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 March 31, ~~2020~~2021


Or
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-5424

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 March 31, ~~2020:~~2021:

Common Stock, $0.0001 par value - ~~637,836,206~~639,661,387 shares outstanding

This document is also available through our website at http://ir.delta.com/.

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, ~~2019~~2020 ("Form 10-K") ~~and "Item 1A. Risk Factors" of Part II of this Form 10-Q,~~, 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.~~report except as required by law.

Delta Air Lines, Inc. 2021 March 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 March 31, ~~2020,~~2021, the related condensed consolidated statements of operations and comprehensive ~~(loss) income,~~loss, cash flows and stockholders' equity for the three-month periods ended March 31, ~~2020~~2021 and ~~2019,~~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, ~~2019,~~2020, the related consolidated statements of operations, comprehensive ~~income,~~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, ~~2020,~~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, ~~2019,~~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
April ~~22, 2020~~15, 2021

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

Financial Statements

DELTA AIR LINES, INC.

Consolidated Balance Sheets

(Unaudited)


(in millions, except share data)	(in millions, except share data)	March 31, 2020		December 31, 2019		(in millions, except share data)	March 31, 2021		December 31, 2020
ASSETS	ASSETS									ASSETS
Current Assets:	Current Assets:					Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	5,967	$	2,882	Cash and cash equivalents	$	8,460	$	8,307
Accounts receivable, net of an allowance for uncollectible accounts of $16 and $13 at March 31, 2020 and December 31, 2019, respectively		2,280		2,854
Short-term investments						Short-term investments	5,575		5,789
Accounts receivable, net of an allowance for uncollectible accounts of $75 and $89						Accounts receivable, net of an allowance for uncollectible accounts of $75 and $89	1,837		1,396
Fuel inventory	Fuel inventory	439		730		Fuel inventory	457		377
Expendable parts and supplies inventories, net of an allowance for obsolescence of $90 and $82 at March 31, 2020 and December 31, 2019, respectively		535		521
Expendable parts and supplies inventories, net of an allowance for obsolescence of $176 and $188						Expendable parts and supplies inventories, net of an allowance for obsolescence of $176 and $188	371		355
Prepaid expenses and other	Prepaid expenses and other	1,054		1,262		Prepaid expenses and other	1,153		1,180
Total current assets	Total current assets	10,275		8,249		Total current assets	17,853		17,404

Noncurrent Assets:	Noncurrent Assets:					Noncurrent Assets:
Property and equipment, net of accumulated depreciation and amortization of $17,506 and $17,027 at March 31, 2020 and December 31, 2019, respectively		31,644		31,310
Property and equipment, net of accumulated depreciation and amortization of $17,922 and $17,511						Property and equipment, net of accumulated depreciation and amortization of $17,922 and $17,511	26,862		26,529
Operating lease right-of-use assets	Operating lease right-of-use assets	5,488		5,627		Operating lease right-of-use assets	5,577		5,733
Goodwill	Goodwill	9,753		9,781		Goodwill	9,753		9,753
Identifiable intangibles, net of accumulated amortization of $875 and $873 at March 31, 2020 and December 31, 2019, respectively		6,019		5,163
Identifiable intangibles, net of accumulated amortization of $885 and $883						Identifiable intangibles, net of accumulated amortization of $885 and $883	6,009		6,011
Cash restricted for airport construction	Cash restricted for airport construction	455		636		Cash restricted for airport construction	1,223		1,556
Equity investments	Equity investments	3,684		2,568		Equity investments	1,929		1,665
Deferred income taxes, net						Deferred income taxes, net	2,306		1,988
Other noncurrent assets	Other noncurrent assets	1,420		1,198		Other noncurrent assets	1,571		1,357
Total noncurrent assets	Total noncurrent assets	58,463		56,283		Total noncurrent assets	55,230		54,592
Total assets	Total assets	$	68,738	$	64,532	Total assets	$	73,083	$	71,996

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY									LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:	Current Liabilities:					Current Liabilities:
Current maturities of debt and finance leases	Current maturities of debt and finance leases	$	4,337	$	2,287	Current maturities of debt and finance leases	$	2,983	$	1,732
Current maturities of operating leases	Current maturities of operating leases	768		801		Current maturities of operating leases	653		678
Air traffic liability	Air traffic liability	5,598		5,116		Air traffic liability	5,105		4,044
Accounts payable	Accounts payable	3,337		3,266		Accounts payable	3,432		2,840
Accrued salaries and related benefits	Accrued salaries and related benefits	1,844		3,701		Accrued salaries and related benefits	2,182		2,086
Loyalty program deferred revenue	Loyalty program deferred revenue	1,099		3,219		Loyalty program deferred revenue	2,439		1,777
Fuel card obligation	Fuel card obligation	1,100		736		Fuel card obligation	1,100		1,100
Other accrued liabilities	Other accrued liabilities	1,309		1,078		Other accrued liabilities	2,794		1,670
Total current liabilities	Total current liabilities	19,392		20,204		Total current liabilities	20,688		15,927

Noncurrent Liabilities:	Noncurrent Liabilities:					Noncurrent Liabilities:
Debt and finance leases	Debt and finance leases	12,662		8,873		Debt and finance leases	26,061		27,425
Noncurrent air traffic liability						Noncurrent air traffic liability	250		500
Pension, postretirement and related benefits	Pension, postretirement and related benefits	8,285		8,452		Pension, postretirement and related benefits	10,396		10,630
Loyalty program deferred revenue	Loyalty program deferred revenue	5,718		3,509		Loyalty program deferred revenue	4,846		5,405
Noncurrent operating leases	Noncurrent operating leases	5,204		5,294		Noncurrent operating leases	5,568		5,713
Deferred income taxes, net		1,502		1,456
Other noncurrent liabilities	Other noncurrent liabilities	1,666		1,386		Other noncurrent liabilities	4,792		4,862
Total noncurrent liabilities	Total noncurrent liabilities	35,037		28,970		Total noncurrent liabilities	51,913		54,535

Commitments and Contingencies	Commitments and Contingencies					Commitments and Contingencies	0		0

Stockholders' Equity:	Stockholders' Equity:					Stockholders' Equity:
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 647,386,115 and 651,731,443 shares issued at March 31, 2020 and December 31, 2019, respectively		—		—
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 649,361,047 and 647,352,203 shares issued						Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 649,361,047 and 647,352,203 shares issued	0		0
Additional paid-in capital	Additional paid-in capital	11,054		11,129		Additional paid-in capital	11,326		11,259
Retained earnings		11,423		12,454
Accumulated deficit						Accumulated deficit	(1,605)		(428)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(7,898)		(7,989)		Accumulated other comprehensive loss	(8,960)		(9,038)
Treasury stock, at cost, 9,549,909 and 8,959,730 shares at March 31, 2020 and December 31, 2019, respectively		(270)		(236)
Treasury stock, at cost, 9,699,660 and 9,169,683 shares						Treasury stock, at cost, 9,699,660 and 9,169,683 shares	(279)		(259)
Total stockholders' equity	Total stockholders' equity	14,309		15,358		Total stockholders' equity	482		1,534
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	68,738	$	64,532	Total liabilities and stockholders' equity	$	73,083	$	71,996

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.	The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.									The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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

Financial Statements

DELTA AIR LINES, INC.

Condensed Consolidated Statements of Operations and Comprehensive ~~(Loss) Income~~Loss

(Unaudited)


		Three Months Ended March 31,							Three Months Ended March 31,
(in millions, except per share data)	(in millions, except per share data)	2020		2019		(in millions, except per share data)	2021		2020
Operating Revenue:	Operating Revenue:					Operating Revenue:
Passenger	Passenger	$	7,569	$	9,254	Passenger	$	2,748	$	7,569
Cargo	Cargo	152		192		Cargo	215		152
Other	Other	871		1,026		Other	1,187		871
Total operating revenue	Total operating revenue	8,592		10,472		Total operating revenue	4,150		8,592

Operating Expense:	Operating Expense:					Operating Expense:
Salaries and related costs	Salaries and related costs	2,771		2,639		Salaries and related costs	2,202		2,862
Aircraft fuel and related taxes	Aircraft fuel and related taxes	1,595		1,978		Aircraft fuel and related taxes	1,017		1,595
Regional carriers expense, excluding fuel		902		893
Ancillary businesses and refinery						Ancillary businesses and refinery	706		219
Contracted services						Contracted services	519		748
Landing fees and other rents						Landing fees and other rents	493		550
Depreciation and amortization	Depreciation and amortization	678		615		Depreciation and amortization	492		678
Contracted services		675		632
Regional carrier expense						Regional carrier expense	401		577
Aircraft maintenance materials and outside repairs	Aircraft maintenance materials and outside repairs	469		476		Aircraft maintenance materials and outside repairs	294		469
Landing fees and other rents		467		419
Passenger service						Passenger service	118		273
Passenger commissions and other selling expenses	Passenger commissions and other selling expenses	358		427		Passenger commissions and other selling expenses	110		398
Passenger service		257		271
Ancillary businesses and refinery		219		351
Aircraft rent	Aircraft rent	100		102		Aircraft rent	104		100
Profit sharing		—		220
Restructuring charges						Restructuring charges	(44)		0
Government grant recognition						Government grant recognition	(1,186)		0
Other	Other	511		429		Other	322		533
Total operating expense	Total operating expense	9,002		9,452		Total operating expense	5,548		9,002

Operating (Loss)/Income		(410)		1,020
Operating Loss						Operating Loss	(1,398)		(410)

Non-Operating Expense:	Non-Operating Expense:					Non-Operating Expense:
Interest expense, net	Interest expense, net	(79)		(83)		Interest expense, net	(361)		(79)
Impairments and equity method losses						Impairments and equity method losses	(54)		(260)
Gain/(loss) on investments, net	Gain/(loss) on investments, net	(112)		100		Gain/(loss) on investments, net	262		(112)
Miscellaneous, net	Miscellaneous, net	(6)		(91)		Miscellaneous, net	36		254
Total non-operating expense, net	Total non-operating expense, net	(197)		(74)		Total non-operating expense, net	(117)		(197)

(Loss)/Income Before Income Taxes		(607)		946
Loss Before Income Taxes						Loss Before Income Taxes	(1,515)		(607)

Income Tax Benefit/(Provision)		73		(216)
Income Tax Benefit						Income Tax Benefit	338		73

Net (Loss)/Income		$	(534)	$	730
Net Loss						Net Loss	$	(1,177)	$	(534)

Basic (Loss)/Earnings Per Share		$	(0.84)	$	1.10
Diluted (Loss)/Earnings Per Share		$	(0.84)	$	1.09
Basic Loss Per Share						Basic Loss Per Share	$	(1.85)	$	(0.84)
Diluted Loss Per Share						Diluted Loss Per Share	$	(1.85)	$	(0.84)
Cash Dividends Declared Per Share	Cash Dividends Declared Per Share	$	0.40	$	0.35	Cash Dividends Declared Per Share	$	0	$	0.40

Comprehensive (Loss)/Income		$	(443)	$	789
Comprehensive Loss						Comprehensive Loss	$	(1,099)	$	(443)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.	The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.									The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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

Financial Statements

DELTA AIR LINES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


		Three Months Ended March 31,							Three Months Ended March 31,
(in millions)	(in millions)	2020		2019		(in millions)	2021		2020
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	$	358	$	1,942	Net Cash Provided by Operating Activities	$	691	$	358

Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Property and equipment additions:	Property and equipment additions:					Property and equipment additions:
Flight equipment, including advance payments	Flight equipment, including advance payments	(629)		(1,059)		Flight equipment, including advance payments	(132)		(629)
Ground property and equipment, including technology	Ground property and equipment, including technology	(308)		(301)		Ground property and equipment, including technology	(306)		(308)

Purchase of short-term investments						Purchase of short-term investments	(3,161)		0
Redemption of short-term investments	Redemption of short-term investments	—		206		Redemption of short-term investments	3,371		0
Acquisition of strategic investments		(2,099)		—
Purchase of equity investments						Purchase of equity investments	0		(2,099)

Other, net	Other, net	65		58		Other, net	168		65
Net cash used in investing activities	Net cash used in investing activities	(2,971)		(1,096)		Net cash used in investing activities	(60)		(2,971)

Cash Flows from Financing Activities:	Cash Flows from Financing Activities:					Cash Flows from Financing Activities:
Proceeds from short-term obligations						Proceeds from short-term obligations	0		2,882
Proceeds from long-term obligations						Proceeds from long-term obligations	924		3,962

Payments on debt and finance lease obligations	Payments on debt and finance lease obligations	(1,238)		(1,285)		Payments on debt and finance lease obligations	(1,775)		(1,238)
Repurchase of common stock	Repurchase of common stock	(344)		(1,325)		Repurchase of common stock	0		(344)
Cash dividends	Cash dividends	(260)		(233)		Cash dividends	0		(260)
Proceeds from short-term obligations		2,882		1,750
Proceeds from long-term obligations		3,962		500
Fuel card obligation	Fuel card obligation	364		(9)		Fuel card obligation	0		364
Other, net	Other, net	(22)		(7)		Other, net	61		(22)
Net cash provided by/(used in) financing activities		5,344		(609)
Net cash (used in)/provided by financing activities						Net cash (used in)/provided by financing activities	(790)		5,344

Net Increase in Cash, Cash Equivalents and Restricted Cash Equivalents		2,731		237
Net (Decrease)/Increase in Cash, Cash Equivalents and Restricted Cash Equivalents						Net (Decrease)/Increase in Cash, Cash Equivalents and Restricted Cash Equivalents	(159)		2,731
Cash, cash equivalents and restricted cash equivalents at beginning of period	Cash, cash equivalents and restricted cash equivalents at beginning of period	3,730		2,748		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	Cash, cash equivalents and restricted cash equivalents at end of period	$	6,461	$	2,985	Cash, cash equivalents and restricted cash equivalents at end of period	$	9,896	$	6,461

Non-Cash Transactions:	Non-Cash Transactions:					Non-Cash Transactions:
Flight and ground equipment acquired under finance leases	Flight and ground equipment acquired under finance leases	$	184	$	3	Flight and ground equipment acquired under finance leases	$	473	$	184
Right-of-use assets acquired under operating leases	Right-of-use assets acquired under operating leases	55		274		Right-of-use assets acquired under operating leases	20		55
Other financings						Other financings	200		0

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:	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:									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:
		March 31,							March 31,
(in millions)	(in millions)	2020		2019		(in millions)	2021		2020
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	5,967	$	1,910	Cash and cash equivalents	$	8,460	$	5,967
Restricted cash included in prepaid expenses and other	Restricted cash included in prepaid expenses and other	39		57		Restricted cash included in prepaid expenses and other	213		39
Noncurrent assets:	Noncurrent assets:					Noncurrent assets:
Cash restricted for airport construction	Cash restricted for airport construction	455		1,018		Cash restricted for airport construction	1,223		455
Total cash, cash equivalents and restricted cash equivalents	Total cash, cash equivalents and restricted cash equivalents	$	6,461	$	2,985	Total cash, cash equivalents and restricted cash equivalents	$	9,896	$	6,461

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.	The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.									The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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

Financial Statements

DELTA AIR LINES, INC.

Consolidated Statements of Stockholders' Equity

(Unaudited)

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) 9 $ (236) $ 15,358
Net loss — — — (534) — — — (534)
Dividends declared — — — (257) — — — (257)
Other comprehensive income — — — — 91 — — 91
Shares of common stock issued and compensation expense associated with equity awards (Treasury shares withheld for payment of taxes, $56.48⁽¹⁾ per share)
1 — 29 — — 1 (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


	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	$	0	$	11,259	$	(428)	$	(9,038)	9	$	(259)	$	1,534
Net loss	—	—		—		(1,177)		—		—	—		(1,177)

Other comprehensive income	—	—		—		—		78		—	—		78
Common stock issued for employee equity awards(1)	2	—		23		—		—		1	(20)		3

Government grant warrant issuance	—	—		44		—		—		—	—		44
Balance at March 31, 2021	649	$	0	$	11,326	$	(1,605)	$	(8,960)	10	$	(279)	$	482

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

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, 2018 688 $ — $ 11,671 $ 10,039 $ (7,825) 8 $ (198) $ 13,687
Net income — — — 730 — — — 730
Dividends declared — — — (232) — — — (232)
Other comprehensive income — — — — 59 — — 59
Shares of common stock issued and compensation expense associated with equity awards (Treasury shares withheld for payment of taxes, 49.75⁽¹⁾ per share)
2 — 27 — — 1 (35) (8)
Stock purchased and retired (26) — (444) (881) — — — (1,325)
Balance at March 31, 2019 664 $ — $ 11,254 $ 9,656 $ (7,766) 9 $ (233) $ 12,911


	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	$	0	$	11,129	$	12,454	$	(7,989)	9	$	(236)	$	15,358
Net loss	—	—		—		(534)		—		—	—		(534)
Dividends declared	—	—		—		(257)		—		—	—		(257)
Other comprehensive income	—	—		—		—		91		—	—		91
Common stock issued for employee equity awards(1)	1	—		29		—		—		1	(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

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

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Delta Air Lines, Inc. 2021 March 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 ~~wholly owned~~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, ~~2019.~~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 ~~severe~~ impacts from the ~~global~~ COVID-19 ~~(coronavirus)~~ 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 months ended March 31, ~~2020~~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.

~~Recent Accounting Standards~~Regional Carrier Expense

~~Credit Losses.~~ ~~In 2016, the Financial Accounting Standards Board~~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 Loss ("~~FASB"~~income statement") ~~issued Accounting Standards Update ("ASU") No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses~~based on Financial Instruments." Under this ASU, an entity is required to utilize an "expected credit loss model" on certain financial instruments, including trade and financing receivables. This model requires consideration of a broader range of reasonable and supportable information and requires an entity to estimate expected credit losses over the lifetime of the asset. We adopted this standard effective January 1, 2020 and due to the COVID-19 pandemic, we recorded reserves against certain of our outstanding financial instruments that were not material individually orrelevant statistics (such as passenger counts). Beginning in the ~~aggregate.~~

~~NOTE 2. IMPACT OF THE COVID-19 PANDEMIC~~

The unprecedented and rapid spread of COVID-19 and the related travel restrictions and social distancing measures implemented throughout the world have significantly reduced demand for air travel. After initially impacting our service to China beginning in January, the spread of the virus and the resulting global pandemic next affected the majority of our international network and ultimately our domestic network. Beginning in March large public events were cancelled, governmental authorities began imposing restrictions on non-essential activities, businesses suspended travel and popular leisure destinations temporarily closed to visitors. Certain countries that are key markets for our business have imposed bans on international travelers for specified periods or indefinitely.

As a result, demand for travel declined at an accelerated pace, which has had an unprecedented and materially adverse impact on our revenues and financial position. The length and severity of the reduction in demand due to the pandemic is uncertain; accordingly, we expect the adverse impact to grow in the June 2020 quarter. While2021 quarter we are ~~planning for a modest demand recovery beginning~~no longer performing this allocation and have reclassified the costs presented in the September 2020 quarter, the exact timing and pace of the recovery is uncertain given the significant impact of the pandemic on the overall U.S. and global economy. Our forecasted expense management and liquidity measures may be modified as we clarify the demand recovery timing.

~~See Note 3, "Revenue Recognition," for discussion of the recognition of passenger revenue, our air traffic liability and ticket breakage assumptions.~~

In response to these developments, we have implemented measures to focus on the safety of our customers and employees, while at the same time seeking to mitigate the impact on our financial position and operations. These measures include, but are not limited to, the following:

~~Taking Care of our Customers and Employees.~~ The safety of our customers and employees continues to be our primary focus. As the COVID-19 pandemic has developed, we have taken numerous steps to help customers and employees practice social distancing on the ground and in the air in keeping with current health-expert recommendations:

•Adopting new cleaning procedures on all flights, including disinfectant electrostatic spraying on all aircraft overnight and sanitizing high-touch areas like tray tables, entertainment screens, armrests and seat-back pockets before boarding.

•Taking steps to help employees and customers practice social distancing, including blocking middle seats, pausing automatic upgrades, modifying our boarding process and moving to essential meal service only.

•~~Extending 2020 Medallion Status an additional year, rolling Medallion Qualification Miles into 2021 and extending Delta SkyMiles American Express Card benefits and Delta Sky Club memberships.~~

•~~Giving customers flexibility to plan, re-book and travel including extending expiration on travel credits through September 2022.~~

•Offering pay protection to employees who have tested positive for COVID-19, must quarantine due to exposure or travel-related requirements or have self-identified as being at high-risk for illness from COVID-19 according to the Centers for Disease Control and Prevention ("CDC") guidelines and do not have the ability to telecommute.

•Implementing significant workforce social distancing and protection measures, including reworking call center spaces to provide appropriate social distancing, increasing cleaning of our facilities using methods and products similar to what we are using on our aircraft and having virtually all employees who can telecommute do so.

~~Capacity Reductions.~~ Following a strong start to 2020 in January and February, we experienced a precipitous decrease in demand in March as COVID-19 spread throughout the world. To align capacity with expected demand, beginning in the second half of March, we have significantly reduced our system capacity to a level that maintains essential services. For the June 2020 quarter, system capacity is expected to be down approximately 85 percent compared to the June 2019 quarter, with international capacity to be reduced by approximately 90 percent and domestic flying to be reduced by approximately 80 percent. As a result of reduced demand expectations and lower capacity, we are temporarily parking approximately 50 percent of our fleet.

