UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31,September 30, 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.
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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,September 30, 2021:
Common Stock, $0.0001 par value - 639,661,387640,013,818 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, goals, aspirations, commitments or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations. Known material risk factors applicable to Delta are described in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 ("Form 10-K"), other than risks that could apply to any issuer or offering. All forward-looking statements speak only as of the date made, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report except as required by law.
Delta Air Lines, Inc. September 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,September 30, 2021, the related condensed consolidated statements of operations and comprehensive loss, cash flowsincome/(loss) and consolidated statements of stockholders' equity for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020, the condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2021 and 2020 and the related notes (collectively referred to as the "condensed consolidated interim financial statements"). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, the related consolidated statements of operations, comprehensive loss, cash flows, and stockholders' equity for the year then ended, and the related notes (not presented herein); and in our report dated February 12, 2021, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
| | | | | |
| /s/ Ernst & Young LLP |
Atlanta, Georgia | |
April 15,October 13, 2021 | |
Delta Air Lines, Inc. September 2021 March Form 10-Q 2
DELTA AIR LINES, INC.
Consolidated Balance Sheets
(Unaudited)
| (in millions, except share data) | (in millions, except share data) | March 31, 2021 | | December 31, 2020 | (in millions, except share data) | September 30, 2021 | | December 31, 2020 |
ASSETS | ASSETS | ASSETS |
Current Assets: | Current Assets: | | Current Assets: | |
Cash and cash equivalents | Cash and cash equivalents | $ | 8,460 | | | $ | 8,307 | | Cash and cash equivalents | $ | 8,785 | | | $ | 8,307 | |
Short-term investments | Short-term investments | 5,575 | | | 5,789 | | Short-term investments | 4,417 | | | 5,789 | |
Accounts receivable, net of an allowance for uncollectible accounts of $75 and $89 | 1,837 | | | 1,396 | | |
Accounts receivable, net of an allowance for uncollectible accounts of $78 and $89 | | Accounts receivable, net of an allowance for uncollectible accounts of $78 and $89 | 2,183 | | | 1,396 | |
Fuel inventory | Fuel inventory | 457 | | | 377 | | Fuel inventory | 641 | | | 377 | |
Expendable parts and supplies inventories, net of an allowance for obsolescence of $176 and $188 | 371 | | | 355 | | |
Expendable parts and supplies inventories, net of an allowance for obsolescence of $174 and $188 | | Expendable parts and supplies inventories, net of an allowance for obsolescence of $174 and $188 | 371 | | | 355 | |
Prepaid expenses and other | Prepaid expenses and other | 1,153 | | | 1,180 | | Prepaid expenses and other | 1,074 | | | 1,180 | |
Total current assets | Total current assets | 17,853 | | | 17,404 | | Total current assets | 17,471 | | | 17,404 | |
Noncurrent Assets: | Noncurrent Assets: | | | | Noncurrent Assets: | | | |
Property and equipment, net of accumulated depreciation and amortization of $17,922 and $17,511 | 26,862 | | | 26,529 | | |
Property and equipment, net of accumulated depreciation and amortization of $18,693 and $17,511 | | Property and equipment, net of accumulated depreciation and amortization of $18,693 and $17,511 | 27,816 | | | 26,529 | |
Operating lease right-of-use assets | Operating lease right-of-use assets | 5,577 | | | 5,733 | | Operating lease right-of-use assets | 5,827 | | | 5,733 | |
Goodwill | Goodwill | 9,753 | | | 9,753 | | Goodwill | 9,753 | | | 9,753 | |
Identifiable intangibles, net of accumulated amortization of $885 and $883 | 6,009 | | | 6,011 | | |
Identifiable intangibles, net of accumulated amortization of $890 and $883 | | Identifiable intangibles, net of accumulated amortization of $890 and $883 | 6,004 | | | 6,011 | |
Cash restricted for airport construction | Cash restricted for airport construction | 1,223 | | | 1,556 | | Cash restricted for airport construction | 713 | | | 1,556 | |
