tort, environmental and other liabilities that arise out of or relate to our use or occupancy of the leased premises. This type of indemnity would typically make us responsible to indemnified parties for liabilities arising out of the conduct of, among others, contractors, licensees and invitees at, or in connection with, the use or occupancy of the leased premises. This indemnity often extends to related liabilities arising from the negligence of the indemnified parties but usually excludes any liabilities caused by either their sole or gross negligence or their willful misconduct.

Our aircraft and other equipment lease and financing agreements typically contain provisions requiring us, as the lessee or obligor, to indemnify the other parties to those agreements, including certain of those parties' related persons, against virtually any liabilities that might arise from the use or operation of the aircraft or other equipment.

We believe that our insurance would cover most of our exposure to liabilities and related indemnities associated with the commercial real estate leases and aircraft and other equipment lease and financing agreements described above. While our insurance does not typically cover environmental liabilities, we have insurance policies in place as required by applicable environmental laws.

Some of our aircraft and other financing transactions include provisions that require us to make payments to preserve an expected economic return to the lenders if that economic return is diminished due to specified changes in laws or regulations. In some of these financing transactions, we also bear the risk of changes in tax laws that would subject payments to non-U.S. lenders to withholding taxes.

We cannot reasonably estimate our potential future payments under the indemnities and related provisions described above because we cannot predict (1) when and under what circumstances these provisions may be triggered and (2) the amount that would be payable if the provisions were triggered because the amounts would be based on facts and circumstances existing at such time.

Other

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


NOTE 8. ACCUMULATED OTHER COMPREHENSIVE LOSS

Components of accumulated other comprehensive loss
(in millions)
Pension and Other Benefit Liabilities(2)
Other Total
Balance at January 1, 2021 (net of tax effect of $1,764)
$ (9,078) $ 40  $ (9,038)
Reclassifications into earnings (net of tax effect of $47)(1)
156  —  156 
Balance at June 30, 2021 (net of tax effect of $1,717)
$ (8,922) $ 40  $ (8,882)

Balance at January 1, 2020 (net of tax effect of $1,549)
$ (8,095) $ 106  $ (7,989)
Changes in value (net of tax effect of $4)
(6)
Reclassifications into earnings (net of tax effect of $123)(1)
133  (83) 50 
Balance at June 30, 2020 (net of tax effect of $1,431)
$ (7,968) $ 31  $ (7,937)

(1)Amounts reclassified from AOCI for pension and other benefit liabilities are recorded in miscellaneous, net in non-operating expense in our income statement.
(2)Includes approximately $750 million of deferred income tax expense primarily related to pension and other benefit obligations that will not be recognized in net income until these obligations are fully extinguished. We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to results from operations.
Delta Air Lines, Inc. June 2021 Form 10-Q                                 17

Notes to the Consolidated Financial Statements
NOTE 9. SEGMENTS

Refinery Operations

Our refinery segment operates for the benefit of the airline segment by providing jet fuel to the airline segment from its own production and through jet fuel obtained through agreements with third parties. The refinery's production consists of jet fuel, as well as non-jet fuel products. We use several counterparties to exchange the non-jet fuel products produced by the refinery for jet fuel consumed in our airline operations. The gross fair value of the products exchanged under these agreements during the three and six months ended June 30, 2021 was $536 million and $1.0 billion, respectively, compared to $65 million and $895 million, respectively, for the three and six months ended June 30, 2020.

Segment Reporting

Segment results are prepared based on our internal accounting methods described below, with reconciliations to consolidated amounts in accordance with GAAP. Our segments are not designed to measure operating income or loss directly related to the products and services included in each segment on a stand-alone basis.

Financial information by segment
(in millions) Airline Refinery Intersegment Sales/Other Consolidated
Three Months Ended June 30, 2021
Operating revenue: $ 6,349  $ 1,434  $ 7,126 
Sales to airline segment $ (108)
(1)
Exchanged products (536)
(2)
Sales of refined products (13)
(3)
Operating income (loss) 973  (157) —  816 
Interest expense, net 337  —  338 
Depreciation and amortization 501  24  (24)
(4)
501 
Restructuring charges —  — 
Total assets, end of period 73,484  1,825  —  75,309 
Net fair value obligations, end of period(5)
—  (527) —  (527)
Capital expenditures 752  —  761 
Three Months Ended June 30, 2020
Operating revenue: $ 1,176  $ 513  $ 1,468 
Sales to airline segment $ (3)
(1)
Exchanged products (65)
(2)
Sales of refined products (153)
(3)
Operating loss (4,701) (114) —  (4,815)
Interest expense (income), net 196  (2) —  194 
Depreciation and amortization 591  25  (25)
(4)
591 
Restructuring charges 2,454  —  —  2,454 
Total assets, end of period 70,707  1,554  —  72,261 
Net fair value obligations, end of period(5)
—  (49) —  (49)
Capital expenditures 281  —  282 
(1)Represents transfers, valued on a market price basis, from the refinery to the airline segment for use in airline operations. We determine market price by reference to the market index for the primary delivery location, which is New York Harbor, for jet fuel from the refinery.
(2)Represents value of products delivered under our exchange agreements, as discussed above, determined on a market price basis.
(3)These sales were at or near cost; accordingly, the margin on these sales is de minimis.
(4)Refinery segment operating results, including depreciation and amortization, are included within aircraft fuel and related taxes in our income statement.
(5)The fair values of these obligations, which are related to renewable fuel compliance costs, are based on quoted market prices and other observable information and are classified as Level 2 in the fair value hierarchy. At June 30, 2021 we had a gross fair value obligation of $581 million and related assets of $55 million. At June 30, 2020 we had a gross fair value obligation of $55 million and related assets of $6 million. We expect to use the assets in settling a portion of our obligations.
Delta Air Lines, Inc. June 2021 Form 10-Q                                 18