~~Expense Management.~~ ~~With the reduction in revenue, we have, and will continue to implement cost saving initiatives, including:~~

•~~Reducing capacity as described above~~prior periods to align with ~~expected demand, which has resulted~~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 ~~temporarily parking approximately 400 aircraft as of March 31,~~ 2020, with the expectation to have over 650 aircraft parked by the end of the June quarter. As a result, we have made the decision to accelerate the retirement of our MD-88 fleet from December 2020 to the end of July 2020.

•~~Consolidating our footprint at our airport facilities,~~ including ~~temporarily closing most Delta Sky Clubs.~~

•~~Reducing employee-related costs, including:~~

◦~~Voluntary unpaid leaves of 30 days to 12 months offered to most employees. Approximately 35,000 employees have volunteered to take leaves beginning~~$325 million in ~~the June 2020 quarter.~~

◦~~Salary reductions of 50% for our officers and 25% for our director level employees.~~

◦~~A 25% reduction in work hours for all other management and most front-line employee work groups.~~

◦~~Instituting a company-wide hiring freeze.~~

•~~Delaying non-essential maintenance projects and reducing or suspending other discretionary spending.~~

~~Balance Sheet, Cash Flow and Liquidity.~~ We have taken the following actions to increase liquidity and strengthen our financial position. As a result of these actions, our cash and cash equivalents balance as of March 31, 2020 was $6.0 billion.

•Reducing planned capital expenditures by approximately $3.5 billion, including working with original equipment manufacturers ("OEM") to optimize the timing of our future aircraft deliveries, delaying aircraft modifications and postponing certain information technology initiatives and replacement of ground equipment.

•~~Drawing $3.0 billion from our previously undrawn revolving credit facilities.~~

•~~Entering into a $2.7 billion secured term loan facility during~~ the March 2020 quarter, ~~with an accordion feature that allowed us~~and $1.4 billion in 2019, including $355 million in the March 2019 quarter. The remaining amounts in regional carrier expense represent payments to ~~increase~~our regional carriers under capacity purchase agreements and the ~~facility to $3.0 billion during April 2020.~~

•~~Entering into $150 million of loans secured by certain~~expenses of our ~~widebody aircraft. In addition, during April 2020, we have entered into an additional $1.2 billion of sale-leaseback transactions for certain aircraft and are pursuing other financing initiatives.~~

•~~Suspending future share repurchases and dividends.~~

•~~Delaying $500 million of planned voluntary pension funding.~~

We continue to evaluate future financing opportunities by leveraging our unencumbered assets which, as of March 31, 2020, have a value of at least $15 billion, and utilizing funding from the CARES Act, discussed below. In response to the impact that the demand environment has had on our financial condition, our credit rating has been downgraded by Standard & Poor's to BB in late March 2020 and by Fitch to BB+ in early April 2020.

Our primary credit facility has various financial and other covenants that require us to maintain a minimum fixed charge coverage ratio and a minimum asset coverage ratio. In the event that we are unable to maintain compliance with such covenants, we expect to obtain an amendment or waiver from our lenders, refinance the indebtedness subject to covenants or take other mitigating actions prior to a potential breach.

~~See Note 7, "Debt," for more information on our debt issuances during the March 2020 quarter.~~

~~Valuation of Goodwill and Indefinite-Lived Intangibles~~

We apply a fair value-based impairment test to the carrying value of goodwill and indefinite-lived intangible assets on an annual basis (as of October 1) and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. Our December 2019 quarter quantitative impairment tests of goodwill and intangibles indicated that there was no indication of impairment as the fair value exceeded our carrying value:

Carrying Value at Fair Value Excess at 2019 Testing Date
(in millions) March 31, 2020 December 31, 2019
Goodwill⁽¹⁾
$ 9,753 $ 9,781 234%
International routes and slots 2,583 2,583 15% to 29%
Airline alliances⁽²⁾
1,863 1,005 67% to 576%
Delta tradename 850 850 185%
Domestic slots 622 622 61% to 181%
Total $ 15,671 $ 14,841

⁽¹⁾ ~~The reduction in goodwill during the March 2020 quarter relates to the combination of Delta Private Jets with Wheels Up.~~ ~~See Note 5, "Investments," for more information on this transaction.~~

⁽²⁾ ~~As part of our strategic alliance with and investment in LATAM~~, ~~we have recorded an alliance-related indefinite-lived intangible asset of~~ ~~$1.2 billion, which was not~~ ~~reflected~~ ~~in the 2019 quantitative impairment assessment.~~

Despite the significant excess fair value identified in our 2019 impairment assessment, we determined that the reduced cash flow projections and the significant decline in Delta's market capitalization as a result of the COVID-19 pandemic indicate that an impairment loss may have been incurred. Therefore, we qualitatively assessed whether it was more likely than not that the goodwill and indefinite-lived intangible assets were impaired as of March 31, 2020. We reviewed our previous forecasts and assumptions based on our current projections that are subject to various risks and uncertainties, including: (1) forecasted revenues, expenses and cash flows, including the duration and extent of impact to our business and our alliance partners from the COVID-19 pandemic, (2) current discount rates, (3) the reduction in Delta's market capitalization, (4) observable market transactions, (5) changes to the regulatory environment and (6) the nature and amount of government support that will be provided.

Based on our interim impairment assessment as of March 31, 2020, we have determined that our goodwill and indefinite-lived intangible assets are not impaired. However, we are unable to predict how long these conditions will persist, what additional measures may be introduced by governments or private parties or what effect any such additional measures may have on air travel and our business. Any measure that encourages potential travelers to stay in their homes, engage in social distancing or avoid larger gatherings of people is highly likely to be harmful to the air travel industry in general, and consequently our business.

~~Valuation of Long-Lived Assets~~

Our flight equipment and other long-lived assets, which are classified as property and equipment, net on the Consolidated Balance Sheet ("balance sheet"), have a recorded value of $31.6 billion at March 31, 2020. We review flight equipment and other long-lived assets used in operations for impairment losses when events and circumstances indicate the assets may be impaired.

As part of our capacity reductions related to the negative effect on our business from the COVID-19 pandemic, we have removed approximately 400 aircraft from active service and plan to park another approximately 250 aircraft during the June 2020 quarter. These aircraft are being temporarily parked, with the exception of the MD-88 fleet discussed above for which an impairment charge of $22 million was recorded, and we have not yet decided to accelerate the retirement of any other fleet.

~~To determine whether impairments exist for active and temporarily parked aircraft, we group assets at the fleet-type level or at the contract level for aircraft operated by~~wholly owned regional carriers (i.e., the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of capacity, passenger mile yield, fuel and labor costs and other relevant factors. Given the substantial reduction in our active aircraft and diminished projections of future cash flows in the near term, we evaluated the remainder of our fleet and determined that no fleet (other than the MD-88) was impaired as the future cash flows from operation of the fleet through the respective retirement dates exceeded the carrying value. As we obtain greater clarity about the duration and extent of reduced demand and potentially execute further capacity adjustments, we will continue to evaluate our current fleet compared to network requirements and may decide to permanently retire additional aircraft.

~~See Note 5, "Investments," for more information on the valuation of our equity investments.~~

~~CARES Act~~

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") into law. The CARES Act is a relief package intended to assist many aspects of the American economy, including providing the airline industry with up to $25 billion in grants to be used for employee wages, salaries and benefits.

In April 2020, we were granted $5.4 billion in emergency relief through the payroll support program of the CARES Act to be paid in installments through July 2020. The relief payments are conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs through September 30, 2020. Other conditions include prohibitions on share repurchases and dividends through September 30, 2021, continuing essential air service as directed by the U.S. Department of Transportation and certain limitations on executive compensation. The relief payments include $3.8 billion in grants and $1.6 billion in an unsecured 10-year low interest loan. The loan includes annual interest rates of 1.00% for the first five years (through April 2025) and the Secured Overnight Financing Rate ("SOFR") plus 2.00% in the final five years. In return, we have agreed to issue to the U.S. Department of the Treasury over 6.5 million warrants to acquire Delta common stock. These warrants include an exercise price of $24.39 per share and have a five-year term.

~~On April 20, 2020, we received the first installment of $2.7 billion under the payroll support program.~~

The CARES Act provides for up to $25 billion in secured loans to the airline industry. We expect to be eligible for approximately $4.6 billion under the loan program and are currently evaluating our level of participation.

Finally, the CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. This is expected to provide us with approximately $200 million of additional liquidity during the current year.

subsidiary, Endeavor Air, Inc.

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

Notes to the Consolidated Financial Statements

NOTE 32. REVENUE RECOGNITION

Passenger Revenue

~~Passenger revenue is primarily composed of passenger ticket sales, loyalty travel awards and travel-related services performed in conjunction with a passenger’s flight.~~

Three Months Ended March 31,
(in millions) 2020 2019
Ticket $ 6,511 $ 7,988
Loyalty travel awards 543 692
Travel-related services 515 574
Total passenger revenue $ 7,569 $ 9,254

The air traffic liability primarily includes sales of passenger tickets to be flown in the future, as well as credits which can be applied as payment toward the cost of a ticket. The credits are typically issued as a result of ticket cancellations prior to their expiration dates. As of March 31, 2020, passenger tickets sold and credits issued were generally valid for ~~one year from the date of original ticket issuance. In April 2020, we announced changes to expiration dates, as discussed below.~~



	Three Months Ended March 31,
(in millions)	2021		2020
Ticket	$	2,277	$	6,511
Loyalty travel awards	241		543
Travel-related services	230		515
Total passenger revenue	$	2,748	$	7,569

We recognized approximately $822 million and $2.8 billion in passenger revenue during the three months ended March 31, 2021 and 2020, respectively, that ~~was~~had been recorded in our air traffic liability balance at ~~December 31, 2019.~~

~~The air traffic liability typically increases during~~ the winter and spring as advanced ticket sales grow prior to the summer peak travel season and decreases during the summer and fall months. However, the current reduction in demand for air travel due to the COVID-19 pandemic has resulted in an unprecedented low levelbeginning of advance bookings and the associated cash received. At the same time, we have experienced significant cancellations beginning in the second half of March, which has led to issuance of refunds to customers, while the remainder have been rebooked on future flights or received credits in lieu of cash refunds. The total value of refunds, excluding taxes and related fees, issued to customers during the March 2020 quarter was approximately $850 million.Due to the uncertainty around the return of demand for air travel, we are unable to estimate the amount of the December 31, 2019 air traffic liability that will be recognized in earnings compared to amounts that will be refunded to customers or issued as a credit for future travel through the end of 2020.those periods.

In ~~April 2020,~~March 2021, we announced ~~that~~the extension of the validity of all passenger tickets and travel credits ~~issued~~expiring in 2021 or purchased in 2021 to December 2022. In addition, we have waived change fees for ~~cancelled travel in March~~all tickets purchased through ~~September 2020 will have an extended expiration date through September 2022. This~~April 30, 2021, as well as eliminated change ~~is expected to shift a portion~~fees for domestic and international tickets originating from North America with the exception of our air traffic liability to noncurrent. We will also consider this change in estimating the future breakage rate, which represents the value of tickets that will expire unused and is recognized as revenue at the scheduled flight date.Basic Economy tickets.

Other Revenue


		Three Months Ended March 31,							Three Months Ended March 31,
(in millions)	(in millions)	2020		2019		(in millions)	2021		2020
Ancillary businesses and refinery						Ancillary businesses and refinery	$	726	$	223
Loyalty program	Loyalty program	$	474	$	474	Loyalty program	368		474
Ancillary businesses and refinery		223		369
Miscellaneous	Miscellaneous	174		183		Miscellaneous	93		174
Total other revenue	Total other revenue	$	871	$	1,026	Total other revenue	$	1,187	$	871

Loyalty Program. Our SkyMiles loyalty ~~program generates customer loyalty by rewarding customers with incentives to travel on Delta. This~~ program allows customers to earn mileage credits ("miles") by flying on Delta, Delta Connection and other airlines that participate in the loyalty program. ~~When traveling, customers earn redeemable miles based on the passenger's loyalty program status and ticket price.~~ Customers can also earn miles through participating companies, such as credit card companies, hotels, car rental agencies and ridesharing companies. Miles are redeemable by customers in future periods for air travel on Delta and other participating airlines, membership in our Sky Club and other program awards. To facilitate transactions with participating companies, ~~we sell~~who purchase miles ~~to non-airline businesses, customers and other airlines.~~from us. Our most significant contract to sell miles relates to our co-brand credit card relationship with American Express. During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, total cash sales from marketing agreements related to our loyalty program were ~~$992~~$760 million and ~~$980~~$992 million, 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. ~~As such,~~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 ~~liability~~deferred revenue and includes miles earned through travel and miles sold to participating companies, which are primarily through marketing agreements.

(in millions) 2020 2019
Balance at January 1 $ 6,728 $ 6,641
Miles earned 660 720
Travel miles redeemed (543) (692)
Non-travel miles redeemed (28) (45)
Balance at March 31 $ 6,817 $ 6,624


Loyalty program activity
(in millions)	2021		2020
Balance at January 1	$	7,182	$	6,728
Miles earned	354		660
Travel miles redeemed	(241)		(543)
Non-travel miles redeemed	(10)		(28)
Balance at March 31	$	7,285	$	6,817

The timing of mile redemptions can vary widely; however, the majority of ~~new~~ miles have historically been redeemed within two ~~years. The loyalty program deferred revenue classified as a current liability represents our current estimate~~years of ~~revenue expected~~being earned.

Delta Air Lines, Inc. 2021 March Form 10-Q 8

Notes to ~~be recognized in~~ the next 12 months based on projected redemptions, while the balance classified as a noncurrent liability represents our current estimate of revenue expected to be recognized beyond 12 months. As a result of the COVID-19 pandemic, a larger portion of mile redemptions is projected to occur beyond 12 months and is therefore reflected as a noncurrent liability as of March 31, 2020. We will continue to monitor redemptions as the situation evolves.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. ~~The majority of the revenues~~A significant portion of the refinery ~~consisting~~segment's revenues typically consists of fuel sales to support the airline, ~~have been~~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
Three Months Ended March 31,
(in millions) 2020 2019
Domestic $ 5,601 $ 6,741
Atlantic 818 1,074
Latin America 765 861
Pacific 385 578
Total $ 7,569 $ 9,254


Passenger revenue by geographic region
	Passenger Revenue
	Three Months Ended March 31,
(in millions)	2021		2020
Domestic	$	2,280	$	5,601
Atlantic	142		818
Latin America	264		765
Pacific	62		385
Total	$	2,748	$	7,569


Operating revenue by geographic region						Operating revenue by geographic region
		Operating Revenue							Operating Revenue
		Three Months Ended March 31,							Three Months Ended March 31,
(in millions)	(in millions)	2020		2019		(in millions)	2021		2020
Domestic	Domestic	$	6,267	$	7,516	Domestic	$	3,368	$	6,267
Atlantic	Atlantic	994		1,287		Atlantic	267		994
Latin America	Latin America	863		969		Latin America	381		863
Pacific	Pacific	468		700		Pacific	134		468
Total	Total	$	8,592	$	10,472	Total	$	4,150	$	8,592

12Delta Air Lines, Inc. 2021 March Form 10-Q 9

Notes to the Consolidated Financial Statements

NOTE 4.3. FAIR VALUE MEASUREMENTS

Assets ~~(Liabilities)~~ Measured at Fair Value on a Recurring Basis


(in millions)	(in millions)	March 31, 2020		Level 1		Level 2		(in millions)	March 31, 2021		Level 1		Level 2		Level 3
Cash equivalents	Cash equivalents	$	4,669	$	4,669	$	—	Cash equivalents	$	6,004	$	6,004	$	0	$	0
Restricted cash equivalents	Restricted cash equivalents	494		494		—		Restricted cash equivalents	1,436		1,436		0		0
Short-term investments								Short-term investments	5,575		3,564		2,011		0
Long-term investments	Long-term investments	1,367		908		459		Long-term investments	1,673		895		557		221
Hedge derivatives, net
Fuel hedge contracts		8		(5)		13
Interest rate contracts		25		—		25
Foreign currency exchange contracts		14		—		14


(in millions)	(in millions)	December 31, 2019		Level 1		Level 2		(in millions)	December 31, 2020		Level 1		Level 2		Level 3
Cash equivalents	Cash equivalents	$	586	$	586	$	—	Cash equivalents	$	5,755	$	5,755	$	0	$	0
Restricted cash equivalents	Restricted cash equivalents	847		847		—		Restricted cash equivalents	1,747		1,747		0		0
Short-term investments								Short-term investments	5,789		3,919		1,870		0
Long-term investments								Long-term investments	1,417		948		38		431

Long-term investments		1,099		881		218
Hedge derivatives, net
Fuel hedge contracts		1		(1)		2
Interest rate contracts		61		—		61
Foreign currency exchange contracts		6		—		6

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 the Consolidated Balance Sheet ("balance sheet") and 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 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.

At March 31, 2021, the estimated fair value of our short-term investments was $5.6 billion, which approximates cost. Of these investments, $4.7 billion are expected to mature in one year or less, with the remainder maturing during 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 that are 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, due to its agreement to merge with Aspirational Consumer Lifestyle Corp ("Aspirational"), a publicly-traded special purpose acquisition company, our investment in Wheels Up was classified as Level 2. In addition, our equity investments in 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 5,4, "Investments," for further information on our equity investments.

~~Hedge Derivatives.~~ A portion of our derivative contracts are negotiated over-the-counter with counterparties without going through a public exchange. Accordingly, our fair value assessments give consideration to the risk of counterparty default (as well as our own credit risk). Such contracts are classified as Level 2 within the fair value hierarchy. The remainder of our hedge contracts are comprised of futures contracts, which are traded on a public exchange. These contracts are classified within Level 1 of the fair value hierarchy.

•~~Fuel Hedge Contracts.~~ Our fuel hedge portfolio consists of options, swaps and futures. Option and swap contracts are valued under income approaches using option pricing models and discounted cash flow models, respectively, based on data either readily observable in public markets, derived from public markets or provided by counterparties who regularly trade in public markets. Futures contracts and options on futures contracts are traded on a public exchange and valued based on quoted market prices.

•~~Interest Rate Contracts.~~ ~~Our interest rate derivatives are swap contracts, which are valued based on data readily observable in public markets.~~

•~~Foreign Currency Exchange Contracts.~~ ~~Our foreign currency derivatives consist of forward contracts and are valued based on data readily observable in public markets.~~

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

Notes to the Consolidated Financial Statements

NOTE 5.4. INVESTMENTS

~~Long-Term Investments~~

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

~~Fair Value Investments~~

~~We account~~Changes in the valuation of investments accounted for ~~the following investments~~ at fair value ~~with adjustments to fair value recognized~~are recorded in gain/(loss) on investments in our income statement within non-operating expense and are driven by changes in ~~our Condensed Consolidated Statements of Operations~~stock prices, other valuation techniques for investments in companies without publicly-traded shares and ~~Comprehensive (Loss) Income ("income statement").~~foreign currency fluctuations. We recorded gains of $262 million and losses of $112 ~~million and gains of $100~~ million on our fair value investments during the three months ended March 31, 2021 and 2020, ~~and 2019,~~ respectively. ~~These results were driven by changes in stock prices and foreign currency fluctuations.~~

Ownership Interest Carrying Value
(in millions) March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019
Hanjin-KAL 15 % 10 % $ 538 $ 205
Air France-KLM 9 % 9 % 211 418
China Eastern 3 % 3 % 159 258
Wheels Up 27 % — % 234 —
Other investments 225 218
Total fair value investments $ 1,367 $ 1,099

~~Wheels Up.~~ In January 2020, we combined Delta Private Jets, our wholly owned subsidiary which provides private jet operations, with Wheels Up. Upon closing, we received a 27% equity stake in Wheels Up which we have elected to record using the fair value option as this is expected to better reflect the economics of our ownership interest. This transaction resulted in a gain of $240 million which was recorded within miscellaneous, net in our income statement.

~~GOL.~~ In the December 2019 quarter we sold our ownership stake of GOL Linhas Aéreas Inteligentes, the parent company of VRG Linhas Aéreas (operating as GOL), and are winding down our commercial agreements. Additionally, GOL has a $300 million ~~five~~-year term loan facility with third parties maturing in August 2020, which we have guaranteed. Based on market value at March 31, 2020, approximately 50% of our guaranty is secured by GOL's ownership interest in Smiles, GOL's publicly traded loyalty program. Because GOL remains in compliance with the terms of its loan facility, we have not recorded a liability for the term loan on our balance sheet as of March 31, 2020. However, as the COVID-19 pandemic continues to impact the global economy, there is an increased risk related to GOL's ability to repay this term loan, which may require our performance under this guarantee. Therefore, we have recorded an immaterial reserve in other accrued liabilities related to the decline in value of our security interest in GOL's Smiles shares.