Equity investments | Equity investments | 1,929 | | | 1,665 | | Equity investments | 1,919 | | | 1,665 | |
Deferred income taxes, net | Deferred income taxes, net | 2,306 | | | 1,988 | | Deferred income taxes, net | 1,813 | | | 1,988 | |
Other noncurrent assets | Other noncurrent assets | 1,571 | | | 1,357 | | Other noncurrent assets | 1,467 | | | 1,357 | |
Total noncurrent assets | Total noncurrent assets | 55,230 | | | 54,592 | | Total noncurrent assets | 55,312 | | | 54,592 | |
Total assets | Total assets | $ | 73,083 | | | $ | 71,996 | | Total assets | $ | 72,783 | | | $ | 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 | $ | 2,983 | | | $ | 1,732 | | Current maturities of debt and finance leases | $ | 2,296 | | | $ | 1,732 | |
Current maturities of operating leases | Current maturities of operating leases | 653 | | | 678 | | Current maturities of operating leases | 636 | | | 678 | |
Air traffic liability | Air traffic liability | 5,105 | | | 4,044 | | Air traffic liability | 6,246 | | | 4,044 | |
Accounts payable | Accounts payable | 3,432 | | | 2,840 | | Accounts payable | 4,017 | | | 2,840 | |
Accrued salaries and related benefits | Accrued salaries and related benefits | 2,182 | | | 2,086 | | Accrued salaries and related benefits | 2,198 | | | 2,086 | |
Loyalty program deferred revenue | Loyalty program deferred revenue | 2,439 | | | 1,777 | | Loyalty program deferred revenue | 2,619 | | | 1,777 | |
Fuel card obligation | Fuel card obligation | 1,100 | | | 1,100 | | Fuel card obligation | 1,100 | | | 1,100 | |
Other accrued liabilities | Other accrued liabilities | 2,794 | | | 1,670 | | Other accrued liabilities | 1,812 | | | 1,670 | |
Total current liabilities | Total current liabilities | 20,688 | | | 15,927 | | Total current liabilities | 20,924 | | | 15,927 | |
Noncurrent Liabilities: | Noncurrent Liabilities: | | | | Noncurrent Liabilities: | | | |
Debt and finance leases | Debt and finance leases | 26,061 | | | 27,425 | | Debt and finance leases | 25,523 | | | 27,425 | |
Noncurrent air traffic liability | Noncurrent air traffic liability | 250 | | | 500 | | Noncurrent air traffic liability | 130 | | | 500 | |
Pension, postretirement and related benefits | Pension, postretirement and related benefits | 10,396 | | | 10,630 | | Pension, postretirement and related benefits | 8,408 | | | 10,630 | |
Loyalty program deferred revenue | Loyalty program deferred revenue | 4,846 | | | 5,405 | | Loyalty program deferred revenue | 4,837 | | | 5,405 | |
Noncurrent operating leases | Noncurrent operating leases | 5,568 | | | 5,713 | | Noncurrent operating leases | 5,742 | | | 5,713 | |
Other noncurrent liabilities | Other noncurrent liabilities | 4,792 | | | 4,862 | | Other noncurrent liabilities | 4,613 | | | 4,862 | |
Total noncurrent liabilities | Total noncurrent liabilities | 51,913 | | | 54,535 | | Total noncurrent liabilities | 49,253 | | | 54,535 | |
| Commitments and Contingencies | Commitments and Contingencies | 0 | | 0 | Commitments and Contingencies | 0 | | 0 |
| Stockholders' Equity: | Stockholders' Equity: | | Stockholders' Equity: | |
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 649,361,047 and 647,352,203 shares issued | 0 | | | 0 | | |
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 649,758,099 and 647,352,203 shares issued | | Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 649,758,099 and 647,352,203 shares issued | — | | | — | |
Additional paid-in capital | Additional paid-in capital | 11,326 | | | 11,259 | | Additional paid-in capital | 11,428 | | | 11,259 | |
Accumulated deficit | (1,605) | | | (428) | | |
Retained earnings/(accumulated deficit) | | Retained earnings/(accumulated deficit) | 259 | | | (428) | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (8,960) | | | (9,038) | | Accumulated other comprehensive loss | (8,800) | | | (9,038) | |
Treasury stock, at cost, 9,699,660 and 9,169,683 shares | (279) | | | (259) | | |
Treasury stock, at cost, 9,744,281 and 9,169,683 shares | | Treasury stock, at cost, 9,744,281 and 9,169,683 shares | (281) | | | (259) | |
Total stockholders' equity | Total stockholders' equity | 482 | | | 1,534 | | Total stockholders' equity | 2,606 | | | 1,534 | |
Total liabilities and stockholders' equity | Total liabilities and stockholders' equity | $ | 73,083 | | | $ | 71,996 | | Total liabilities and stockholders' equity | $ | 72,783 | | | $ | 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. September 2021 March Form 10-Q 3
DELTA AIR LINES, INC.