Notes to the Consolidated Financial Statements
Financial information by segment
(in millions) Airline Refinery Intersegment Sales/Other Consolidated
Six Months Ended June 30, 2021
Operating revenue: $ 9,959  $ 2,481  $ 11,276 
Sales to airline segment $ (108)
(1)
Exchanged products (1,039)
(2)
Sales of refined products (17)
(3)
Operating loss (299) (283) —  (582)
Interest expense, net 697  —  700 
Depreciation and amortization 993  48  (48)
(4)
993 
Restructuring charges (36) —  —  (36)
Capital expenditures 1,177  22  —  1,199 
Six Months Ended June 30, 2020
Operating revenue: $ 9,768  $ 1,697  $ 10,060 
Sales to airline segment $ (214)
(1)
Exchanged products (895)
(2)
Sales of refined products (296)
(3)
Operating loss (5,140) (85) —  (5,225)
Interest expense (income), net 277  (4) —  273 
Depreciation and amortization 1,268  49  (49)
(4)
1,268 
Restructuring charges 2,454  —  —  2,454 
Capital expenditures 1,206  12  —  1,218 
(1)Represents transfers, valued on a market price basis, from the refinery to the airline segment for use in airline operations. We determine market price by reference to the market index for the primary delivery location, which is New York Harbor, for jet fuel from the refinery.
(2)Represents value of products delivered under our exchange agreements, as discussed above, determined on a market price basis.
(3)These sales were at or near cost; accordingly, the margin on these sales is de minimis.
(4)Refinery segment operating results, including depreciation and amortization, are included within aircraft fuel and related taxes in our income statement.


NOTE 10. EARNINGS/(LOSS) PER SHARE

We calculate basic earnings/(loss) per share and diluted (loss) per share by dividing net income/(loss) by the weighted average number of common shares outstanding, excluding restricted shares. We calculate diluted earnings per share by dividing net income by the weighted average number of common shares outstanding plus the dilutive effect of outstanding share-based awards, including stock options, restricted stock awards and warrants. Antidilutive common stock equivalents excluded from the diluted earnings per share calculation are not material. The following table shows the computation of basic and diluted earnings/(loss) per share:

Basic and diluted earnings/(loss) per share
Three Months Ended June 30,
Six Months Ended June 30,
(in millions, except per share data) 2021 2020 2021 2020
Net income/(loss) $ 652  $ (5,717) $ (525) $ (6,251)
Basic weighted average shares outstanding 637  635  636  636 
Dilutive effect of share-based awards —  —  — 
Diluted weighted average shares outstanding 642  635  636  636 
Basic earnings/(loss) per share $ 1.02  $ (9.01) $ (0.82) $ (9.83)
Diluted earnings/(loss) per share $ 1.02  $ (9.01) $ (0.82) $ (9.83)
Delta Air Lines, Inc. June 2021 Form 10-Q                                 19

Item 2. MD&A
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes included in our 2020 Form 10-K.

Our business and operating results for 2021 continue to be significantly impacted by the COVID-19 pandemic. However, as described further below, we have seen improvement in our business beginning in March 2021 and progressing through the June 2021 quarter, which we expect to continue throughout the remainder of the year. Given the drastic and unprecedented impact of the pandemic on our operating results in 2020, we believe that for the financial overview discussion below, a comparison of our results in 2021 to 2019 allows for a better understanding of the full impact of the COVID-19 pandemic and the progress of our recovery. Throughout the remainder of this management's discussion and analysis, we present results for the three and six months ended June 30, 2021, 2020 and 2019, and our commentary on results of operations, financial conditions and liquidity includes comparisons of 2021 results to both 2020 and 2019.

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  ¢ % (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) % 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  % (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  % (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  % (3) %
Restructuring charges 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  % (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  % (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)