~~Equity Method Investments~~

~~We account for the investments listed below under the equity method of accounting.~~

Ownership Interest Carrying Value
(in millions) March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019
LATAM 20 % — % $ 1,088 $ —
Grupo Aeroméxico ⁽¹⁾
51 % 51 % 770 833
Virgin Atlantic ⁽²⁾
49 % 49 % 207 375
AirCo 49 % 49 % 141 142

⁽¹⁾Grupo Aeroméxico's corporate bylaws (as authorized by the Mexican Foreign Investment Commission) limit our voting interest to a maximum of 49%. Therefore, we account for our investment under the equity method. Due to Grupo Aeroméxico's share repurchase program, our equity stake in Grupo Aeroméxico has increased to a non-controlling 51% interest.

⁽²⁾~~We have a non-controlling equity stake in Virgin Atlantic Limited, the parent company of Virgin Atlantic Airways, and similar non-controlling interests in certain affiliated Virgin Atlantic companies.~~

~~LATAM.~~ In January 2020, we acquired 20% of the shares of LATAM Airlines Group S.A. ("LATAM") for $1.9 billion, or $16 per share, through a tender offer as part of our plan to enter into a strategic alliance with LATAM. In addition, to support the establishment of the strategic alliance, we agreed to make transition payments to LATAM totaling $350 million, $200 million of which was disbursed in 2019. As part of our planned strategic alliance with LATAM, we have also agreed to acquire 4 A350 aircraft from LATAM and have assumed 10 of LATAM's A350 purchase commitments with Airbus for deliveries through 2025. The total consideration of $2.3 billion, including the tender offer and the transition payments, has been allocated based on their relative fair values to the shares ($1.1 billion) and to the alliance-related indefinite-lived intangible asset ($1.2 billion). We expect to record the aircraft at cost upon delivery.

Based on our 20% ownership interest and planned strategic alliance, we determined that we have significant influence over LATAM and will accordingly record this investment under the equity method of accounting. At acquisition, our investment was recorded at $1.1 billion based on the allocated value to our 20% equity stake in LATAM on January 3, 2020. Due to the timing of information available from LATAM, we will record our portion of LATAM's financial results on a one quarter lag, beginning in the June 2020 quarter.

Our ~~portion of Grupo Aeroméxico's and Virgin Atlantic's financial results are recorded in miscellaneous, net in our income statement under non-operating expense, and our~~ share of ~~AirCo's~~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.~~

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 eq~~uity~~investment accounted for under the equity method ~~investment~~ experiences a loss in ~~fair~~ value that is determined to be other than temporary, we will reduce our ~~basis in~~carrying value of the investment to fair value and record the loss in ~~non-operating expense. Given the recent~~impairments and ~~unprecedented impact of the COVID-19 pandemic on the airline industry, we evaluated whether our~~ equity method ~~investments~~losses in LATAM, Grupo Aeroméxico, Virgin Atlantic and AirCo were other than temporarily impaired. Based on discussions with each investee's management and review of their respective liquidity and financial projections, we do not believe these investments are other than temporarily impaired as we have the intent and ability to retain these investments for a period of time sufficient to allow for anticipated recovery in value. However, we will continue to monitor the continuing effects of the pandemic, self-help measures each investee executes and potential assistance provided by their respective governments.our income statement.

Effective January 2020, we combined our separate transatlantic joint venture agreements with Air France-KLM and Virgin Atlantic into a single 3-party transatlantic joint venture. Under the new agreement, certain measurement thresholds were reset from the previous joint venture with Virgin Atlantic, reducing the value Delta would have received over the original term. To compensate Delta for this reduced value, we entered into a transition agreement with Virgin Atlantic and, as of March 31, 2020, have recognized a receivable of approximately $200 million, which is recorded in other noncurrent assets, and corresponding deferred revenue, which is recorded in other noncurrent liabilities.


Equity investments ownership interest and carrying value
	Accounting Treatment	Ownership Interest				Carrying Value
(in millions)		March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Wheels Up	Fair Value	24	%	24	%	$	520	$	210
Hanjin-KAL	Fair Value	13	%	13	%	447		512
Air France-KLM	Fair Value	9	%	9	%	225		235
China Eastern	Fair Value	3	%	3	%	219		201
Unifi Aviation	Equity Method	49	%	49	%	165		154
Other investments	Various					353		353
Equity investments						$	1,929	$	1,665

Wheels Up.

~~NOTE 6. DERIVATIVES AND RISK MANAGEMENT~~In February 2021, Wheels Up entered into a definitive agreement to become publicly-traded via a merger with Aspirational. The transaction is expected to close in the June 2021 quarter. We account for our investment using the fair value option, as this election better reflects the economics of our ownership interest, and we have recorded our investment primarily based on Aspirational’s stock price and information included in its public filings.

Changes in fuel prices, interest rates and foreign currency exchange rates impact our results of operations. In an effort to manage our exposure to these risks, we enter into derivative contracts and adjust our derivative portfolio as market conditions change. We recognize derivative contractsOther Investments. This category includes various investments that are accounted for at fair value or under the equity method, depending on our ~~balance sheet.~~

~~Cash flows associated with purchasing~~ownership interest and ~~settling hedge contracts generally~~the level of influence conveyed by our investment. Included in this category are ~~classified as operating cash flows.~~

~~Fuel Price Risk~~

~~Our derivative contracts to hedge~~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 ~~financial risk from changing fuel prices are primarily related to Monroe’s inventory.~~

~~Interest Rate Risk~~

Our exposure to market risk from adverse changes in interest rates is primarily associated with our debt obligations. 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.

~~In March 2020, we unwound a majority of our interest rate swap contracts. The unwind~~carrying values of these ~~contracts generated approximately $100 million of cash in the quarter. These gains will be reflected in~~investments remain 0 at March 31, 2021. In order to support our ~~income statement over the remaining term of the related debt agreements.~~

~~Foreign Currency Exchange Risk~~

~~We are subject to foreign currency exchange rate risk because~~relationships with these carriers, we have ~~revenue, expense~~provided them with strategic and ~~equity investments denominated~~operational assistance through their restructurings. We have notes payable of $480 million, which are recorded in ~~foreign currencies. To manage exchange rate risk, we execute both our international revenue~~current maturities of debt and ~~expense transactions in the same foreign currency to the extent practicable. From time to time, we may also enter into foreign currency option~~finance leases, and ~~forward contracts.~~

~~Hedge Position~~receivables from those partners recorded within other noncurrent assets as of March 31, ~~2020~~

(in millions) Volume Final Maturity Date Prepaid Expenses and Other Other Noncurrent Assets Other Accrued Liabilities Other Noncurrent Liabilities Hedge Derivatives, net
Designated as hedges
Interest rate contracts (fair value hedges) 150 U.S. dollars April 2028 $ 2 $ 23 $ — $ — $ 25
Not designated as hedges
Foreign currency exchange contracts 238 Euros December 2020 11 — — — 11
Foreign currency exchange contracts 177,045 South Korean won April 2023 1 2 — — 3
Fuel hedge contracts 219 gallons - crude oil and refined products April 2021 98 — (90) — 8
Total derivative contracts $ 112 $ 25 $ (90) $ — $ 47

2021.

~~Hedge Position as of December 31, 2019~~

(in millions) Volume Final Maturity Date Prepaid Expenses and Other Other Noncurrent Assets Other Accrued Liabilities Other Noncurrent Liabilities Hedge Derivatives, net
Designated as hedges
Interest rate contracts (fair value hedges) 1,872 U.S. dollars April 2028 $ 12 $ 53 $ (4) $ — $ 61
Not designated as hedges
Foreign currency exchange contracts 397 Euros December 2020 9 — — — 9
Foreign currency exchange contracts 177,045 South Korean won April 2023 1 — — (4) (3)
Fuel hedge contracts 243 gallons - crude oil and refined products July 2020 16 — (15) — 1
Total derivative contracts $ 38 $ 53 $ (19) $ (4) $ 68

~~Balance Sheet Location of Hedged Item in Fair Value Hedges~~

Carrying Amount of Hedge Instruments
Cumulative Amount of Fair Value Hedge Adjustments¹
(in millions) March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019
Current maturities of debt and finance leases $ 22 $ (19) $ 22 $ 8
Debt and finance leases $ (47) $ (1,783) $ 102 $ 53

⁽¹⁾~~As of March 31, 2020, these amounts include the cumulative amount of fair value hedging adjustments remaining for which hedge accounting has been discontinued of approximately $100 million.~~

~~Offsetting Assets and Liabilities~~

We have master netting arrangements with our counterparties giving us the right to offset hedge assets and liabilities. However, we have elected not to offset the fair value positions recorded on our balance sheet. The following table shows the net fair value of our counterparty positions had we elected to offset.

(in millions) Prepaid Expenses and Other Other Noncurrent Assets Other Accrued Liabilities Other Noncurrent Liabilities Hedge Derivatives, net
March 31, 2020
Net derivative contracts $ 22 $ 25 $ — $ — $ 47
December 31, 2019
Net derivative contracts $ 24 $ 53 $ (5) $ (4) $ 68

~~Not Designated Hedge Gains (Losses)~~

~~Gains (losses) related to our foreign currency exchange and fuel hedge contracts are as follows:~~

Location of Gain (Loss) Recognized in Income Amount of Gain (Loss) Recognized in Income
(in millions) 2020 2019
Three Months Ended March 31,
Foreign currency exchange contracts Gain/(loss) on investments, net $ 19 $ 11
Fuel hedge contracts Aircraft fuel and related taxes 216 (54)
Total $ 235 $ (43)

~~Credit Risk~~

To manage credit risk associated with our fuel price, interest rate and foreign currency hedging programs, we evaluate counterparties based on several criteria, including their credit ratings, and limit our exposure to any one counterparty.

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

Notes to the Consolidated Financial Statements

NOTE 7.5. DEBT

~~The following table summarizes our debt:~~


Summary of outstanding debt by category												Summary of outstanding debt by category
		Maturity					Interest Rate(s) Per Annum at									March 31,		December 31,			Maturity				Interest Rate(s) Per Annum at		March 31,	December 31,
(in millions)	(in millions)	Dates					March 31, 2020									2020		2019		(in millions)	Dates				March 31, 2021		2021	2020
Unsecured notes	Unsecured notes	2020	to	2029	2.60%	to	4.38%	$	4,550	$	5,550	Unsecured notes	2021		to		2029		2.90%		to	7.38%	$	5,350	$	5,350
2020 Secured Term Loan Facility⁽¹⁾		2021					2.75%	to		2.96%		2,700		—
Unsecured Payroll Support Program Loan												Unsecured Payroll Support Program Loan	2030						1.00%				1,648		1,648
Unsecured Payroll Support Program Extension Loan												Unsecured Payroll Support Program Extension Loan	2031						1.00%				828		0
Financing arrangements secured by SkyMiles assets:												Financing arrangements secured by SkyMiles assets:
SkyMiles Notes(1)												SkyMiles Notes(1)	2023		to		2028		4.50%		and	4.75%	6,000		6,000
SkyMiles Term Loan(1)(2)												SkyMiles Term Loan(1)(2)	2023		to		2027		4.75%				3,000		3,000
Financing arrangements secured by slots, gates and/or routes:												Financing arrangements secured by slots, gates and/or routes:
2020 Senior Secured Notes												2020 Senior Secured Notes	2025						7.00%				3,500		3,500
2020 Term Loan												2020 Term Loan	n/a										0		1,493
2018 Revolving Credit Facility(2)												2018 Revolving Credit Facility(2)	2021		to		2023		Undrawn				0		0
Financing arrangements secured by aircraft:	Financing arrangements secured by aircraft:											Financing arrangements secured by aircraft:
Certificates⁽²⁾		2020	to	2028	2.00%	to	8.02%	2,611		1,669
Certificates(1)												Certificates(1)	2021		to		2028		2.00%		to	8.02%	2,518		2,633
Notes⁽¹⁾⁽²⁾	Notes⁽¹⁾⁽²⁾	2020	to	2025	1.37%	to	6.03%	1,243		1,193		Notes(1)(2)	2021		to		2033		0.77%		to	5.75%	1,350		1,284
NYTDC Special Facilities Revenue Bonds, Series 2018⁽²⁾		2022	to	2036	4.00%	to	5.00%	1,383		1,383
Other financings^(1)(2)(3)		2021	to	2030	1.99%	to	8.75%	256		196
2018 Unsecured Revolving Credit Facility⁽¹⁾		2021	to	2023	2.45%							2,650		—
Other revolving credit facilities⁽¹⁾		2020	to	2021	2.37%	to	3.21%	292		—
NYTDC Special Facilities Revenue Bonds, Series 2020(1)												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)												NYTDC Special Facilities Revenue Bonds, Series 2018(1)	2022		to		2036		4.00%		to	5.00%	1,383		1,383
Other financings(1)(2)												Other financings(1)(2)	2021		to		2030		2.25%		to	8.75%	611		412
Other revolving credit facilities(2)												Other revolving credit facilities(2)	2021		to		2022		Undrawn				0		0
Total secured and unsecured debt	Total secured and unsecured debt							15,685		9,991		Total secured and unsecured debt											27,699		28,214
Unamortized premium and debt issue cost, net and other								155		115
Unamortized (discount)/premium and debt issue cost, net and other												Unamortized (discount)/premium and debt issue cost, net and other											(226)		(240)
Total debt	Total debt							15,840		10,106		Total debt											27,473		27,974
Less: current maturities	Less: current maturities							(4,090)		(2,054)		Less: current maturities											(2,671)		(1,443)
Total long-term debt	Total long-term debt							$	11,750	$	8,052	Total long-term debt											$	24,802	$	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.

⁽²⁾~~Due~~

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 ~~installments.~~grants and loans 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. In the March 2021 quarter, we received $2.9 billion in payroll support payments, 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 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.

⁽³⁾~~Primarily includes~~These support payments consisted of approximately $2.0 billion in a grant and $828 million in an unsecured ~~bonds~~10-year low interest loan. 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. In return, we entered into a promissory note for the $828 million and issued warrants to the U.S. Department of the Treasury to acquire approximately 2.1 million shares of Delta common stock, representing approximately 0.3% of our outstanding shares. These 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 $784 million of noncurrent debt, ~~secured by~~net of discount, and $44 million in additional paid in capital, respectively.

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

Notes to the Consolidated Financial Statements

We have participated in the initial payroll support program, and as described above, the first extension of the payroll support program. A summary of the amounts received and warrants issued to date under these programs is set forth in the following table:


Summary of payroll support program activity
(in millions, except percentages)	Total Amount		Grant		Loan		Number of Warrants	Percentage of Outstanding Shares at March 31, 2021
Payroll Support Program (PSP1)	$	5,594	$	3,946	$	1,648	6.8	1.1	%
First Payroll Support Program Extension (PSP2) (1)	2,861		2,033		828		2.1	0.3	%

(1)During the March 2021 quarter $1.2 billion of this grant was recognized in government grant recognition in our income statement and $847 million is deferred in other accrued liabilities on our balance sheet as of March 31, 2021.

The American Rescue Plan Act of 2021 was enacted on March 11, 2021, and included a second extension of the payroll support program providing an additional $14 billion in grants and loans to be used for airline employee wages, salaries and benefits. We expect to enter into similar agreements as those discussed above with the U.S. Department of the Treasury. Based on the share of funds we received from the first extension of the payroll support program, and the similar structures of both extensions, we estimate that we will receive approximately $2.7 billion, consisting of $1.9 billion in a grant and $800 million in an unsecured 10-year low interest loan. However, the actual amounts received and the allocation between the grant and loan could differ from our estimates. These payments are expected to be conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs through September 2021 or the date on which assistance provided under the agreement is exhausted, whichever is later. Other conditions would include prohibitions on share repurchases and dividends through September 2022 and certain ~~accounts receivable~~limitations on executive compensation until April 2023. In return, we expect to enter into a promissory note for the amount of the loan and ~~real estate.~~to issue warrants to the U.S. Department of the Treasury to acquire shares of Delta common stock in an amount to be determined consistent with the structure of the prior warrant issuances.

2020 ~~Secured~~ Term Loan ~~Facility~~

In ~~March~~ 2020 we entered into a ~~$2.7~~$1.5 billion ~~364-day secured~~ term loan ~~facility ("the facility"). Borrowings under the facility are~~ secured by certain ~~aircraft. The facility also contains an accordion feature under~~slots, gates and routes. In the March 2021 quarter we repaid in full the term loan, which ~~the aggregate commitment can be increased~~was scheduled to ~~$4.0 billion upon our request, provided that the new lenders agree to the existing terms~~mature in April 2023, and incurred a $56 million loss on extinguishment of ~~the facility. The facility contains covenants similar to our other existing borrowings. In April 2020, this loan was increased to $3.0 billion.~~

~~2020-1 EETC~~

~~We completed a $1.0 billion offering of Pass Through Certificates, Series 2020-1 ("2020-1 EETC") utilizing a pass through trust during March 2020. This amount~~debt, which is ~~included~~recorded in ~~Certificates~~miscellaneous, net in non-operating expense in the table above. The proceeds of this issuance were used to pay the unsecured notes that matured in the March 2020 quarter. The details of the 2020-1 EETC, which is secured by 33 aircraft, are shown in the table below:

(in millions) Total Principal Fixed Interest Rate Issuance Date Final Maturity Date
2020-1 Class AA Certificates $ 796 2.00% March 2020 June 2028
2020-1 Class A Certificates 204 2.50% March 2020 June 2028
Total $ 1,000
income statement.

Availability Under Revolving ~~Credit~~ Facilities

~~During~~As of March 31, 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 March 31, 2021, including approximately $400 million that reduced the ~~March 2020 quarter, we drew $3.0 billion on~~availability under our revolving credit facilities and ~~had $21~~approximately $300 million ~~undrawn as~~that did not affect the availability of ~~March 31, 2020. The amounts drawn are included as outstanding debt in the table above.~~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						Fair value of outstanding debt
(in millions)	(in millions)	March 31, 2020		December 31, 2019		(in millions)	March 31, 2021		December 31, 2020
Net carrying amount	Net carrying amount	$	15,840	$	10,106	Net carrying amount	$	27,473	$	27,974
Fair value	Fair value	$	14,800	$	10,400	Fair value	$	29,500	$	29,800

Covenants

Our debt agreements contain various affirmative, negative and financial covenants. We were in compliance with the covenants in ~~our financing~~these debt agreements at March 31, ~~2020.~~2021.

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

Notes to the Consolidated Financial Statements

NOTE 8.6. EMPLOYEE BENEFIT PLANS

~~The following table shows the components of net periodic (benefit) cost:~~


Employee benefit plans net periodic (benefit) cost										Employee benefit plans net periodic (benefit) cost
		Pension Benefits						Other Postretirement and Postemployment Benefits							Pension Benefits					Other Postretirement and Postemployment Benefits
(in millions)	(in millions)	2020		2019		2020		2019		(in millions)	2021		2020			2021		2020
Three Months Ended March 31,	Three Months Ended March 31,									Three Months Ended March 31,
Service cost	Service cost	$	—	$	—	$	24	$	21	Service cost	$	0	$	0		$	21	$	24
Interest cost	Interest cost	175		208		28		34		Interest cost	146		175			29		28
Expected return on plan assets	Expected return on plan assets	(343)		(297)		(11)		(12)		Expected return on plan assets	(375)		(343)			(9)		(11)
Amortization of prior service credit	Amortization of prior service credit	—		—		(2)		(2)		Amortization of prior service credit	0		0			(2)		(2)
Recognized net actuarial loss	Recognized net actuarial loss	75		73		10		9		Recognized net actuarial loss	89		75			15		10

Net periodic (benefit) cost	Net periodic (benefit) cost	$	(93)	$	(16)	$	49	$	50	Net periodic (benefit) cost	$	(140)	$	(93)		$	54	$	49

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. Due~~plans in 2021, however we voluntarily contributed $1.0 billion to ~~the impact of the COVID-19 pandemic on our liquidity, we no longer plan to make any voluntary contributions during 2020.~~these plans in April 2021.

NOTE 9.7. COMMITMENTS AND CONTINGENCIES

Aircraft Purchase Commitments

~~We have committed to the future aircraft purchases reflected below. However, we are working with the OEMs to optimize the timing of our future aircraft deliveries.~~ Our future aircraft purchase commitments totaled approximately ~~$14.7~~$13.4 billion at March 31, ~~2020:~~2021:

(in millions) Total
Nine months ending December 31, 2020 $ 2,560
2021 4,560
2022 3,060
2023 1,860
2024 1,000
Thereafter 1,700
Total $ 14,740

~~Our future aircraft purchase commitments included the following aircraft at March 31, 2020:~~


~~Aircraft Type~~			~~Purchase Commitments~~
~~A220-100~~			14
~~A220-300~~			50
~~A321-200~~			27
~~A321-200neo~~			~~100~~
~~A330-900neo~~⁽¹⁾			32
~~A350-900~~			26
~~CRJ-900~~			4
~~Total~~			~~253~~

⁽¹⁾~~Includes 2 A330-900neo lease commitments with one in each of 2020 and 2021.~~

~~LATAM A350 Commitments~~

We have agreed to acquire 4 A350 aircraft from LATAM and assumed 10 of LATAM's A350 purchase commitments from Airbus, with deliveries through 2025, which are included as purchase commitments in the table above. See Note 5, "Investments," for further information on our strategic alliance with LATAM.