Condensed Consolidated Statements of Operations and Comprehensive LossIncome/(Loss)
(Unaudited)
| | | | | | | | | | | |
| Three Months Ended March 31, |
(in millions, except per share data) | 2021 | | 2020 |
Operating Revenue: | | | |
Passenger | $ | 2,748 | | | $ | 7,569 | |
Cargo | 215 | | | 152 | |
Other | 1,187 | | | 871 | |
Total operating revenue | 4,150 | | | 8,592 | |
| | | |
Operating Expense: | | | |
Salaries and related costs | 2,202 | | | 2,862 | |
Aircraft fuel and related taxes | 1,017 | | | 1,595 | |
Ancillary businesses and refinery | 706 | | | 219 | |
Contracted services | 519 | | | 748 | |
Landing fees and other rents | 493 | | | 550 | |
Depreciation and amortization | 492 | | | 678 | |
Regional carrier expense | 401 | | | 577 | |
Aircraft maintenance materials and outside repairs | 294 | | | 469 | |
Passenger service | 118 | | | 273 | |
Passenger commissions and other selling expenses | 110 | | | 398 | |
Aircraft rent | 104 | | | 100 | |
Restructuring charges | (44) | | | 0 | |
Government grant recognition | (1,186) | | | 0 | |
Other | 322 | | | 533 | |
Total operating expense | 5,548 | | | 9,002 | |
| | | |
Operating Loss | (1,398) | | | (410) | |
| | | |
Non-Operating Expense: | | | |
Interest expense, net | (361) | | | (79) | |
Impairments and equity method losses | (54) | | | (260) | |
Gain/(loss) on investments, net | 262 | | | (112) | |
Miscellaneous, net | 36 | | | 254 | |
Total non-operating expense, net | (117) | | | (197) | |
| | | |
Loss Before Income Taxes | (1,515) | | | (607) | |
| | | |
Income Tax Benefit | 338 | | | 73 | |
| | | |
Net Loss | $ | (1,177) | | | $ | (534) | |
| | | |
Basic Loss Per Share | $ | (1.85) | | | $ | (0.84) | |
Diluted Loss Per Share | $ | (1.85) | | | $ | (0.84) | |
Cash Dividends Declared Per Share | $ | 0 | | | $ | 0.40 | |
| | | |
Comprehensive Loss | $ | (1,099) | | | $ | (443) | |
| | | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions, except per share data) | 2021 | | 2020 | | 2021 | | 2020 |
Operating Revenue: | | | | | | | |
Passenger | $ | 7,191 | | | $ | 1,938 | | | $ | 15,278 | | | $ | 10,185 | |
Cargo | 262 | | | 142 | | | 728 | | | 403 | |
Other | 1,701 | | | 982 | | | 4,423 | | | 2,534 | |
Total operating revenue | 9,154 | | | 3,062 | | | 20,429 | | | 13,122 | |
| | | | | | | |
Operating Expense: | | | | | | | |
Salaries and related costs | 2,566 | | | 2,012 | | | 7,096 | | | 7,000 | |
Aircraft fuel and related taxes | 1,552 | | | 486 | | | 4,056 | | | 2,453 | |
Ancillary businesses and refinery | 1,079 | | | 561 | | | 2,724 | | | 1,181 | |
Contracted services | 634 | | | 419 | | | 1,723 | | | 1,536 | |
Depreciation and amortization | 501 | | | 545 | | | 1,494 | | | 1,813 | |
Landing fees and other rents | 524 | | | 458 | | | 1,477 | | | 1,430 | |
Regional carrier expense | 453 | | | 290 | | | 1,258 | | | 1,204 | |
Aircraft maintenance materials and outside repairs | 433 | | | 106 | | | 1,014 | | | 618 | |
Passenger commissions and other selling expenses | 308 | | | 100 | | | 640 | | | 548 | |
Passenger service | 226 | | | 92 | | | 520 | | | 456 | |
Aircraft rent | 105 | | | 99 | | | 313 | | | 295 | |
Restructuring charges | 33 | | | 5,345 | | | (3) | | | 7,798 | |
Government grant recognition | (1,822) | | | (1,315) | | | (4,512) | | | (2,595) | |
Other | 357 | | | 250 | | | 1,006 | | | 996 | |
Total operating expense | 6,949 | | | 9,448 | | | 18,806 | | | 24,733 | |
| | | | | | | |
Operating Income/(Loss) | 2,205 | | | (6,386) | | | 1,623 | | | (11,611) | |
| | | | | | | |
Non-Operating Expense: | | | | | | | |
Interest expense, net | (314) | | | (291) | | | (1,014) | | | (564) | |
Impairments and equity method losses | (49) | | | (114) | | | (102) | | | (2,432) | |
Gain/(loss) on investments, net | (223) | | | (95) | | | 251 | | | (199) | |
Loss on extinguishment of debt | (183) | | | — | | | (266) | | | — | |
Miscellaneous, net | 96 | | | 27 | | | 301 | | | 327 | |
Total non-operating expense, net | (673) | | | (473) | | | (830) | | | (2,868) | |
| | | | | | | |
Income/(Loss) Before Income Taxes | 1,532 | | | (6,859) | | | 793 | | | (14,479) | |
| | | | | | | |
Income Tax (Provision)/Benefit | (320) | | | 1,480 | | | (105) | | | 2,849 | |
| | | | | | | |