Aircraft purchase commitments
(in millions)	Total
Nine months ending December 31, 2021	$	750
2022	2,480
2023	2,310
2024	2,960
2025	2,750
Thereafter	2,110
Total	$	13,360

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.

~~Credit Card Processing Agreements~~

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

Our VISA/MasterCard and American Express credit card processing agreements provide that no cash reserve ("Reserve") is required, and no withholding of payment related to receivables collected will occur, except in certain circumstances, including when we do not maintain a required level of liquidity as outlined in the merchant processing agreements. In circumstances in which the credit card processor can establish a Reserve or withhold payments, the amount of the Reserve or payments that may be withheld would be equalNotes to the potential liability of the credit card processor for tickets purchased with VISA/MasterCard or American Express credit cards, as applicable, that had not yet been used for travel. We did not have a Reserve or an amount withheld as of March 31, 2020 or December 31, 2019.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 ~~10.~~8. ACCUMULATED OTHER COMPREHENSIVE LOSS

~~The following tables show the components of accumulated other comprehensive loss:~~

(in millions)
Pension and Other Benefit Liabilities⁽²⁾
Other Total
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 $3) — 21 21
Reclassifications into earnings (net of tax effect of $21)⁽¹⁾
70 — 70
Balance at March 31, 2020 (net of tax effect of $1,531) $ (8,025) $ 127 $ (7,898)


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 $23)(1)	78		0		78
Balance at March 31, 2021 (net of tax effect of $1,741)	$	(9,000)	$	40	$	(8,960)

Balance at January 1, 2019 (net of tax effect of $1,492) $ (7,925) $ 100 $ (7,825)
Changes in value (net of tax effect of $1) — (2) (2)
Reclassifications into earnings (net of tax effect of $19)⁽¹⁾
60 1 61
Balance at March 31, 2019 (net of tax effect of $1,474) $ (7,865) $ 99 $ (7,766)


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 $3)	0		21		21
Reclassifications into earnings (net of tax effect of $21)(1)	70		0		70
Balance at March 31, 2020 (net of tax effect of $1,531)	$	(8,025)	$	127	$	(7,898)

⁽¹⁾Amounts reclassified from AOCI for pension and other benefit liabilities ~~and for derivative contracts designated as foreign currency cash flow hedges~~ are recorded in miscellaneous, net in non-operating expense ~~and in passenger revenue, respectively,~~ in our income statement.

⁽²⁾Includes ~~$672~~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 ~~continuing~~results from operations.

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

Notes to the Consolidated Financial Statements

NOTE ~~11.~~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. Due to the decrease in demand for jet fuel caused by the COVID-19 pandemic, the refinery has shifted production to more 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 months ended March 31, 2021 and 2020 was $503 million and ~~2019 was~~ $831 million, ~~and~~respectively.

~~$732 million, respectively.~~

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.

(in millions) Airline Refinery Intersegment Sales/Other Consolidated
Three Months Ended March 31, 2020
Operating revenue: $ 8,592 $ 1,184 $ 8,592
Sales to airline segment $ (210)
⁽¹⁾
Exchanged products (831)
⁽²⁾
Sales of refined products (143)
⁽³⁾
Operating (loss) income (439) 29 — (410)
Interest expense (income), net 80 (1) — 79
Depreciation and amortization 678 25 (25)
⁽⁴⁾
678
Total assets, end of period 66,864 1,874 — 68,738
Capital expenditures 926 11 — 937
Three Months Ended March 31, 2019
Operating revenue: $ 10,424 $ 1,283 $ 10,472
Sales to airline segment $ (271)
⁽¹⁾
Exchanged products (732)
⁽²⁾
Sales of refined products (232)
⁽³⁾
Operating income (loss) 1,054 (34) — 1,020
Interest expense (income), net 92 (9) — 83
Depreciation and amortization 615 23 (23)
⁽⁴⁾
615
Total assets, end of period 60,343 1,498 — 61,841
Capital expenditures 1,350 10 — 1,360


Financial information by segment
(in millions)	Airline		Refinery		Intersegment Sales/Other			Consolidated
Three Months Ended March 31, 2021
Operating revenue:	$	3,610	$	1,047				$	4,150
Sales to airline segment					$	0	(1)
Exchanged products					(503)		(2)
Sales of refined products					(4)		(3)
Operating loss	(1,273)		(125)		0			(1,398)
Interest expense, net	360		1		0			361
Depreciation and amortization	492		24		(24)		(4)	492
Total assets, end of period	71,505		1,578		0			73,083
Fair value obligations, end of period(5)	0		(346)		0			(346)
Capital expenditures	425		13		0			438

Three Months Ended March 31, 2020
Operating revenue:	$	8,592	$	1,184				$	8,592
Sales to airline segment					$	(210)	(1)
Exchanged products					(831)		(2)
Sales of refined products					(143)		(3)
Operating (loss)/income	(439)		29		0			(410)
Interest expense (income), net	80		(1)		0			79
Depreciation and amortization	678		25		(25)		(4)	678
Total assets, end of period	66,864		1,874		0			68,738
Fair value obligations, end of period(5)	0		(33)		0			(33)
Capital expenditures	926		11		0			937

⁽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.

22Delta Air Lines, Inc. 2021 March Form 10-Q 16

Notes to the Consolidated Financial Statements

NOTE ~~12. (LOSS)/EARNINGS~~10. LOSS PER SHARE

We calculate basic ~~(loss)~~loss~~/earnings~~ per share and diluted ~~(loss)~~loss per share by dividing net ~~(loss)/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 and restricted stock awards. Antidilutive common stock equivalents excluded from the diluted ~~(loss)/earnings~~loss per share calculation are not material. The following table shows the computation of basic and diluted ~~(loss)/earnings~~loss per share:

Three Months Ended March 31,
(in millions, except per share data) 2020 2019
Net (loss)/income $ (534) $ 730
Basic weighted average shares outstanding 637 665
Dilutive effect of share-based awards — 2
Diluted weighted average shares outstanding 637 667
Basic (loss)/earnings per share $ (0.84) $ 1.10
Diluted (loss)/earnings per share $ (0.84) $ 1.09


Basic and diluted loss per share
	Three Months Ended March 31,
(in millions, except per share data)	2021		2020
Net loss	$	(1,177)	$	(534)

Basic weighted average shares outstanding	636		637
Dilutive effect of share-based awards	0		0
Diluted weighted average shares outstanding	636		637

Basic loss per share	$	(1.85)	$	(0.84)
Diluted loss per share	$	(1.85)	$	(0.84)

23Delta Air Lines, Inc. 2021 March Form 10-Q 17

Item 2. MD&A

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Impact~~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 ~~COVID-19 Pandemic~~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 Annual Report on Form 10-K.

~~The unprecedented~~Our business and ~~rapid spread of~~operating results for 2021 continue to be significantly impacted by the COVID-19 ~~and the related travel restrictions and social distancing measures implemented throughout the world~~pandemic. However, as described further below, we have ~~significantly reduced demand for air travel. After initially impacting our service to China beginning~~seen improvement in January, the spread of the virus and the resulting global pandemic next affected the majority of our international network and ultimately our domestic network. Beginning in March, large public events were cancelled, governmental authorities began imposing restrictions on non-essential activities, businesses suspended travel and popular leisure destinations temporarily closed to visitors. Certain countries that are key markets for our business ~~have imposed bans on international travelers for specified periods or indefinitely.~~

~~As a result, demand for travel declined at an accelerated pace,~~during the March 2021 quarter, which ~~has had an unprecedented and materially adverse impact on our revenues and financial position. The length and severity of the reduction in demand due to the pandemic is uncertain; accordingly,~~ we expect to continue throughout 2021. Given the ~~adverse impact to grow in the June 2020 quarter. While we are planning for a modest demand recovery beginning in the September 2020 quarter, the exact timing~~drastic and ~~pace of the recovery is uncertain given the significant~~unprecedented impact of the pandemic on our operating results in 2020, we believe that for the ~~overall U.S. and global economy. Our forecasted expense management and liquidity measures may be modified as we clarify the demand recovery timing.~~

~~In response to these developments, we have implemented measures to focus on the safety~~financial overview discussion below, a comparison of our ~~customers and employees, while at~~results in 2021 to 2019 allows for an understanding of the ~~same time seeking to mitigate the~~full impact ~~on our financial position and operations. These measures include, but are not limited to, the following:~~

~~Taking Care~~ of ~~our Customers and Employees.~~ ~~The safety of our customers and employees continues to be our primary focus. As~~ the COVID-19 pandemic ~~has developed, we have taken numerous steps to help customers~~ and ~~employees practice social distancing on~~ the ~~ground and in the air in keeping with current health-expert recommendations:~~

•~~Extending 2020 Medallion Status an additional year, rolling Medallion Qualification Miles into 2021 and extending Delta SkyMiles American Express Card benefits and Delta Sky Club memberships.~~

•~~Giving customers flexibility to plan, re-book and travel including extending expiration on travel credits through September 2022.~~

•~~Implementing significant workforce social distancing and protection measures, including reworking call center spaces to provide appropriate social distancing, increasing cleaning~~progress of our ~~facilities using methods~~recovery. Throughout the remainder of this management's discussion and ~~products similar to what~~analysis, we ~~are using on our aircraft and having virtually all employees who can telecommute do so.~~

~~Expense Management.~~ ~~With the reduction in revenue, we have, and will continue to implement cost saving initiatives, including:~~

•Reducing capacity as described above to align with expected demand, which has resulted in temporarily parking approximately 400 aircraft as of March 31, 2020, with the expectation to have over 650 aircraft parked by the end of the June quarter. As a result, we have made the decision to accelerate the retirement of our MD-88 fleet from December 2020 to the end of July 2020.

•~~Consolidating our footprint at our airport facilities, including temporarily closing most Delta Sky Clubs.~~

•~~Reducing employee-related costs, including:~~

◦~~Voluntary unpaid leaves of 30 days to 12 months offered to most employees. Approximately 35,000 employees have volunteered to take leaves beginning in the June 2020 quarter.~~

◦~~Salary reductions of 50%~~present results for ~~our officers and 25% for our director level employees.~~

◦~~A 25% reduction in work hours for all other management and most front-line employee work groups.~~

◦~~Instituting a company-wide hiring freeze.~~

•~~Delaying non-essential maintenance projects and reducing or suspending other discretionary spending.~~

•~~Drawing $3.0 billion from our previously undrawn revolving credit facilities.~~

•~~Entering into a $2.7 billion secured term loan facility during the March 2020 quarter with an accordion feature that allowed us to increase the facility to $3.0 billion during April 2020.~~

•Entering into $150 million of loans secured by certain of our widebody aircraft. In addition, during April 2020, we have entered into an additional $1.2 billion of sale-leaseback transactions for certain aircraft and are pursuing other financing initiatives.

•~~Suspending future share repurchases and dividends.~~

•~~Delaying $500 million of planned voluntary pension funding.~~

~~Our primary credit facility has various financial~~both 2020 and other covenants that require us to maintain a minimum fixed charge coverage ratio and a minimum asset coverage ratio. In the event that we are unable to maintain compliance with such covenants, we expect to obtain an amendment or waiver from our lenders, refinance the indebtedness subject to covenants or take other mitigating actions prior to a potential breach.

~~On April 20, 2020, we received the first installment of $2.7 billion under the payroll support program.~~

2019 results.

March ~~2020~~2021 Quarter Financial Overview

Our pre-tax loss for the March ~~2020~~2021 quarter was ~~$607 million, representing~~$1.5 billion, including the $1.2 billion benefit related to recognition of a ~~$1.6~~portion of the first payroll support program extension grant during the quarter. This represents a $2.5 billion decrease compared to the ~~corresponding prior year~~March 2019 quarter primarily resulting from a ~~18.0%~~60% decrease in revenue. Pre-tax loss, adjusted (a non-GAAP financial measure) was ~~$422 million,~~$2.9 billion, a decrease of ~~$1.3~~$3.8 billion compared to the ~~corresponding prior year period.~~March 2019 quarter.

Revenue. Compared to the March 2019 quarter, our operating revenue decreased ~~$1.9~~$6.3 billion, or ~~18.0%~~60%, due to reduced demand resulting from the COVID-19 pandemic, including a rapid decrease in demand during the last three weeks of March 2020. The decrease in operating revenue generated a 13.1% decrease in total revenue per available seat mile ("TRASM") and a 12.3% decrease in TRASM, adjusted (a non-GAAP financial measure) compared to the March 2019 quarter.pandemic.

Operating Expense. Total operating expense in the March 2021 quarter decreased ~~$450 million,~~$3.9 billion, or ~~4.8%~~41%, ~~primarily resulting from lower fuel costs, volume-related expenses and profit sharing. Our consolidated operating cost per available seat mile ("CASM") increased 1.0% to 15.30 cents~~ compared to the March 2019 quarter, primarily ~~due~~resulting from lower volume-related expenses, mainly fuel and passenger commissions and other selling expenses, recognition of the first payroll support program extension grant and significant cost reduction measures taken across all aspects of our operation in response to the ~~5.7% reduction in capacity, which was mitigated by lower fuel costs. Non-fuel unit costs ("CASM-Ex" a~~COVID-19 pandemic. Total operating expense, adjusted (a non-GAAP financial measure) ~~increased 9.5% to 12.58 cents~~for the March 2021 quarter decreased $3.1 billion, or 33%, compared to the March 2019 ~~quarter, due to employee wage increases and effects of the 5.7% reduction in capacity.~~quarter.

Non-Operating Results. Total non-operating expense was ~~$197~~$117 million in the March ~~2020~~2021 quarter, ~~$123~~$43 million higher than the March 2019 quarter, primarily due to ~~unrealized losses~~higher interest expense as a result of our increased debt due to financing arrangements entered into during 2020, partially offset by mark-to-market gains on our equity ~~investments compared to minimal gains in the prior year.~~investments.

Cash Flow. ~~Due~~Our cash, cash equivalents, short-term investments and aggregate principal amount committed and available to be drawn under our revolving credit facilities ("liquidity") at March 31, 2021 was $16.6 billion. During the ~~sudden onset of~~March 2021 quarter, operating activities provided $691 million, which included $2.0 billion from the ~~COVID-19 pandemic, losses~~first payroll support program extension grant. Also during ~~the quarter resulted in $358 million of operating cash flow. During~~ the quarter we incurred ~~$3.0 billion~~$60 million of investing cash outflows, primarily from capital expenditures related to our ~~$1.9 billion investment in~~ ~~LATAM Airlines Group S.A. ("LATAM")~~airport redevelopment projects, the purchase of aircraft and ~~$937 million~~fleet modifications, partially offset by the net redemption of ~~capital~~short-term investments. The $937 million of capital investments primarily occurred before the negative effects of the COVID-19 pandemic materialized. As discussed above, we have suspended, or are planning to significantly reduce, capital investments for the remainder of the year by limiting capital expenditures to only those critical to our operation. These results generated ~~$161~~$710 millionof ~~negative~~ free cash flow (a non-GAAP financial measure) ~~compared to $751 million of free cash flow~~ in the March ~~2019~~2021 quarter. ~~Despite this negative free cash flow,~~Additionally, during the March 2021 quarter we ~~ended~~repaid $1.8 billion on our debt and finance leases, of which $1.5 billion was early repayment of the ~~March 2020~~ ~~quarter~~term loan secured by certain of our slots, gates and routes and issued $924 million of debt primarily in connection with ~~$6.0 billion ofliquidity due to debt issuances, borrowings and other liquidity initiatives.~~the first payroll support program extension.

The above non-GAAP financial measures for pre-tax loss, adjusted, ~~TRASM,~~operating expense, adjusted, ~~CASM-Ex~~ 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 plan to spend more than $30 million in 2021 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, including $20 million on credits that we purchased and retired during the March 2021 quarter.

Delta Air Lines, Inc. 2021 March Form 10-Q 18

Item 2. MD&A - Results of Operations

Results of Operations - Three Months Ended March 31, 2021, 2020 and 2019

Operating Revenue


		Three Months Ended March 31,									Increase (Decrease)		% Increase (Decrease)				Three Months Ended March 31,										2021 vs. 2020 % Increase (Decrease)		2021 vs. 2019 % Increase (Decrease)
(in millions)⁽¹⁾	(in millions)⁽¹⁾	2020			2019										(in millions)(1)		2021			2020			2019
Ticket - Main cabin	Ticket - Main cabin	$	3,798		$	4,721		$	(923)				(19.6)	%	Ticket - Main cabin		$	1,399		$	3,798		$	4,721			(63)	%	(70)	%
Ticket - Business cabin and premium products	Ticket - Business cabin and premium products	2,713			3,267			(554)			(17.0)	%	Ticket - Business cabin and premium products	878			2,713			3,267					(68)	%	(73)	%
Loyalty travel awards	Loyalty travel awards	543			692			(149)			(21.5)	%	Loyalty travel awards	241			543			692					(56)	%	(65)	%
Travel-related services	Travel-related services	515			574			(59)			(10.3)	%	Travel-related services	230			515			574					(55)	%	(60)	%
Total passenger revenue	Total passenger revenue	$	7,569		$	9,254		$	(1,685)		(18.2)	%	Total passenger revenue	$	2,748		$	7,569		$	9,254				(64)	%	(70)	%
Cargo	Cargo	152			192			(40)			(20.8)	%	Cargo	215			152			192					41	%	12	%
Other	Other	871			1,026			(155)			(15.1)	%	Other	1,187			871			1,026					36	%	16	%
Total operating revenue	Total operating revenue	$	8,592		$	10,472		$	(1,880)		(18.0)	%	Total operating revenue	$	4,150		$	8,592		$	10,472				(52)	%	(60)	%

TRASM (cents)	TRASM (cents)	14.59		¢	16.78		¢	(2.19)		¢	(13.1)	%	TRASM (cents)	10.34		¢	14.59		¢	16.78		¢			(29)	%	(38)	%
Third-party refinery sales⁽²⁾	Third-party refinery sales⁽²⁾	—			(0.08)			0.08			NM		Third-party refinery sales(2)	(1.35)			—			(0.08)					NM
Delta Private Jets adjustment⁽²⁾	Delta Private Jets adjustment⁽²⁾	—			(0.07)			0.07			NM		Delta Private Jets adjustment(2)	—			—			(0.07)					NM		(100)	%
TRASM, adjusted	TRASM, adjusted	14.59		¢	16.63		¢	(2.04)		¢	(12.3)	%	TRASM, adjusted	9.00		¢	14.59		¢	16.63		¢			(38)	%	(46)	%

⁽¹⁾This reconciliation may not calculate exactly due to rounding.

⁽²⁾For additional information on adjustments to TRASM, see "Supplemental Information" below.

Operating Revenue

Compared to the March 2019 quarter, our operating revenue decreased ~~$1.9~~$6.3 billion, or ~~18.0%~~60%, due to reduced demand resulting from the COVID-19 ~~pandemic, primarily in the second half of March.~~pandemic. The decrease in operating revenue, ~~generated~~on a ~~13.1%~~36% decrease in ~~TRASM~~capacity, resulted in a 38% decrease in total revenue per available seat mile ("TRASM") and a ~~12.3%~~46% decrease in TRASM, adjusted compared to the March 2019 quarter. The revenue declines compared to the March 2020 quarter are attributable to these same factors, with the impact of the pandemic largely limited to the month of March in 2020.

The increase in third-party refinery sales resulted from the refinery's shift to producing more non-jet fuel products due to the decline in demand for jet fuel. See "Refinery Segment" below for additional details on the refinery's operations during the March 2021 quarter.

Passenger revenue during the month of March 2021 was approximately 50% higher than the month of February 2021, which is a higher increase than we have historically experienced in prior years between February and March. The length and severity of the reduction in travel demand due to the COVID-19 pandemic are uncertain, but 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 in the spring and summer of 2021. The increase in passenger revenue from February 2021 to March 2021 is indicative of this increasing demand. We expect widespread vaccination to result in sustained demand improvement going forward, with recovery of domestic demand preceding the recovery of international demand in most regions.

We have historically generated cargo revenues 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 March 2021 quarter compared to the March 2020 and March 2019 quarters, in contrast to the decreases experienced in passenger revenue.

Delta Air Lines, Inc. 2021 March Form 10-Q 19

Item 2. MD&A - Results of Operations

Passenger Revenue by Geographic Region

Increase (Decrease)
vs. Three Months Ended March 31, 2019
(in millions) Three Months Ended March 31, 2020 Passenger Revenue
RPMs(Traffic)
ASMs(Capacity)
Passenger Mile Yield PRASM Load Factor
Domestic $ 5,601 (16.9) % (14.1) % (1.1) % (3.2) % (16.0) % (10.9) pts
Atlantic 818 (23.8) % (19.4) % (12.1) % (5.5) % (13.3) % (6.5) pts
Latin America 765 (11.2) % (12.4) % (5.9) % 1.5 % (5.6) % (6.0) pts
Pacific 385 (33.3) % (34.0) % (26.5) % 1.0 % (9.3) % (8.7) pts
Total $ 7,569 (18.2) % (16.6) % (5.7) % (2.0) % (13.3) % (9.6) pts


			Increase (Decrease) vs. Three Months Ended March 31, 2020
(in millions)	Three Months Ended March 31, 2021		Passenger Revenue		RPMs (Traffic)		ASMs (Capacity)		Passenger Mile Yield		PRASM		Load Factor
Domestic	$	2,280	(59)	%	(50)	%	(27)	%	(18)	%	(44)	%	(23)	pts
Atlantic	142		(83)	%	(84)	%	(63)	%	7	%	(53)	%	(40)	pts
Latin America	264		(65)	%	(53)	%	(6)	%	(27)	%	(63)	%	(40)	pts
Pacific	62		(84)	%	(91)	%	(58)	%	75	%	(61)	%	(60)	pts
Total	$	2,748	(64)	%	(58)	%	(32)	%	(13)	%	(47)	%	(28)	pts


			Increase (Decrease) vs. Three Months Ended March 31, 2019
(in millions)	Three Months Ended March 31, 2021		Passenger Revenue		RPMs (Traffic)		ASMs (Capacity)		Passenger Mile Yield		PRASM		Load Factor
Domestic	$	2,280	(66)	%	(57)	%	(27)	%	(21)	%	(53)	%	(34)	pts
Atlantic	142		(87)	%	(87)	%	(68)	%	1	%	(59)	%	(47)	pts
Latin America	264		(69)	%	(59)	%	(11)	%	(26)	%	(65)	%	(46)	pts
Pacific	62		(89)	%	(94)	%	(69)	%	77	%	(65)	%	(68)	pts
Total	$	2,748	(70)	%	(65)	%	(36)	%	(15)	%	(54)	%	(38)	pts

Passenger revenue decreased ~~$1.7~~$4.8 billion, or ~~18.2%~~64%, compared to the March ~~2019~~2020 quarter. Passenger revenue per available seat mile ("PRASM") decreased ~~13.3%~~47%, and passenger mile yield decreased ~~2.0%~~13% on ~~5.7%~~32% lower capacity. Load factor decreased ~~9.6~~28 points from the ~~prior year~~March 2020 quarter to ~~73.1%~~45%.

Passenger revenue decreased $6.5 billion, or 70%, compared to the March 2019 quarter. PRASM decreased 54%, and passenger mile yield decreased 15% on 36% lower capacity. Load factor decreased 38 points from the March 2019 quarter to 45%.

In March 2021, we announced the extension of the validity of all passenger tickets and travel credits expiring in 2021 or purchased in 2021 to December 2022. In addition, we have 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

~~Prior~~Passenger unit revenue related to our domestic region for the March 2021 quarter decreased 53% with capacity down 27% compared to the ~~effects~~March 2019 quarter as a result of reduced demand due to the COVID-19 pandemic ~~domestic~~and our policy to block middle seats on flights through April 30, 2021. The revenue ~~results were strong with January and February revenue nearly 10% higher than the prior year period. However, due~~decline compared to ~~the decrease in customer demand beginning in March, unit revenue for~~ the March 2020 quarter ~~decreased 16.0%~~is attributable to these same factors, with ~~capacity down 1.1%(with March month capacity down 18.1%) compared~~the impact of the pandemic largely limited to the ~~prior year period.~~ month of March in 2020.

We ~~expect this significantly lower~~are planning for improvement to the demand environment, primarily from leisure customers, to continue throughout 2021, though still lower than the comparable periods in 2019. Throughout the ~~June 2020~~latter half of the March 2021 quarter ~~and possibly beyond, and~~we have seen leisure customer bookings continue to improve, ending the quarter down approximately only 25% from March 2019 quarter levels. We remain optimistic about the ultimate recovery of business travel but are unable to predict the timing or extent of that recovery. As a result, we are planning for our domestic capacity to be approximately ~~80 percent~~20% lower in the June ~~2020~~2021 quarter than the June 2019 quarter.

27Delta Air Lines, Inc. 2021 March Form 10-Q 20

Item 2. MD&A - Results of Operations

International

Passenger revenue related to our international regions decreased ~~21.7% year-over-year due~~81% with capacity down 51% compared to ~~decreased demand as a result of~~ the ~~COVID-19 pandemic.~~March 2019 quarter, with similar declines compared to the March 2020 quarter. The reductions in revenue and capacity ~~discussed below~~presented in the tables above were a result of continued reduced demand and government travel directives and quarantines significantly limiting or suspending air travel due to the ~~spread~~COVID-19 pandemic. Additionally, many countries have implemented international testing requirements, which has slowed demand in the short-term but is expected to enable the long-term recovery of ~~COVID-19.~~ international air travel.

We expect this significantly lower demand environment to continue for an extended period, with improvement expected after the recovery in ~~the June 2020 quarter and possibly beyond.~~

~~Atlantic.~~ ~~Unit revenue decreased 13.3%~~ondomestic travel. As a ~~capacity reduction of 12.1%in the March 2020 quarter (with March month capacity down 44.9%) compared to the prior year period. We~~result, we are planning for our international capacity to be approximately 50% lower in the June ~~2020~~2021 quarter ~~to be approximately 95 percent lower~~ than the June 2019 quarter.

~~Latin America.~~ Unit revenue decreased 5.6% on a capacity reduction of 5.9% in the March 2020 quarter (with March month capacity down 27.2%) compared to the prior year period. We are planning for our capacity in the June 2020 quarter to be approximately 90 percent lower than the June 2019 quarter.

~~Pacific.~~ Unit revenue decreased 9.3% on a capacity reduction of 26.5% in the March 2020 quarter (with March month capacity down 58.7%) compared to the prior year period. We are planning for our capacity in the June 2020 quarter to be approximately 85 percent lower than the June 2019 quarter. ~~Also, as previously announced, in March 2020 we transferred our U.S.-Tokyo services from Narita to Haneda airport, Tokyo's preferred airport for corporate customers.~~

In each of ~~these~~the international regions, we continue to monitor government travel directives and customer demand and will adjust flight schedules accordingly. The length and severity of the reduction in demand due to the COVID-19 pandemic is uncertain. We expect these trends in revenue to continue until the global pandemic has moderated and demand for air travel returns.

~~Prior~~The Atlantic and Pacific regions continue to be the ~~COVID-19 pandemic, we completed two transactions to further strengthen our partnerships.~~most impacted by the restrictions described above. In ~~the Atlantic region, effective January~~December 2020, we combined our separate transatlantic joint venture agreements with Air France-KLM and Virgin Atlantic into a single three-party transatlantic joint venture. This enhanced joint venture will strengthen collaborationbecame the first U.S. airline to offer flights between the ~~three airlines~~U.S. and ~~will provide~~Europe that allow customers ~~with increased access~~ to ~~destinations across North America,~~avoid quarantine upon arrival after testing negative for the ~~U.K.~~virus prior to travel and ~~Europe. In~~upon arrival in Amsterdam and Rome. We plan to continue this program to Rome through the June 2021 quarter, while also adding more routes and frequencies, including the addition of Milan as a destination.

The Latin America region ~~in January 2020, we completed~~has shown the ~~tender offer to acquire 20%~~most recovery of the ~~shares of LATAM as part of our plan to enter into a strategic alliance. Additionally~~international regions, with improving demand for leisure destinations in the ~~March 2020~~Caribbean, Mexico and Central America. We expect that trend to continue into the June 2021 quarter ~~we started codesharing for certain flights operated by LATAM. This alliance is expected to generate new growth opportunities, building upon Delta's~~with the recovery in the Atlantic and ~~LATAM's global footprint and joint ventures.~~Pacific regions lagging behind Latin America.

Other Revenue


		Three Months Ended March 31,						Increase (Decrease)		% Increase (Decrease)			Three Months Ended March 31,							2021 vs. 2020 % Increase (Decrease)		2021 vs. 2019 % Increase (Decrease)
(in millions)	(in millions)	2020		2019								(in millions)	2021		2020		2019
Ancillary businesses and refinery										Ancillary businesses and refinery	$	726	$	223	$	369		NM		97	%
Loyalty program	Loyalty program	$	474	$	474	$	—			—	%	Loyalty program	368		474		474			(22)	%	(22)	%
Ancillary businesses and refinery		223		369		(146)		(39.6)	%
Miscellaneous	Miscellaneous	174		183		(9)		(4.9)	%	Miscellaneous	93		174		183			(47)	%	(49)	%
Total other revenue	Total other revenue	$	871	$	1,026	$	(155)	(15.1)	%	Total other revenue	$	1,187	$	871	$	1,026		36	%	16	%

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 approximately $540 million and $490 million compared to the March 2020 and March 2019 quarters, respectively. The increase in third-party refinery sales resulted from the refinery's shift to producing more non-jet fuel products due to the decline in demand for jet fuel. The increase in refinery sales was partially offset by declines in revenue from aircraft maintenance services we provide to third parties, which decreased due to the reduction in flights operated worldwide. The March 2019 quarter results also included $52 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, which ~~did not experience the same decline in demand as~~declined at a less severe rate than air ~~travel during the quarter.~~

~~Ancillary Businesses and Refinery.~~ Ancillary businesses and refinery includes aircraft maintenance services we provide to third parties, our vacation wholesale operations and refinery sales to third parties. Refinery sales to third parties, which are at or near cost, decreased $49 million compared to the March 2019 quarter. The March 2019 quarter results also included $52 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.travel.

Miscellaneous. Miscellaneous revenue is primarily composed of lounge access and codeshare revenues. The volume of these transactions has fallen compared to the March 2020 and March 2019 quarters due to the impact of, and our response to, the COVID-19 pandemic, including reduced capacity and the temporary closure of certain lounges. We expect to reopen nearly all of our lounges by July 2021.

28Delta Air Lines, Inc. 2021 March Form 10-Q 21

Item 2. MD&A - Results of Operations

Operating Expense


		Three Months Ended March 31,						Increase (Decrease)		% Increase (Decrease)			Three Months Ended March 31,								2021 vs. 2020 % Increase (Decrease)		2021 vs. 2019 % Increase (Decrease)
(in millions)	(in millions)	2020		2019								(in millions)	2021		2020		2019
Salaries and related costs	Salaries and related costs	$	2,771	$	2,639	$	132			5.0	%	Salaries and related costs	$	2,202	$	2,862	$	2,732			(23)	%	(19)	%
Aircraft fuel and related taxes	Aircraft fuel and related taxes	1,595		1,978		(383)		(19.4)	%	Aircraft fuel and related taxes	1,017		1,595		1,978				(36)	%	(49)	%
Regional carriers expense, excluding fuel		902		893		9		1.0	%
Ancillary businesses and refinery										Ancillary businesses and refinery	706		219		351				NM
Contracted services										Contracted services	519		748		709				(31)	%	(27)	%
Landing fees and other rents										Landing fees and other rents	493		550		524				(10)	%	(6)	%
Depreciation and amortization	Depreciation and amortization	678		615		63		10.2	%	Depreciation and amortization	492		678		615				(27)	%	(20)	%
Contracted services		675		632		43		6.8	%
Regional carrier expense										Regional carrier expense	401		577		538				(31)	%	(25)	%
Aircraft maintenance materials and outside repairs	Aircraft maintenance materials and outside repairs	469		476		(7)		(1.5)	%	Aircraft maintenance materials and outside repairs	294		469		476				(37)	%	(38)	%
Landing fees and other rents		467		419		48		11.5	%
Passenger service										Passenger service	118		273		288				(57)	%	(59)	%
Passenger commissions and other selling expenses	Passenger commissions and other selling expenses	358		427		(69)		(16.2)	%	Passenger commissions and other selling expenses	110		398		474				(72)	%	(77)	%
Passenger service		257		271		(14)		(5.2)	%
Ancillary businesses and refinery		219		351		(132)		(37.6)	%
Aircraft rent	Aircraft rent	100		102		(2)		(2.0)	%	Aircraft rent	104		100		102				4	%	2	%
Restructuring charges										Restructuring charges	(44)		—		—				NM
Government grant recognition										Government grant recognition	(1,186)		—		—				NM
Profit sharing	Profit sharing	—		220		(220)		(100.0)	%	Profit sharing	—		—		220				NM		(100)	%
Other	Other	511		429		82		19.1	%	Other	322		533		445				(40)	%	(28)	%
Total operating expense	Total operating expense	$	9,002	$	9,452	$	(450)	(4.8)	%	Total operating expense	$	5,548	$	9,002	$	9,452			(38)	%	(41)	%

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 decreased significantly in the March 2021 quarter compared to the March 2020 and 2019 quarters. 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 and the reduction in volume and selling-related costs. During 2021, as distribution of effective vaccines continues, travel restrictions and advisories ease and customer confidence continues to grow, we expect revenue and capacity to return and operating expense to 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 March 2020 and March 2019 quarters that were not primarily driven by the reduction in capacity or revenue. These include many of the cost reduction measures and programs we implemented in response to the COVID-19 pandemic.

Salaries and Related ~~Cost~~s.Costs. The ~~increase~~decrease in salaries and related costs compared to the March 2020 and March 2019 quarters is primarily due to ~~pay rate increases for eligible employees implemented in the December 2019 quarter. As~~actions taken as a result of decreased demand for air travel due to the COVID-19 ~~pandemic, we have instituted a hiring freeze,~~pandemic. In the second half of 2020, approximately 18,000 employees elected to participate in voluntary separation programs, reducing our workforce by approximately 20%. Additionally, approximately 13,000 employees took voluntary unpaid leaves of absence during the March 2021 quarter.

Beginning in March 2020 and continuing through December 2020, salaries were reduced ~~salaries~~ by ~~50% and 25%~~100% for our ~~officer~~CEO and ~~director level employees, respectively, and reduced~~50% for our other officers. In addition, work hours were reduced by 25% for all other management and most front-line employee work ~~groups for the June 2020 quarter. In addition,~~groups. On January 1, 2021, employees were restored to full work hours and we plan to recall approximately ~~35,000 of our employees will take a voluntary unpaid leave of absence for periods ranging from 30 days up to 12 months beginning in the June 2020 quarter. As a result, we expect salaries~~1,700 pilots between March and ~~related costs to decline in future periods versus the comparable prior year period.~~October that had been placed on inactive status.

Delta Air Lines, Inc. 2021 March Form 10-Q 22

Item 2. MD&A - Results of Operations

Aircraft Fuel and Related Taxes. Fuel expense decreased $~~383~~961 million compared to the ~~prior year~~March 2019 quarter primarily due to ~~an approximately 8%~~a 43%decrease in consumption and a 18% decrease in the market price ~~per gallon~~ of jet ~~fuel and~~fuel. Fuel expense decreased $578 million compared to the March 2020 quarter primarily due to a 8%38% decrease in ~~consumption. We expect~~ consumption and an 11% decrease in ~~future quarters~~the market price of jet fuel. Consumption decreased on a combination of reduced capacity and improved fuel efficiency on an available seat mile basis. Additionally, during the March 2021 quarter, we purchased and retired approximately $20 million of carbon offset credits which relate to ~~decline further,~~approximately 60% of the 13 million metric tons of carbon emissions generated by our airline segment from March 1 to December 31, 2020. In the table below, these costs are shown in ~~line with the expected capacity reductions discussed above.~~environmental sustainability impact.

The table below also shows the impact of hedging and the refinery on fuel expense and average price per ~~gallon, adjusted (non-GAAP financial measures):~~

Average Price Per Gallon
Three Months Ended March 31, Increase (Decrease) Three Months Ended March 31, Increase (Decrease)
(in millions, except per gallon data) ⁽¹⁾
2020 2019 2020 2019
Fuel purchase cost⁽²⁾
$ 1,631 $ 1,936 $ (305) $ 1.85 $ 2.01 $ (0.16)
Fuel hedge impact (7) 8 (15) (0.01) 0.01 (0.02)
Refinery segment impact (29) 34 (63) (0.03) 0.04 (0.07)
Total fuel expense $ 1,595 $ 1,978 $ (383) $ 1.81 $ 2.06 $ (0.25)
MTM adjustments and settlements⁽³⁾
7 (8) 15 0.01 (0.01) 0.02
Delta Private Jets adjustment⁽⁴⁾
— (7) 7 — (0.01) 0.01
Total fuel expense, adjusted $ 1,602 $ 1,963 $ (361) $ 1.82 $ 2.04 $ (0.22)
gallon.

⁽¹⁾


Fuel expense and average price per gallon
									Average Price Per Gallon
	Three Months Ended March 31,						2021 vs. 2019 Increase (Decrease)		Three Months Ended March 31,						2021 vs. 2019 Increase (Decrease)
(in millions, except per gallon data)	2021		2020		2019				2021		2020		2019
Fuel purchase cost(1)	$	895	$	1,631	$	1,936	$	(1,041)	$	1.64	$	1.85	$	2.01	$	(0.37)
Environmental sustainability impact	20		—		—		20		0.04		—		—		0.04
Fuel hedge impact	(23)		(7)		8		(31)		(0.04)		(0.01)		0.01		(0.05)
Refinery segment impact	125		(29)		34		91		0.23		(0.03)		0.04		0.19
Total fuel expense	$	1,017	$	1,595	$	1,978	$	(961)	$	1.87	$	1.81	$	2.06	$	(0.19)

~~This reconciliation may not calculate exactly due to rounding.~~

⁽²⁾(1)Market price for jet fuel at airport locations, including related taxes and transportation costs.

⁽³⁾Mark-to-market ("MTM") adjustments and settlements include the effects of the derivative transactions disclosed in Note 6 of the Notes to the Condensed Consolidated Financial Statements. For additional information and the reason for adjusting fuel expense, see "Supplemental Information" below.

⁽⁴⁾~~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.~~

~~Regional carriers expense, excluding fuel.~~ Expenses associated with the regional carriers is dependent on our capacity and utilization of these carriers. We expect regional carriers expense to decline in future quarters due to the capacity reductions discussed above.

~~Passenger Commissions and Other Selling Expenses.~~ The decrease in passenger commissions and other selling expenses is primarily related to the significant reduction in demand for travel beginning in March 2020 due to the impact of the COVID-19 pandemic.

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 and~~operations. Increased expenses were primarily related to refinery ~~sales to third parties. Refinery~~ sales to third parties, which are at or near ~~cost, decreased $49 million~~cost. Due to the decrease in demand for jet fuel, the refinery has shifted production to more non-jet fuel products, which increased the sales to third parties compared to the March 2019 quarter. The refinery cost of sales increased approximately $540 million and approximately $490 million compared to the March 2020 and March 2019 quarters, respectively. The increase in refinery costs was partially offset by lower expenses related to aircraft maintenance services we provide to third parties due to the reduction in flights operated worldwide. In addition, $44 million of costs related to services performed by Delta Private Jets in the March 2019 quarter were recorded in ancillary businesses and refinery prior to the combination of that business with Wheels Up in January 2020.

~~Profit Sharing.~~ Regional Carrier Expense.~~Our profit sharing program pays 10%~~ Regional carrier expense decreased compared to ~~all eligible employees for~~ the ~~first $2.5 billion of annual profit~~March 2020 and ~~20% of annual profit above $2.5 billion. The decrease in profit sharing is~~March 2019 quarters due to lower utilization of these carriers as a result of the ~~current expectations for a pre-tax loss~~overall reduced capacity.

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 are no longer 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, ~~compared to expectations for pre-tax income~~including $325 million in the March 2020 quarter, and $1.4 billion in 2019, including $355 million in the March 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, aircraft rent did not decline as our other operating expense line items did compared to the March 2020 and March 2019 quarters.

~~Other.~~Restructuring charges. ~~The increase~~During 2020, we recorded restructuring charges, including certain accruals, following strategic business decisions in ~~other expense is primarily driven by costs resulting from~~response to the COVID-19 pandemic. In the March 2021 quarter, we recognized $44 million of adjustments to certain of those restructuring charges, representing changes in our ~~decision in January 2020 to launch new uniforms for flight attendants and above-wing customer service agents.~~estimates.

~~CARES Act.~~Government Grant Recognition. In ~~April 2020,~~January 2021, we ~~were granted $5.4 billion in emergency relief through the~~entered into a payroll support program ~~of the CARES Act to be paid in installments through July 2020. The relief payments are conditioned on our~~extension agreement to refrain from conducting involuntary employee layoffs or furloughs through September 30, 2020. Other conditions include prohibitions on share repurchases and dividends through September 30, 2021, continuing essential air service as directed by the U.S. Department of Transportation and certain limitations on executive compensation. The relief payments include $3.8 billion in grants and $1.6 billion in an unsecured 10-year low interest loan. The loan includes annual interest rates of 1.00% for the first five years (through April 2025) and the Secured Overnight Financing Rate ("SOFR") plus 2.00% in the final five years. In return, we have agreed to issue towith the U.S. Department of the ~~Treasury~~Treasury. In the March 2021 quarter, we received $2.9 billion in payroll support payments, which must be used exclusively for the payment of employee wages, salaries and benefits. The support payments included a grant of $2.0 billion that is being recognized as contra-expense in 2021 over ~~6.5 million warrants~~the period that the funds are expected to ~~acquire Delta common stock. These warrants include an exercise price of $24.39 per share and have a five-year term.~~benefit. We expect to fully recognize ~~a portion~~the grant proceeds from this first payroll support program extension by the end of the June 2021 quarter.

Delta Air Lines, Inc. 2021 March Form 10-Q 23

Item 2. MD&A - Results of Operations

We additionally expect to receive approximately $2.7 billion, including a grant of $1.9 billion, under a second extension of the payroll support program. The grant will also be recognized as ~~contra-operating expense.~~contra-expense in 2021 over the period that the funds are expected to benefit. The amounts of the second extension of the payroll support program are estimated based on our share, and the structure of, the first extension of the payroll support program although actual amounts could differ from our estimates. See Note 5 of the Notes to the Condensed Consolidated Financial Statements for additional information on the payroll support program extensions.

Non-Operating Results


		Three Months Ended March 31,									Three Months Ended March 31,						2021 vs. 2020		2021 vs. 2019
(in millions)	(in millions)	2020		2019		Favorable (Unfavorable)		(in millions)	2021		2020		2019		Favorable (Unfavorable)
Interest expense, net	Interest expense, net	$	(79)	$	(83)	$	4	Interest expense, net	$	(361)	$	(79)	$	(83)	$	(282)	$	(278)
Impairments and equity method losses								Impairments and equity method losses	(54)		(260)		(54)		206		—
Gain/(loss) on investments, net	Gain/(loss) on investments, net	(112)		100		(212)		Gain/(loss) on investments, net	262		(112)		100		374		162
Miscellaneous, net	Miscellaneous, net	(6)		(91)		85		Miscellaneous, net	36		254		(37)		(218)		73
Total non-operating expense, net	Total non-operating expense, net	$	(197)	$	(74)	$	(123)	Total non-operating expense, net	$	(117)	$	(197)	$	(74)	$	80	$	(43)

Interest ~~expense.~~expense, net. Interest expense ~~decreased~~increased compared to the prior year ~~period~~periods as a result of ~~lower interest rates~~financing arrangements entered into during 2020. See Note 5 of the Notes to the Condensed Consolidated Financial Statements for additional information on ~~our debt.~~recent financings. As a result of the ~~financing activities entered into~~increase in our outstanding debt since the onset of the COVID-19 pandemic, interest expense, net in the March 2021 quarter was $361 million. However, we have begun reducing the total amount of interest expense by paying down our debt in addition to periodic amortization payments and scheduled maturities. This began with early repayments made during the December 2020 quarter and ~~expectations for future financings~~continued with the early repayment of our $1.5 billion secured term loan in the March 2021 quarter. We expect interest expense in the June ~~2020~~2021 quarter ~~our debt balance has increased and we expect interest expense~~ to ~~increase in future quarters.~~be approximately $350 million.

~~Gain/(loss) on investments.~~ Impairments and equity method losses.~~Gain/(loss) on investments~~ Impairments and equity method losses reflects ~~the gains~~our share of LATAM's and ~~losses on~~Grupo Aeroméxico's equity method results prior to their respective bankruptcy filings, and our share of Virgin Atlantic's equity investments. The decrease compared to the prior year period results from unrealized losses in our equity investments in international airlines, which experienced significant market declines during the March 2020 quarter due to the global travel restrictions from the COVID-19 pandemic.method results. See Note 54 of the Notes to the Condensed Consolidated Financial Statements for additional information on our equity investments.

~~Miscellaneous.~~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 March 2021 quarter gain is primarily due to the mark-to-market adjustment on our investment in Wheels Up. See Note 4 of the Notes to the Condensed Consolidated Financial Statements for additional information on our equity investments.

Miscellaneous, net. Miscellaneous, net is primarily ~~composed of our proportionate share of earnings/losses from our equity investments in Virgin Atlantic and Grupo Aeroméxico,~~includes pension and related ~~expense, charitable contributions and~~benefit/(expense), foreign exchange gains/~~losses. Our equity investment financial results~~(losses) and ~~foreign exchange gains/losses vary and impact the comparability of miscellaneous, net from period to period.~~charitable contributions. The ~~favorability compared to the prior year period is primarily due to~~March 2020 quarter included the $240 million gain recognized as a result of the combination of Delta Private Jets with Wheels Up in January ~~2020, offset by equity investment losses.~~2020.

Income Taxes

During 2021 interim periods, we will calculate our income tax expense by applying to any pre-tax loss/income an effective tax rate determined as if the year to date period is the annual period. Using this method, for the three months ended March 31, 2021 our effective tax rate was 22%. We ~~project~~believe that, ~~our~~at this time, this method for determining the effective tax rate is more reliable than projecting an annual effective tax rate ~~for 2020 will be between 18% and 22%. In certain interim periods, we may have adjustments~~due to ~~our net deferred tax liabilities as a result~~the uncertainty of ~~changes in prior year estimates and tax laws enacted during~~estimating annual pre-tax loss/income due to the ~~period, which will~~ impact of the ~~effective tax rate for that interim period.~~COVID-19 pandemic.

Delta Air Lines, Inc. 2021 March Form 10-Q 24

Item 2. MD&A - Refinery Segment

Refinery Segment

The refinery operated by our ~~subsidiary~~subsidiaries Monroe Energy, LLC ~~("Monroe"~~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. ~~In future periods,~~During the March 2021 quarter, the refinery ~~expects to operate~~operated at 60% – 90% of normal production levels, largely due to the significant ~~drop~~decrease in the demand for jet ~~fuel.~~fuel, and expects production levels at the high end of that range during the June 2021 quarter, subject to market conditions. Additionally, due to the ~~drop~~decrease in demand for jet fuel, ~~we are shifting our~~the refinery has shifted production to ~~produce~~ more non-jet fuel products. ~~Those~~We plan to continue to exchange those non-jet fuel products ~~will continue to be exchanged~~ for jet fuel to the extent ~~that we can balance refinery sales with~~needed based on jet fuel demand.

The refinery recorded operating revenue of $1.2 billion in the three months ended March 31, 2020, compared to $1.3 billion in the three months ended March 31, 2019. Operating revenue in the three months ended March 31, 2020 was primarily composed of $831 million of non-jet fuel products exchanged with third parties to procure jet fuel, $210 million of sales of jet fuel to the airline segment and $143 million of non-jet fuel product sales.


Refinery segment financial information
	Three Months Ended March 31,						2021 vs. 2020		2021 vs. 2019
(in millions, except per gallon data)	2021		2020		2019		% Increase (Decrease)		% Increase (Decrease)
Exchange products	$	503	$	831	$	732	(39)	%	(31)	%
Sales of refined products	4		143		232		(97)	%	(98)	%
Sales to airline segment	—		210		271		NM		NM
Third party refinery sales	540		—		48		NM		NM
Operating revenue	$	1,047	$	1,184	$	1,283	(12)	%	(18)	%

Operating (loss)/income	$	(125)	$	29	$	(34)	NM		NM
Refinery segment impact on average price per fuel gallon	$	0.23	$	(0.03)	$	0.04	NM		NM

Refinery revenues decreased compared to the ~~prior year period~~March 2020 and March 2019 quarters due to lower ~~costs of crude oil leading to lower pricing for associated refined products, partially offset by higher~~ refinery run rates during the ~~quarter.~~

quarter, as well as lower pricing for refined products. The ~~refinery recorded~~ operating ~~income of $29 million~~loss was higher in the ~~three months ended~~ March ~~31, 2020,~~2021 quarter as compared to ~~operating loss of $34 million~~the March 2019 quarter, which was mainly driven by the reduction in ~~the three months ended March 31, 2019.~~revenue and an increase in Renewable Identification Numbers ("RINs") compliance costs discussed below, and was partially offset by cost savings resulting from decreased production levels.

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 ~~renewable energy credits, called Renewable Identification Numbers ("RINs"),~~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 March 2021 quarter, with Monroe incurring $158 million in RINs compliance costs during the March 2021 quarter as compared to $27 million and $15 million in the March 2020 and March 2019 quarters, respectively.

For more information regarding the refinery's results, see Note 119 of the Notes to the Condensed Consolidated Financial Statements.

31Delta Air Lines, Inc. 2021 March Form 10-Q 25

Item 2. MD&A - Operating Statistics

Operating Statistics


		Three Months Ended March 31,							% Increase (Decrease)									Three Months Ended March 31,					2021 vs. 2020 % Increase (Decrease)		2021 vs. 2019 % Increase (Decrease)
Consolidated⁽¹⁾	Consolidated⁽¹⁾	2020			2019						Consolidated(1)	2021			2020			2019
Revenue passenger miles (in millions)	Revenue passenger miles (in millions)	43,062			51,617			(16.6)		%						Revenue passenger miles (in millions)		17,948			43,062	51,617	(58)	%	(65)	%
Available seat miles (in millions)	Available seat miles (in millions)	58,885			62,416			(5.7)	%		Available seat miles (in millions)	40,118			58,885			62,416			(32)	%	(36)	%
Passenger mile yield	Passenger mile yield	17.58		¢	17.93		¢	(2.0)	%		Passenger mile yield	15.31		¢	17.58		¢	17.93		¢	(13)	%	(15)	%
PRASM	PRASM	12.85		¢	14.83		¢	(13.3)	%		PRASM	6.85		¢	12.85		¢	14.83		¢	(47)	%	(54)	%
TRASM	TRASM	14.59		¢	16.78		¢	(13.1)	%		TRASM	10.34		¢	14.59		¢	16.78		¢	(29)	%	(38)	%
TRASM, adjusted⁽²⁾	TRASM, adjusted⁽²⁾	14.59		¢	16.63		¢	(12.3)	%		TRASM, adjusted(2)	9.00		¢	14.59		¢	16.63		¢	(38)	%	(46)	%
CASM	CASM	15.30		¢	15.14		¢	1.0	%		CASM	13.83		¢	15.30		¢	15.14		¢	(10)	%	(9)	%
CASM-Ex⁽²⁾	CASM-Ex⁽²⁾	12.58		¢	11.49		¢	9.5	%		CASM-Ex(2)	13.01		¢	12.58		¢	11.49		¢	3	%	13	%
CASM, adjusted(2)											CASM, adjusted(2)	15.61		¢	15.30		¢	14.99		¢	2	%	4	%
Passenger load factor	Passenger load factor	73.1		%	82.7		%	(9.6)	pts		Passenger load factor	45		%	73		%	83		%	(28)	pts	(38)	pts
Fuel gallons consumed (in millions)	Fuel gallons consumed (in millions)	880			962			(8.5)	%		Fuel gallons consumed (in millions)	545			880			962			(38)	%	(43)	%
Average price per fuel gallon⁽³⁾	Average price per fuel gallon⁽³⁾	$	1.81		$	2.06		(12.1)	%		Average price per fuel gallon(3)	$	1.87		$	1.81		$	2.06		3	%	(9)	%
Average price per fuel gallon, adjusted⁽³⁾⁽⁴⁾		$	1.82		$	2.04		(11.0)	%
Average price per fuel gallon, adjusted(2)(3)											Average price per fuel gallon, adjusted(2)(3)	$	1.91		$	1.82		$	2.04		5	%	(6)	%

⁽¹⁾Includes the operations of our regional carriers under capacity purchase agreements.

⁽²⁾Non-GAAP financial measure defined and reconciled to TRASM, CASM and ~~CASM,~~average fuel price per gallon, respectively, in "Supplemental Information" below.

⁽³⁾Includes the impact of fuel hedge activity, ~~and~~ refinery segment ~~results.~~

⁽⁴⁾~~Non-GAAP financial measure defined~~results and ~~reconciled to average fuel price per gallon in "Results of Operations" for the three months ended March 31, 2020 and 2019.~~environmentalsustainability activity.

32Delta Air Lines, Inc. 2021 March Form 10-Q 26

Item 2. MD&A - Fleet Information

Fleet Information

To align capacity with customer demand as a result of the COVID-19 pandemic we are working with OEMs to optimize the timing of our future aircraft deliveries and expect to remove from active service over 650 mainline and regional aircraft until demand recovers. As of March 31, 2020, we have temporarily parked approximately 400 aircraft and permanently parked 28 aircraft.

During the March 2020 quarter, we recorded a $22 million impairment charge related to accelerating the planned retirement of the MD-88 fleet from December 2020 to the end of July 2020, which resulted in a reduction in forecasted cash flows. As we obtain greater clarity around the duration and extent of reduced demand and potentially execute further capacity adjustments, we will continue to evaluate our current fleet compared to network requirements and may decide to permanently retire additional aircraft.

Prior to the onset of the pandemic and our decision to work with OEMs to optimize the timing of our future aircraft deliveries, we took delivery of eight mainline aircraft and two CRJ-900 aircraft in the March 2020 quarter.

Our operating aircraft fleet, purchase commitments and options at March 31, ~~2020~~2021 are summarized in the following ~~table:~~table. As of March 31, 2021, less than 10% of our mainline and regional aircraft were temporarily parked.


Mainline aircraft information by fleet type													Mainline aircraft information by fleet type
		Active Fleet⁽¹⁾						Temporarily Parked Fleet⁽¹⁾								Commitments				Current Fleet(1)			Commitments(2)
Aircraft Type		Owned		Finance Lease	Operating Lease	Owned	Finance Lease	Operating Lease	Total	Average Age	Purchase	Options
Fleet Type													Fleet Type	Owned	Finance Lease		Operating Lease	Total	Average Age (Years)		Purchase	Options
B-717-200	B-717-200	11		16	38	2	11	13	91	18.6	—	—	B-717-200	9	30		11	50	20.0
B-737-700		6		—	—	4	—	—	10	11.2	—	—
B-737-800	B-737-800	49		3	—	24	1	—	77	18.6	—	—	B-737-800	73	4		—	77	19.6
B-737-900ER	B-737-900ER	58		—	31	30	—	11	130	3.6	—	—	B-737-900ER	81	—		49	130	4.6
B-757-200	B-757-200	48		6	—	44	2	—	100	22.6	—	—	B-757-200	93	7		—	100	23.6
B-757-300	B-757-300	10		—	—	6	—	—	16	17.1	—	—	B-757-300	16	—		—	16	18.1
B-767-300ER	B-767-300ER	14		—	—	42	—	—	56	23.8	—	—	B-767-300ER	36	—		—	36	24.4
B-767-400ER	B-767-400ER	9		—	—	12	—	—	21	19.3	—	—	B-767-400ER	21	—		—	21	20.3
B-777-200ER		5		—	—	3	—	—	8	20.3	—	—
B-777-200LR		4		—	—	6	—	—	10	11.0	—	—
A220-100	A220-100	27		4	—	—	—	—	31	0.8	14	—	A220-100	37	4		—	41	1.5		4
A220-300	A220-300	—		—	—	—	—	—	—	—	50	50	A220-300	7	—		—	7	0.4		43	50
A319-100	A319-100	41		—	1	14	—	1	57	18.1	—	—	A319-100	55	—		2	57	19.1
A320-200	A320-200	34		—	3	24	—	1	62	24.6	—	—	A320-200	51	—		4	55	25.1
A321-200	A321-200	38		14	21	17	—	10	100	1.9	27	—	A321-200	55	22		36	113	2.6		14
A321-200neo	A321-200neo	—		—	—	—	—	—	—	—	100	100	A321-200neo	—	—		—	—	—		100	100
A330-200	A330-200	3	��	—	—	8	—	—	11	15.0	—	—	A330-200	11	—		—	11	16.0
A330-300	A330-300	14		—	2	14	—	1	31	11.2	—	—	A330-300	28	—		3	31	12.2
A330-900neo	A330-900neo	3		1	—	1	—	—	5	0.6	32	—	A330-900neo	3	1		4	8	1.2		29
A350-900	A350-900	8		—	—	5	—	—	13	2.1	26	—	A350-900	13	—		2	15	2.7		20
MD-88		18		—	—	—	—	—	18	29.0	—	—
MD-90		9		—	—	18	—	—	27	22.8	—	—
Total	Total	409		44	96	274	14	37	874	14.9	249	150	Total	589	68		111	768	13.7		210	150

⁽¹⁾Excludes certain aircraft we own or lease or ~~have committed to purchase (including four CRJ-900 aircraft)~~ that are operated by regional carriers on our behalf shown in the table below.

(2)

~~We have agreed~~Purchase commitments include one A330-900neo lease commitment in 2021 incremental to ~~acquire four A350 aircraft from LATAM and assumed ten of LATAM's A350 purchase commitments from Airbus,~~our order book with deliveries through 2025, which are included as purchase commitments in the table above. For more information regarding our planned strategic alliance with LATAM, see Note 5, "Investments", of the Notes to the Condensed Consolidated Financial Statements.Airbus.

The table below summarizes the aircraft operated by regional carriers on our behalf at March 31, 2020. Of this fleet, we have temporarily parked approximately 60 aircraft as of March 31, 2020 and plan to temporarily park an additional 80 aircraft during the June 2020 quarter. The majority of these temporarily parked aircraft will come from our Endeavor fleet but will also include aircraft operated by SkyWest and Republic.2021.

In April 2020, Compass and GoJet ceased operations on our behalf. Our contracts with each of these carriers were previously scheduled to terminate by the end of 2020. We expect that another carrier will fly the aircraft that were previously operated by Compass and GoJet but have not yet made definitive plans due to the capacity reductions resulting from the COVID-19 pandemic.


Regional aircraft information by carrier								Regional aircraft information by carrier
		Fleet Type											Fleet Type
Carrier	Carrier	CRJ-200	CRJ-700	CRJ-900	Embraer 170	Embraer 175	Total	Carrier	CRJ-200	CRJ-700	CRJ-900	Embraer 170	Embraer 175	Total
Endeavor Air, Inc.⁽¹⁾	Endeavor Air, Inc.⁽¹⁾	42	14	120	—	—	176	Endeavor Air, Inc.(1)	45	13	101	—	—	159
SkyWest Airlines, Inc.	SkyWest Airlines, Inc.	76	8	43	—	62	189	SkyWest Airlines, Inc.	—	5	40	—	68	113
Republic Airline, Inc.	Republic Airline, Inc.	—	—	—	22	37	59	Republic Airline, Inc.	—	—	—	18	41	59
Compass Airlines, Inc.		—	—	—	—	12	12
GoJet Airlines, LLC		—	6	—	—	—	6
Total	Total	118	28	163	22	111	442	Total	45	18	141	18	109	331

⁽¹⁾Endeavor Air, Inc. is a wholly owned subsidiary of Delta.

34Delta Air Lines, Inc. 2021 March Form 10-Q 27

Item 2. MD&A - Financial Condition and Liquidity

Financial Condition and Liquidity

As ~~a result~~ of ~~the COVID-19 pandemic,~~March 31, 2021, we ~~have taken,~~had $16.6 billion in cash, cash equivalents, short-term investments and ~~are continuing~~aggregate principal amount committed and available to ~~take, certain actions to increase liquidity and strengthen~~be drawn under our ~~financial position which include:~~

•~~Drawing $3.0 billion from our previously undrawn~~ revolving credit facilities.

•~~Entering into a $2.7 billion secured term loan facility during the March 2020 quarter with an accordion feature that allowed us to increase the facility to $3.0 billion during April 2020.~~

•~~Suspending future share repurchases and dividends.~~

•~~Delaying $500 million of planned voluntary pension funding.~~

•Receiving assistance under the CARES Act, which will be available beginning in the June 2020 quarter. In April 2020 we were granted $5.4 billion in emergency relief payments under the payroll support program and are evaluating participation in the loan program. On April 20, 2020, we received the first installment of $2.7 billion under the payroll support program. The CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. This is expected to provide us with approximately $200 million of additional liquidity during the current year.

We expect to meet our ~~cash~~liquidity needs for the next twelve months with cash and cash equivalents, ~~financing arrangements,~~short-term investments, government assistance ~~from~~under the ~~CARES Act,~~payroll support program extensions, restricted cash equivalents and cash flows from operations. ~~As of March 31, 2020, we had $6.0 billion in unrestricted~~We expect to meet our long-term liquidity ~~consisting of $6.0 billion in~~needs with cash and cash equivalents and $21 million in available revolving credit facilities. Additionally, we have at least $15 billion of unencumbered assets available for potential financing arrangements if needed. During the three months ended March 31, 2020, we used existing cash, cash received from financings and cash generatedflows from operations ~~to fund capital expenditures of $937 million~~ and return $604 million to shareholders prior to the materialization of the pandemic impact. Beginning in the second half of March 2020, capital expenditures have been limited to only those critical to our operation. In addition, share repurchases and dividends have been suspended indefinitely.financing arrangements.

Sources and Uses of Liquidity

Operating Activities

Operating activities in the three months ended March 31, ~~2020~~2021 provided ~~$358~~$691 million compared to providing $1.9 billion in the three months ended March 31, 2019. ~~Due to~~As described above, we are planning for domestic demand recovery throughout 2021, with sustained demand improvement expected during the ~~impact~~second half of ~~COVID-19 on our ticket purchases,~~2021. If the demand environment evolves in that manner, we expect to ~~experience negative~~generate positive cash flows from operations, ~~through~~including funds received from the ~~June 2020 quarter and possibly beyond.~~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 current reduction in demand for air travel due to the COVID-19 pandemic has resulted in ~~an unprecedented low~~a lower level of advance bookings and the associated cash ~~received. At the same time,~~received than we have ~~experienced significant cancellations beginning in~~historically experienced.

Domestic demand improved throughout the ~~second~~latter half of March, which has led to issuance of refunds to customers, while the remainder have been rebooked on future flights or received credits in lieu of cash refunds. The total value of refunds, excluding taxes and related fees, issued to customers during the March ~~2020~~2021 quarter ~~was approximately $850 million. The outlook~~as consumers gained confidence to travel and began buying tickets for ~~the remainder~~travel further in advance. New bookings for travel departures beyond 60 days nearly equaled our historical booking patterns, driving an extension of the ~~year is unclear, but we are currently planning~~booking curve and reversing a three-quarter trend of decline in our air traffic liability. Travel credits represented approximately 50% of the air traffic liability as of March 31, 2021. See Note 2 of the Notes to the Condensed Consolidated Financial Statements for ~~a modest demand recovery beginning in the September 2020 quarter.~~additional information on travel credits and our air traffic liability.

Fuel. Fuel expense represented approximately 18% of our total operating ~~expenses~~expense for the three months ended March 31, ~~2020.~~2021. The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations. WeAs demand increases and capacity returns, we expect fuel consumption to ~~decline consistent with the capacity reductions we are making in response~~increase compared to the ~~pandemic.~~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 ~~Contributions.~~ Protection Act of 2006. We have no minimum funding requirements for our defined benefit pension plans in ~~2020. As part of our liquidity initiatives, we are delaying $500 million of voluntary pension funding that we were previously planning for 2020. We had no minimum funding requirements in 2019.~~2021. However, ~~during 2019,~~ we voluntarily contributed $1$1.0 billion to these ~~plans.~~plans during April 2021 and we are evaluating up to $1.0 billion of additional voluntary contributions later in the year. 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. 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.

~~Profit Sharing.~~ Voluntary Separation Programs.~~Our broad-based~~ In 2020, we recorded a $3.4 billion charge associated with voluntary early retirement and separation programs and other employee ~~profit sharing program provides~~benefit charges. Approximately $150 million of this charge was disbursed in cash payments to participants in the March 2021 quarter. 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 ~~each year in which we have an annual pre-tax profit, as defined by the terms~~discussion of the impact to our liquidity from the payroll support program ~~we will pay a specified portion of that profit to employees. In determining the amount of profit sharing, the program defines profit as pre-tax profit adjusted for profit sharing~~extensions.

Delta Air Lines, Inc. 2021 March Form 10-Q 28

Item 2. MD&A - Financial Condition and ~~certain other items.~~Liquidity

Investing Activities

Short-Term Investments. During the three months ended March 31, ~~2020,~~2021, we ~~did not accrue profit sharing expense based on~~redeemed a net of $210 million in short-term investments. See Note 3 of the ~~year-to-date performance and current expectations for a pre-tax loss in 2020 due~~Notes to the ~~pandemic.~~

~~We paid $1.6 billion in profit sharing in February 2020 related to our 2019 pre-tax profit in recognition of our employees' contributions toward meeting our financial goals.~~

~~Investing Activities~~Condensed Consolidated Financial Statements for further information on these investments.

Capital Expenditures. Our capital expenditures were ~~$937~~$438 million and $1.4 billion for the three months ended March 31, ~~2020~~2021 and 2019, respectively. Our capital expenditures during the three months ended March 31, ~~2020~~2021 were primarily related to our airport redevelopment projects, the purchases of aircraft, fleet modifications and technology ~~enhancements that happened prior to the COVID-19 pandemic.~~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 ~~certain aircraft; however we are working with~~ the ~~OEMs to optimize~~aircraft. Excluding the ~~timing~~airport project discussed below, our expected 2021 capital expenditures of ~~our future aircraft deliveries. In order to preserve liquidity throughout the COVID-19 pandemic, we~~approximately $2.5 billion will be ~~deferring substantially all of our previously planned 2020 capital expenditures. Our expected 2020 investments total $1.2 billion, of which $937 million was in the March quarter~~primarily for aircraft, including deliveries and ~~substantially all occurred before the steps taken to mitigate the impact of the COVID-19 pandemic. Planned investments for the remainder of the year are limited to those critical to our operation.~~

In October 2019, the Office of the U.S. Trade Representative announced a 10% tariff on new aircraft imported from Europe, which was subsequently increased to 15% in February 2020. We are continuing to evaluate the impact of this announcement on our future Airbus deliveries.

~~Equity Investments.~~ ~~In 2019, we announced our plan to enter into a strategic alliance with LATAM~~advance deposit payments, as well as acquire up to a 20% interest through a tender offer. In January 2020, we acquired 20% of the shares of LATAM for $1.9 billion, or $16 per share. In addition, to support the establishment of the strategic alliance, we will invest $350 million, $200 million of which was disbursed in 2019. As part of our planned strategic alliance with LATAM, we have also agreed to acquire four A350 aircraft ~~from LATAM~~modifications and assumed ten of LATAM's A350 purchase commitments with Airbus for deliveries through 2025. This alliance is expected to generate new growth opportunities, building upon Delta's and LATAM's global footprint and joint ventures.

We sold our GOL ownership stake in 2019 and are winding down our commercial agreements with GOL to facilitate the formation of our strategic alliance with LATAM. Additionally, GOL has a $300 million five-year term loan facility with third parties maturing in August 2020, which we have guaranteed. Based on market value at March 31, 2020, approximately 50% of our guaranty is secured by GOL's ownership interest in Smiles, GOL's publicly traded loyalty program. Because GOL remains in compliance with the terms of its loan facility, we have not recorded a liability for the term loan on our balance sheet as of March 31, 2020. However, as the COVID-19 pandemic continues to impact the global economy, there is an increased risk related to GOL's ability to repay this term loan, which may require our performance under this guarantee. Therefore, we have recorded an immaterial reserve in other accrued liabilities related to the decline in value of our security interest in GOL's Smiles shares.

Over a three week period, concluding March 9, 2020, we acquired through open market transactions an additional 5% of the outstanding shares of Hanjin-KAL, the largest shareholder of Korean Air, for $158 million.

~~Los Angeles International Airport ("LAX") Construction.~~ We executed a modified lease agreement during 2016 with the City of Los Angeles ("the City"), which owns and operates LAX, and announced plans to modernize, upgrade and connect Terminals 2 and 3 at LAX. Under the lease agreement, we have relocated certain airlines and other tenants from Terminals 2 and 3 to Terminals 5 and 6 and undertaken various initial projects to enable operations from Terminals 2 and 3 during the project. We are now designing and constructing the redevelopment of Terminal 3 and enhancement of Terminal 2, which also includes rebuilding the ticketing and arrival halls and security checkpoint, construction of core infrastructure to support the City's planned airport people mover, ramp improvements and construction of a secure connector to the north side of the Tom Bradley International Terminal. Construction is expected to be completed by 2024.

Under the lease agreement and subsequent project component approvals by the City's Board of Airport Commissioners, the City has appropriated to date approximately $1.6 billion to purchase completed project assets. The lease allows for a maximum reimbursement by the City of $1.8 billion. Costs we incur in excess of such a maximum will not be reimbursed by the City.

A substantial majority of the project costs will be funded through the Regional Airports Improvement Corporation ("RAIC"), a California public benefit corporation, using an $800 million revolving credit facility provided by a group of lenders. The credit facility was executed during 2017 and amended in 2019, and we have guaranteed the obligations of the RAIC under the credit facility. Loans made under the credit facility are being repaid with the proceeds from the City’s purchase of completed project assets. Using funding provided by cash flows from operations and/or the credit facility, we expect to spend approximately $200 million on this project during 2020, of which $28 million was incurred in the three months ended March 31, 2020.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 consisting of 37 gates across four concourses connected to a central headhouse. The terminal will feature a new, larger Delta Sky Club, wider concourses, more gate seating~~facility. Construction is underway and 30 percent more concessions space than the existing terminals. The facility will also offer direct access between the parking garage and terminal and improved roadways and drop-off/pick-up areas. The design of the new terminal will integrate sustainable technologies and improvements in energy efficiency. Construction will be phased to limit passenger inconvenience and, due to an acceleration effort that commenced in 2020, completion is now expected ~~to be completed by 2026.~~in 2025.

In connection with the redevelopment, during 2017, we entered into an amended and restated terminal lease with the Port Authority with a term through 2050. Pursuant to the lease agreement, as amended to date, we will (1) fund (through debt issuance and existing cash) and undertake the design, management and construction of the terminal and certain off-premises supporting facilities, (2) receive a Port Authority contribution of $481 million to facilitate construction of the terminal and other supporting infrastructure, (3) be responsible for all operations and maintenance during the term of the lease and (4) have preferential rights to all gates in the terminal, subject to Port Authority requirements with respect to accommodation of designated carriers.

In 2019, we opened Concourse G, the first of the four new concourses housing seven of the 37 new gates. Not only does this deliver the first direct impact to the Delta passenger experience, it also represents the first major phasing milestone. This new concourse allowed us to vacate portions of the existing terminals which have been demolished and made ready for the next phase of construction. The next major milestone will be the opening of the headhouse and Concourse E, which is scheduled for 2022.

In 2020, the Port Authority and Delta agreed to certain deletions and modifications to the scope of the project impacting the terminal canopy, expansion of a parking garage and a pedestrian bridge to that garage, representing an anticipated $186 million reduction in scope. Accordingly, the Port Authority's original contribution of $600 million was reduced to $481 million to reflect its share of the modified scope. We currently expect our ~~net~~ project ~~cost~~costs to be approximately $3.5 billion and we bear the risks of project construction, including any potential cost over-runs. Using funding primarily ~~funding~~ provided by existing financing arrangements, we expect to spend approximately ~~$675~~$900 million on this project during ~~2020,~~2021, of which ~~$100~~$218 million was incurred in the three months ended March 31, ~~2020.~~2021.

Financing Activities

Debt and Finance Leases. In the three months ended March ~~2020 quarter,~~31, 2021, we ~~completed~~repaid approximately $1.8 billion on our debt and finance leases, of which $1.5 billion was the ~~following debt issuances:~~

•~~In March 2020, we entered into a $2.7 billion 364-day secured~~early repayment of the term loan ~~facility ("the facility"). Borrowings under the facility are~~ secured by certain ~~aircraft. The facility also contains an accordion feature under which the aggregate commitment can be increased~~of our slots, gates and routes. We plan to ~~$4.0 billion upon~~continue paying down our ~~request, provided that the new lenders agree~~debt, in addition to ~~the existing terms of the facility. The facility contains covenants similar to our other existing borrowings. In April 2020, this loan was increased to $3.0 billion.~~

•We completed a $1.0 billion offering of Pass Through Certificates, Series 2020-1 ("2020-1 EETC") utilizing a pass through trust during March 2020. The proceeds of this issuance were used to pay unsecured notes maturingperiodic amortization and scheduled maturities, during the ~~quarter.~~

•~~In March 2020, we drew $3.0 billion from our previously undrawn revolving credit facilities.~~remainder of 2021.

The principal amount of our debt and finance leases was ~~$16.8~~$29.3 billion at March 31, 2020. We continue to evaluate future financing opportunities, including leveraging our at least $15 billion of unencumbered assets. In response to the impact that the demand environment has had on our financial condition, our credit rating has been downgraded by Standard & Poor's to BB in late March 2020 and by Fitch to BB+ in early April 2020.2021.

~~CARES Act.~~Government Support Programs. ~~On March~~The Consolidated Appropriations Act, 2021 was enacted on December 27, 2020, ~~President Trump signed~~and included an extension of the payroll support program created under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") ~~into law. The CARES Act is a relief package intended to assist many aspects of the American economy, including~~ providing ~~the airline industry with up to $25~~an additional $15 billion in grants and loans to be used for airline employee wages, salaries and benefits.

In ~~April 2020,~~January 2021, we ~~were granted $5.4 billion in emergency relief through the~~entered into a payroll support program extension agreement with the U.S. Department of the ~~CARES Act to~~Treasury. In the March 2021 quarter, we received $2.9 billion in payroll support payments, which must be ~~paid in installments through July 2020. The relief payments are~~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 extension agreement through ~~September 30, 2020.~~March 2021. Other conditions include prohibitions on share repurchases and dividends through ~~September 30, 2021, continuing essential air service as directed by the U.S. Department of Transportation~~March 2022 and certain limitations on executive ~~compensation.~~compensation until October 2022. The ~~relief~~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.

These support payments ~~include $3.8~~consisted of approximately $2.0 billion in ~~grants~~a grant and ~~$1.6 billion~~$828 million in an unsecured 10-year low interest loan. The loan ~~includes~~bears interest at an annual ~~interest rates~~rate of 1.00% for the first five years ~~(through April 2025)~~ and the applicable Secured Overnight Financing Rate ("SOFR") plus 2.00% in the final five years. In return, we ~~have agreed to issue~~entered into a promissory note for the $828 million and issued warrants to the U.S. Department of the Treasury ~~over 6.5 million warrants~~ to acquire approximately 2.1 million shares of Delta common ~~stock.~~stock, representing approximately 0.3% of our outstanding shares. These warrants ~~include~~have an initial exercise price of ~~$24.39~~$39.73 per share, subject to adjustment in certain cases, and ~~have~~ a five-year term. We have recorded the value of the promissory note and warrants on a relative fair value basis as $784 million of noncurrent debt, net of discount, and $44 million in additional paid in capital, respectively.

~~On April 20, 2020, we received the first installment~~

Delta Air Lines, Inc. 2021 March Form 10-Q 29

Item 2. MD&A - Financial Condition and Liquidity

The American Rescue Plan Act of ~~$2.7 billion under~~2021 was enacted on March 11, 2021, and included a second extension of the payroll support ~~program.~~program providing an additional $14 billion in grants and loans to be used for airline employee wages, salaries and benefits. We expect to enter into similar agreements as those discussed above with the U.S. Department of the Treasury. Based on the share of funds we received from the first extension of the payroll support program, and the similar structures of both extensions, we estimate that we will receive approximately $2.7 billion, consisting of $1.9 billion in a grant and $800 million in an unsecured 10-year low interest loan. However, the actual amounts received and the allocation between the grant and loan could differ from our estimates. These payments are expected to be conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs through September 2021 or the date on which assistance provided under the agreement is exhausted, whichever is later. Other conditions would include prohibitions on share repurchases and dividends through September 2022 and certain limitations on executive compensation until April 2023. In return, we expect to enter into a promissory note for the amount of the loan and to issue warrants to the U.S. Department of the Treasury to acquire shares of Delta common stock in an amount to be determined consistent with the structure of the prior warrant issuances.

~~Finally, the CARES Act also provides for deferred payment~~As of ~~the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December~~March 31, 2021, we had approximately $2.6 billion undrawn and ~~the remaining 50% due December 31, 2022. This is expected to provide us with approximately $200 million~~available under our revolving credit facilities. In addition, we had outstanding letters of ~~additional liquidity during the current year.~~

~~Capital Return to Shareholders.~~ ~~During the three months ended~~credit as of March 31, ~~2020, we repurchased and retired 6~~2021, including approximately $400 million ~~shares of our common stock at a cost of $344 million.~~

Inthat reduced the March 2020 quarter, prior to the declaration of the COVID-19 pandemic, the Board of Directors approved and we paid a quarterly dividend of $0.4025 per share, for total cash dividends of $260 million. In early March 2020, we suspended both our share repurchase program and future dividends due to the impact of the pandemic.

~~Undrawn Lines of Credit~~

~~During the March 2020 quarter, we drew $3.0 billion on~~availability under our revolving credit facilities and ~~had $21~~approximately $300 million ~~undrawn as~~that did not affect the availability of ~~March 31, 2020. These~~our revolving credit ~~facilities include covenants customary for financing of this type. If we are not in compliance with these covenants, we may be required to repay amounts borrowed under the credit~~ facilities.

Covenants

We were in compliance with the covenants in ~~our financing~~these debt agreements at March 31, ~~2020.~~2021.

Critical Accounting ~~Policies and~~ Estimates

For information regarding our Critical Accounting ~~Policies and~~ Estimates, see the "Critical Accounting ~~Policies and~~ Estimates" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form ~~10-K and Note 2, "Impact of the COVID-19 Pandemic," for discussion about the valuation of goodwill, indefinite-lived intangible assets and long-lived assets.~~

~~Recent Accounting Standards~~

~~Credit Losses.~~ In 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." Under this ASU, an entity is required to utilize an "expected credit loss model" on certain financial instruments, including trade and financing receivables. This model requires consideration of a broader range of reasonable and supportable information and requires an entity to estimate expected credit losses over the lifetime of the asset. We adopted this standard effective January 1, 2020 and due to the COVID-19 pandemic, we recorded reserves against certain of our outstanding financial instruments that were not material individually or in the aggregate.10-K.

39Delta Air Lines, Inc. 2021 March Form 10-Q 30

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 ~~U.S.~~ 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 (loss)/income (a GAAP measure) to pre-tax (loss)/income, adjusted (a non-GAAP financial measure). In the current period, 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 March 2021 quarter, we recognized $44 million of adjustments to certain of those restructuring charges, representing changes in our estimates.

•Government grant recognition. We recognized $1.2 billion of the grant proceeds from the first payroll support program extension as a contra-expense. 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 first payroll support program extension by the end of the June 2021 quarter.

•Impairments and equity method losses. These adjustments relate to recording our share of the losses recorded by our equity method investees.

•Loss on extinguishment of debt. This adjustment relates to early termination of a portion of our debt that was incurred during the COVID-19 pandemic.

We also regularly adjust pre-tax (loss)/income 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 ~~record~~adjust for our proportionate share of ~~earnings/loss from our equity investments in Virgin Atlantic and Grupo Aeroméxico in non-operating expense. We adjust for~~ our equity method ~~investees'~~investee, Virgin Atlantic’s, hedge portfolio MTM adjustments (recorded in non-operating expense) to allow investors to ~~better~~ understand and analyze our core operational performance in the periods shown.

•MTM adjustments on investments. Unrealized gains/losses onresult from our equity investments ~~in GOL, China Eastern, Air France-KLM and Hanjin-KAL, the largest shareholder of Korean Air, which~~that are accounted for at fair value in non-operating ~~expense,~~expense. These gains/losses are driven by changes in stock prices, foreign currency fluctuations and ~~foreign currency.~~other valuation techniques for investments in companies without publicly-traded shares. 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. 2021 March Form 10-Q 31

Item 2. MD&A - Supplemental Information


Pre-tax (loss)/income, adjusted reconciliation
	Three Months Ended March 31,
(in millions)	2021		2020		2019
Pre-tax (loss)/income	$	(1,515)	$	(607)	$	946
Adjusted for:
Restructuring charges	(44)		—		—
Government grant recognition	(1,186)		—		—
Impairments and equity method losses	54		—		—
Loss on extinguishment of debt	56		—		—
MTM adjustments and settlements on hedges	(23)		(7)		8
Equity investment MTM adjustments	—		69		(21)
MTM adjustments on investments	(262)		123		(100)
Delta Private Jets adjustment	—		—		(1)
Pre-tax (loss)/income, adjusted	$	(2,919)	$	(422)	$	831

Three Months Ended March 31,
(in millions) 2020 2019
Pre-tax (loss)/income $ (607) $ 946
Adjusted for:
MTM adjustments and settlements on hedges (7) 8
Equity investment MTM adjustments 69 (21)
MTM adjustments on investments 123 (100)
Delta Private Jets adjustment — (1)
Pre-tax (loss)/income, adjusted $ (422) $ 831
Operating Expense, adjusted

The following table shows a reconciliation of operating expense (a GAAP measure) to operating expense, adjusted (a non-GAAP financial measure). In the current period, 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 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 reasons 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 March 31,
(in millions)	2021		2020		2019
Operating expense	$	5,548	$	9,002	$	9,452
Adjusted for:
Restructuring charges	44		—		—
Government grant recognition	1,186		—		—
MTM adjustments and settlements on hedges	23		7		(8)
Third-party refinery sales	(540)		—		(48)
Delta Private Jets adjustment	—		—		(42)
Operating expense, adjusted	$	6,261	$	9,009	$	9,354

40Delta Air Lines, Inc. 2021 March Form 10-Q 32

Item 2. MD&A - Supplemental Information

Fuel Expense, 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 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 March 31,						Three Months Ended March 31,
(in millions, except per gallon data)	2021		2020		2019		2021		2020		2019
Total fuel expense	$	1,017	$	1,595	$	1,978	$	1.87	$	1.81	$	2.06
MTM adjustments and settlements on hedges	23		7		(8)		0.04		0.01		(0.01)
Delta Private Jets adjustment	—		—		(7)		—		—		(0.01)
Total fuel expense, adjusted	$	1,040	$	1,602	$	1,963	$	1.91	$	1.82	$	2.04

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 ~~the following items to determine TRASM, adjusted for the reasons described below.~~

•~~Third-party refinery sales.~~ ~~We adjust TRASM for~~ refinery sales to third parties ~~to determine TRASM, adjusted because these revenues are not related to our airline segment. TRASM, adjusted therefore provides a more meaningful comparison of revenue from our airline operations to~~for the ~~rest of~~same reason described above under the ~~airline industry.~~heading operating expense, adjusted. We adjust for Delta Private Jets for the same reason described above under the heading pre-tax (loss)/income, adjusted.

•~~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.~~


TRASM, adjusted reconciliation
	Three Months Ended March 31,
	2021		2020		2019
TRASM (cents)	10.34	¢	14.59	¢	16.78	¢
Adjusted for:
Third-party refinery sales	(1.35)		—		(0.08)
Delta Private Jets adjustment	—		—		(0.07)
TRASM, adjusted	9.00	¢	14.59	¢	16.63	¢

Three Months Ended March 31,
2020 2019
TRASM 14.59 ¢ 16.78 ¢
Adjusted for:
Third-party refinery sales — (0.08)
Delta Private Jets adjustment — (0.07)
TRASM, adjusted 14.59 ¢ 16.63 ¢

Delta Air Lines, Inc. 2021 March Form 10-Q 33

Item 2. MD&A - Supplemental Information

CASM-Ex

The following table shows a reconciliation of ~~CASM~~operating cost per available seat mile ("CASM") (a GAAP measure) to CASM-Ex (a non-GAAP financial measure). In the current period, 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 adjusted for refinery sales to third parties for the same reason described above under the heading operating expense, adjusted. We adjust for 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.

•~~Third-party refinery sales.~~ We adjust CASM for refinery sales to third parties to determine CASM-Ex because these revenues are not related to our airline segment. CASM-Ex therefore provides a more meaningful comparison of revenue from our airline operations to the rest of the airline industry.

•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 March 31,
	2021		2020		2019
CASM (cents)	13.83	¢	15.30	¢	15.14	¢
Adjusted for:
Restructuring charges	0.11		—		—
Government grant recognition	2.96		—		—
Aircraft fuel and related taxes	(2.54)		(2.72)		(3.17)
Third-party refinery sales	(1.35)		—		(0.08)
Profit sharing	—		—		(0.35)
Delta Private Jets adjustment	—		—		(0.05)
CASM-Ex	13.01	¢	12.58	¢	11.49	¢

•

CASM, adjusted

The following table shows a reconciliation of CASM (a GAAP measure) to CASM, adjusted (a non-GAAP financial measure). In the current period, 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 for Delta Private Jets ~~adjustment. Because we combined Delta Private Jets with Wheels Up in January 2020, we have excluded~~for the ~~impact of Delta Private Jets from 2019 results~~same reason described above under the heading pre-tax (loss)/income, adjusted. We adjust for ~~comparability.~~refinery sales to third parties for the same reason described above under the heading operating expense, adjusted.

Three Months Ended March 31,
2020 2019
CASM 15.30 ¢ 15.14 ¢
Adjusted for:
Aircraft fuel and related taxes (2.72) (3.17)
Third-party refinery sales — (0.08)
Profit sharing — (0.35)
Delta Private Jets adjustment — (0.05)
CASM-Ex 12.58 ¢ 11.49 ¢


CASM, adjusted reconciliation
	Three Months Ended March 31,
	2021		2020		2019
CASM (cents)	13.83	¢	15.30	¢	15.14	¢
Adjusted for:
Restructuring charges	0.11		—		—
Government grant recognition	2.96		—		—
MTM adjustments and settlements on hedges	0.06		0.01		(0.01)
Third-party refinery sales	(1.35)		—		(0.08)
Delta Private Jets adjustment	—		—		(0.07)
CASM, adjusted	15.61	¢	15.30	¢	14.99	¢

41Delta Air Lines, Inc. 2021 March Form 10-Q 34

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 of short-term investments. Net redemptions 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.~~investments and related. Cash flows related to our investments in ~~LATAM~~ and ~~Hanjin-KAL, the largest shareholder of Korean Air,~~related transactions with other airlines are included in our GAAP investing activities. We adjust ~~free cash flow~~ for this activity because it provides a more meaningful comparison to ~~the~~our airline ~~industry.~~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						Free cash flow reconciliation
		Three Months Ended March 31,							Three Months Ended March 31,
(in millions)	(in millions)	2020		2019		(in millions)	2021		2020		2019
Net cash provided by operating activities	Net cash provided by operating activities	$	358	$	1,942	Net cash provided by operating activities	$	691	$	358	$	1,942
Net cash used in investing activities	Net cash used in investing activities	(2,971)		(1,096)		Net cash used in investing activities	(60)		(2,971)		(1,096)
Adjusted for:	Adjusted for:					Adjusted for:
Net redemptions of short-term investments	Net redemptions of short-term investments	—		(206)		Net redemptions of short-term investments	(210)		—		(206)
Strategic investments		2,099		—
Strategic investments and related						Strategic investments and related	(19)		2,099		—
Net cash flows related to certain airport construction projects and other	Net cash flows related to certain airport construction projects and other	353		111		Net cash flows related to certain airport construction projects and other	308		353		111
Total free cash flow	Total free cash flow	$	(161)	$	751	Total free cash flow	$	710	$	(161)	$	751

42Delta Air Lines, Inc. 2021 March Form 10-Q 35

Item 3. Market Risk

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risk from the information provided in "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in our Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Our management, including our Chief Executive Officer and ~~Chief~~Interim Co-Chief Financial ~~Officer,~~Officers, performed an evaluation of our disclosure controls and procedures, which have been designed to permit us to effectively identify and timely disclose important information. Our management, including our Chief Executive Officer and ~~Chief~~Interim Co-Chief Financial ~~Officer,~~Officers, concluded that the controls and procedures were effective as of March 31, ~~2020~~2021 to ensure that material information was accumulated and communicated to our management, including our Chief Executive Officer and ~~Chief~~Interim Co-Chief Financial ~~Officer,~~Officers, as appropriate to allow timely decisions regarding required disclosure.

During the three months ended March 31, ~~2020,~~2021, we did not make any changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

"Item 3. Legal Proceedings" of our Form 10-K includes a discussion of our legal proceedings. There have been no material changes from the legal proceedings described in our Form 10-K.

ITEM 1A. RISK FACTORS

“Item 1A. Risk Factors” of our Form 10-K includes a discussion of our ~~risk factors. The information presented below updates, and should be read in conjunction with, the~~known material risk factors, ~~and information disclosed in our Form 10-K. Except as presented below, there~~other than risks that could apply to any issuer or offering. There have been no material changes from the risk factors described in our Form 10-K.

The rapid spread of the COVID-19 virus and measures implemented to combat it are having, and are likely to continue to have, a material adverse effect on our business. Moreover, the longer the pandemic persists, the more material the ultimate effects are likely to be. It is likely that there will be future negative effects that we cannot presently predict, including near term effects.

Delta Air Lines, Inc. 2021 March Form 10-Q 36

The rapid spread of COVID-19, as well as the escalating measures governments and private organizations have implemented in order to stem the spread of this pandemic, are having a material adverse effect on the demand for worldwide air travel, and consequently upon our business. Among other effects of the COVID-19 pandemic affecting air travel and our business:

•In the United States, which is our primary market, the government has placed significant restrictions on travel between the United States and specific countries, issued a mandate for U.S. citizens to avoid all international travel and has issued a travel advisory for residents of New York, New Jersey and Connecticut due to extensive community transmission of COVID-19 in the area;

•~~Many foreign governments have placed restrictions on citizens of other countries, including citizens of the U.S., flying into their countries;~~

•~~State or local governments have issued health-related curfews or “shelter in place” orders which dissuade or restrict air travel;~~

•~~Employers in both the public and private sectors have issued instructions to employees to work from home and/or otherwise dissuading or restricting air travel;~~

•Business conventions and conferences, significant sporting events, concerts and similar entertainment have been, and are continuing to be, cancelled, reducing the demand for both business air travel (which drives our most profitable ticket sales) and leisure air travel;

•~~Popular tourist destinations have been, and are continuing to be, closed, or operations are being curtailed, reducing the demand for leisure air travel;~~

•~~Travelers are discouraged from air travel to destinations where COVID-19 is particularly virulent;~~

•Travelers have indicated they are wary of airports and commercial aircraft, where they may view the risk of contagion as increased (and contagion or virus-related deaths linked or alleged to be linked to travel on our aircraft, whether accurate or not, may injure our reputation);

•~~Travelers may be dissuaded from flying due to possible enhanced COVID-19-related screening measures which are being implemented across multiple markets we serve; and~~

•~~Travelers may be dissuaded from flying due to the concern that additional travel restrictions implemented between their departure and return may affect their ability to return to their homes.~~

These effects related to the COVID-19 pandemic are negatively impacting air travel in general, which in turn are negatively affecting our revenues and results of operations. Moreover, additional currently unknown restrictions or other events dissuading air travel may occur in the future as a result of the pandemic (including possibly in the near term), lengthening the negative effects of the COVID-19 pandemic on our business.

Our operations could be negatively affected further if our employees are quarantined or sickened as a result of exposure to COVID-19, or if they are subject to governmental COVID-19 curfews or “shelter in place” health orders. Measures restricting the ability of our airport or inflight employees to come to work may cause a further deterioration in our service or operations, all of which could negatively affect our business.

In response to the crisis, we are taking certain steps to mitigate the effects on our business, which themselves may have negative consequences with respect to our business and operations. For example, we have significantly reduced our flight capacity. However, the cost savings achievable with temporary capacity reductions cannot be achieved immediately and will not completely eliminate the costs related to unused capacity.

Furthermore, we have waived air travel booking change fees to a broad extent and extended the ability to rebook that travel for up to two years in order to encourage travelers to book air travel (or not cancel already booked travel) despite the inherent uncertainty caused by the COVID-19 pandemic. Despite these efforts, we are experiencing significant ticket cancellations. Cancellations, the waiver of change fees and other refunds have negatively affected our revenues and liquidity, and we expect such negative effects to continue.

Other cost-saving measures that we are implementing or may consider, such as deferral of nonessential maintenance, capital expenditure reductions, hiring freezes, facility closures, deferral of pension funding and compensation reductions, are unlikely to entirely make-up for the loss in cash as result of decreased ticket sales and could also negatively affect our service to customers, revenues and results of operations. The pandemic is also having a material adverse effect on third parties whose services we utilize, including regional carriers in the Delta Connection program and providers of ground services at some airports, which may also negatively affect our service to customers.

We are unable to predict how long these conditions will persist, what additional measures may be introduced by governments or private parties or what effect any such additional measures may have on air travel and our business. Furthermore, not only is the duration of the pandemic and future correlative combative measures at present unknown, the overall situation is extremely fluid, and it is impossible to predict the timing of future material changes in the situation. It therefore is impossible to predict whether any such unknown future developments will occur in the near, medium or long terms, and depending on the duration of the pandemic, such negative developments may occur over the entirety of the event.

At this time we are also not able to predict whether the COVID-19 pandemic will result in permanent changes to our customers' behavior, with such changes including but not limited to a permanent reduction in business travel as a result of increased usage of "virtual" and "teleconferencing" products and more broadly a general reluctance to travel by consumers, each of which could have a material impact on our business.

~~All of the foregoing have had a material adverse effect on our business, results of operations and financial condition.~~

We have a significant amount of fixed obligations and have incurred significant new debt in a short period in response to the COVID-19 pandemic. Insufficient liquidity may have a material adverse effect on our financial condition and business.

We have a significant amount of existing fixed obligations, including aircraft lease and debt financings, leases of airport property and other facilities, and other material cash obligations. In response to the travel restrictions imposed as a result of the COVID-19 pandemic, decreased demand and other effects the outbreak of COVID-19 has had and is expected to have on our business, we have incurred and continue to seek significant amounts of additional liquidity in the short-term, through the issuance of additional debt securities as well as through bilateral and syndicated secured and/or unsecured credit facilities. In addition, we have substantial noncancelable commitments for capital expenditures, including for the acquisition of new aircraft and related spare engines.

Although our cash flows from operations and our available capital, including the proceeds from financing transactions, have been sufficient to meet these obligations and commitments to date, our future liquidity could be negatively affected by the risk factors discussed in this form 10-Q, in “Item 1A., Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and other filings we may make from time to time with the SEC. We had $6.0 billion in unrestricted liquidity as of March 31, 2020 and have raised an additional $1.6 billion through April 21, 2020. In addition, we are receiving cash from the U.S. government under the payroll support program of the CARES Act, including $2.7 billion on April 20, 2020. If our liquidity is materially diminished, we might not be able to timely pay our leases and debts or comply with certain operating and financial covenants under our financing and credit card processing agreements or with other material provisions of our contractual obligations. In particular, under our credit card processing agreements, counterparties may require that we maintain a reserve equal to a portion of advanced ticket sales that have been processed by that financial institution, but for which we have not yet provided the air transportation. Such financial institutions may require additional cash or other collateral reserves to be established or additional withholding of payments related to receivables collected if we do not maintain certain minimum levels of liquidity.

~~Agreements governing our debt, including credit agreements, include financial and other covenants. Failure to comply with these covenants could result in events of default.~~

Our primary credit facility has various financial and other covenants that require us to maintain a minimum fixed charge coverage ratio and a minimum asset coverage ratio. Based on the reduction in demand that we are currently experiencing as a result of the COVID-19 pandemic and given the limited visibility to the future recovery of demand, there is a range of possible outcomes where our earnings could be reduced enough to result in a breach of the minimum fixed charge coverage ratio within the next year. If we anticipate a potential breach, we expect to seek an amendment or waiver from our lenders. There is no assurance that our efforts to obtain such an amendment or waiver would be successful.

We have other facilities, some of which are secured and also contain collateral coverage ratios. A decline in the value of our assets supporting these facilities from factors that are not under our control could affect one or more of the ratios. In addition, the credit facilities contain other negative covenants customary for such financings. These covenants are subject to important exceptions and qualifications. If we fail to comply with these covenants and are unable to remedy or obtain a waiver or amendment, an event of default would result.

The credit facilities also contain other events of default customary for such financings. If an event of default were to occur, the lenders could, among other things, declare outstanding amounts due and payable and where applicable, repossess collateral, which may include aircraft or other valuable assets. In addition, an event of default or declaration of acceleration under any of the credit facilities could also result in an event of default under other of our financing agreements. The acceleration of significant amounts of debt could require us to renegotiate, repay or refinance the obligations under the credit facilities or other financing arrangements.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table presents information with respect to purchases of common stock we made during the March ~~2020~~2021 quarter. The total number of shares purchased includes shares repurchased pursuant to our $5 billion share repurchase program, which was publicly announced on May 11, 2017 and will terminate no later than December 31, 2020. Some purchases made in the March 2020 quarter were made pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934. In March 2020, we suspended our share repurchase program due to the impact of the COVID-19 pandemic.

~~In addition, the~~ table ~~includes~~reflects shares withheld from employees to satisfy certain tax obligations due in connection with grants of stock under the Delta Air Lines, Inc. Performance Compensation Plan (the "Plan"). The Plan provides for the withholding of shares to satisfy tax obligations. It does not specify a maximum number of shares that can be withheld for this purpose. The shares of common stock withheld to satisfy tax withholding obligations may be deemed to be "issuer purchases" of shares that are required to be disclosed pursuant to this Item.

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value (in millions) of Shares That May
Yet be Purchased Under the
Plan or Programs
January 2020 2,780,349 $ 58.59 2,780,349 $ 930
February 2020 3,165,706 $ 56.86 3,165,706 $ 760
March 2020 738,722 $ 46.99 738,722 $ 730
Total 6,684,777 6,684,777


Shares purchased / withheld from employee awards during the March 2021 quarter
Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value (in millions) of Shares That May Yet be Purchased Under the Plan
January 2021	18,484	$	40.17	18,484	$	—
February 2021	508,982	$	38.24	508,982	$	—
March 2021	2,511	$	47.23	2,511	$	—
Total	529,977			529,977

46Delta Air Lines, Inc. 2021 March Form 10-Q 37

ITEM 6. EXHIBITS

(a) Exhibits

3.1(a) Delta's Amended and Restated Certificate of Incorporation (Filed as Exhibit 3.1 to Delta's Current Report on Form 8-K as filed on April 30, 2007).*

3.1 (b) Amendment to Amended and Restated Certificate of Incorporation (Filed as Exhibit 3.1 to Delta's Current Report on Form 8-K as filed on June 27, 2014).*

3.2 Delta's Bylaws (Filed as Exhibit 3.1 to Delta's Current Report on Form 8-K as filed on February 8, 2019).*

10.1~~364-Day Term Loan Credit Agreement, dated as of March 17, 2020, among Delta Air Lines, Inc., each of the Lenders party thereto, JP Morgan Chase Bank, N.A., as administrative and JP Morgan Chase Bank, N.A., as Sole~~ ~~Lead Arranger and Bookrunner~~

~~10.2~~ Model Award Agreement for the Delta Air Lines, InInc. ~~c. 2020~~2021 Long-Term Incentive Plan

~~10.3~~ ~~Description of Certain Benefits of Members of the Board of Directors and Executive Officers~~

15 Letter from Ernst & Young LLP regarding unaudited interim financial information

31.1 Certification by Delta's Chief Executive Officer with respect to Delta's Quarterly Report on Form 10-Q for the quarterly period ended March 3 1 31 , 20 2021

31.2 Certification by Delta's ~~Executive Vice President and~~ Interim Co-Chief Financial Officer and Senior Vice President - Finance and Controller with respect to Delta's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021

31.3 Certification by Delta's Interim Co-Chief Financial Officer and Senior Vice Pres 3ident - Business Development and Financial Planning with respect to Delta's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2 1 ~~, 20~~20021

32 Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code by Delta's Chief Executive Officer and ~~Executive~~Senior Vice President s and Interim Co-Chief Financial Officer s with respect to Delta's Quarterly Report on Form 10-Q for the quarterly period ended M ~~arch~~ 3 1 ~~, 20~~20March 31, 2021

101.INS Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 The cover page from this Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2020,~~2021, formatted in Inline XBRL (included in Exhibit 101)

____________

* Incorporated by reference.

47Delta Air Lines, Inc. 2021 March Form 10-Q 38

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Delta Air Lines, Inc.
			(Registrant)

			/s/ William C. Carroll
			William C. Carroll
			Interim Co-Chief Financial Officer and Senior Vice President - Finance and Controller
			(Co-Principal Financial Officer and Principal Accounting Officer)
April ~~22, 2020~~15, 2021

48Delta Air Lines, Inc. 2021 March Form 10-Q 39


Table of Contents

			Page
Forward Looking Statements			1
Report of Independent Registered Public Accounting Firm			2

Part I. Financial Information
Item 1. Financial Statements			3
Consolidated Balance Sheets			3
Condensed Consolidated Statements of Operations and Comprehensive ~~(Loss)~~ ~~Income~~Loss			4
Condensed Consolidated Statements of Cash Flows			5
Consolidated Statements of Stockholders' Equity			6
Notes to the Condensed Consolidated Financial Statements			7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			2418
Item 3. Quantitative and Qualitative Disclosures About Market Risk			4336
Item 4. Controls and Procedures			4336

Part II. Other Information
Item 1. Legal Proceedings			4336
Item 1A. Risk Factors			4336
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4637
Item 6. Exhibits			4738

Signature			4839


	Carrying Value at					Fair Value Excess at 2019 Testing Date
(in millions)	March 31, 2020		December 31, 2019
Goodwill⁽¹⁾	$	9,753	$	9,781	234%
International routes and slots	2,583		2,583		15% to 29%
Airline alliances⁽²⁾	1,863		1,005		67% to 576%
Delta tradename	850		850		185%
Domestic slots	622		622		61% to 181%
Total	$	15,671	$	14,841


(in millions)	Volume		Final Maturity Date	Prepaid Expenses and Other		Other Noncurrent Assets		Other Accrued Liabilities		Other Noncurrent Liabilities		Hedge Derivatives, net
Designated as hedges
Interest rate contracts (fair value hedges)	150	U.S. dollars	April 2028	$	2	$	23	$	—	$	—	$	25
Not designated as hedges
Foreign currency exchange contracts	238	Euros	December 2020	11		—		—		—		11
Foreign currency exchange contracts	177,045	South Korean won	April 2023	1		2		—		—		3
Fuel hedge contracts	219	gallons - crude oil and refined products	April 2021	98		—		(90)		—		8
Total derivative contracts						$	112	$	25	$	(90)	$	—	$	47


	Carrying Amount of Hedge Instruments						Cumulative Amount of Fair Value Hedge Adjustments¹
(in millions)	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
Current maturities of debt and finance leases	$	22	$	(19)	$	22	$	8
Debt and finance leases	$	(47)	$	(1,783)	$	102	$	53


	Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Income
(in millions)		2020		2019
Three Months Ended March 31,
Foreign currency exchange contracts	Gain/(loss) on investments, net	$	19	$	11
Fuel hedge contracts	Aircraft fuel and related taxes	216		(54)
Total		$	235	$	(43)


(in millions)	Total
Nine months ending December 31, 2020	$	2,560
2021	4,560
2022	3,060
2023	1,860
2024	1,000
Thereafter	1,700
Total	$	14,740


(in millions)	Pension and Other Benefit Liabilities⁽²⁾		Other		Total
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 $3)	—		21		21
Reclassifications into earnings (net of tax effect of $21)⁽¹⁾	70		—		70
Balance at March 31, 2020 (net of tax effect of $1,531)	$	(8,025)	$	127	$	(7,898)


Balance at January 1, 2019 (net of tax effect of $1,492)	$	(7,925)	$	100	$	(7,825)
Changes in value (net of tax effect of $1)	—		(2)		(2)
Reclassifications into earnings (net of tax effect of $19)⁽¹⁾	60		1		61
Balance at March 31, 2019 (net of tax effect of $1,474)	$	(7,865)	$	99	$	(7,766)