Net Income/(Loss) | $ | 1,212 | | | $ | (5,379) | | | $ | 688 | | | $ | (11,630) | |
| | | | | | | |
Basic Earnings/(Loss) Per Share | $ | 1.90 | | | $ | (8.47) | | | $ | 1.08 | | | $ | (18.30) | |
Diluted Earnings/(Loss) Per Share | $ | 1.89 | | | $ | (8.47) | | | $ | 1.07 | | | $ | (18.30) | |
Cash Dividends Declared Per Share | $ | — | | | $ | — | | | $ | — | | | $ | 0.40 | |
| | | | | | | |
Comprehensive Income/(Loss) | $ | 1,294 | | | $ | (5,381) | | | $ | 926 | | | $ | (11,580) | |
| | | | | | | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. |
Delta Air Lines, Inc. September 2021 March Form 10-Q 4
DELTA AIR LINES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | |
| Three Months Ended March 31, |
(in millions) | 2021 | | 2020 |
Net Cash Provided by Operating Activities | $ | 691 | | | $ | 358 | |
| | | |
Cash Flows from Investing Activities: | | | |
Property and equipment additions: | | | |
Flight equipment, including advance payments | (132) | | | (629) | |
Ground property and equipment, including technology | (306) | | | (308) | |
| | | |
Purchase of short-term investments | (3,161) | | | 0 | |
Redemption of short-term investments | 3,371 | | | 0 | |
Purchase of equity investments | 0 | | | (2,099) | |
| | | |
Other, net | 168 | | | 65 | |
Net cash used in investing activities | (60) | | | (2,971) | |
| | | |
Cash Flows from Financing Activities: | | | |
Proceeds from short-term obligations | 0 | | | 2,882 | |
Proceeds from long-term obligations | 924 | | | 3,962 | |
| | | |
Payments on debt and finance lease obligations | (1,775) | | | (1,238) | |
Repurchase of common stock | 0 | | | (344) | |
Cash dividends | 0 | | | (260) | |
Fuel card obligation | 0 | | | 364 | |
Other, net | 61 | | | (22) | |
Net cash (used in)/provided by financing activities | (790) | | | 5,344 | |
| | | |
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 | 10,055 | | | 3,730 | |
Cash, cash equivalents and restricted cash equivalents at end of period | $ | 9,896 | | | $ | 6,461 | |
| | | |
Non-Cash Transactions: | | | |
Flight and ground equipment acquired under finance leases | $ | 473 | | | $ | 184 | |
Right-of-use assets acquired under operating leases | 20 | | | 55 | |
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: |
| March 31, |
(in millions) | 2021 | | 2020 |
Current assets: | | | |
Cash and cash equivalents | $ | 8,460 | | | $ | 5,967 | |
Restricted cash included in prepaid expenses and other | 213 | | | 39 | |
Noncurrent assets: | | | |
Cash restricted for airport construction | 1,223 | | | 455 | |
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. |
| | | | | | | | | | | |
| Nine Months Ended September 30, |
(in millions) | 2021 | | 2020 |
Net Cash Provided by/(Used in) Operating Activities | $ | 2,708 | | | $ | (2,507) | |
| | | |
Cash Flows from Investing Activities: | | | |
Property and equipment additions: | | | |
Flight equipment, including advance payments | (961) | | | (594) | |
Ground property and equipment, including technology | (1,068) | | | (757) | |
Proceeds from sale-leaseback transactions | — | | | 465 | |
Purchase of short-term investments | (10,799) | | | (8,700) | |
Redemption of short-term investments | 12,158 | | | 3,654 | |
Purchase of equity investments | — | | | (2,099) | |
| | | |
Other, net | 252 | | | (159) | |
Net cash used in investing activities | (418) | | | (8,190) | |
| | | |
Cash Flows from Financing Activities: | | | |
Proceeds from short-term obligations | — | | | 3,261 | |
Proceeds from long-term obligations | 1,902 | | | 22,481 | |
Proceeds from sale-leaseback transactions | — | | | 2,306 | |
Payments on debt and finance lease obligations | (4,685) | | | (2,318) | |
Repurchase of common stock | — | | | (344) | |
Cash dividends | — | | | (260) | |
Fuel card obligation | — | | | 364 | |
Other, net | 98 | | | (177) | |
Net cash (used in)/provided by financing activities | (2,685) | | | 25,313 | |
| | | |
Net (Decrease)/Increase in Cash, Cash Equivalents and Restricted Cash Equivalents | (395) | | | 14,616 | |
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 | $ | 9,660 | | | $ | 18,346 | |
| | | |
Non-Cash Transactions: | | | |
Flight and ground equipment acquired under finance leases | $ | 904 | | | $ | 347 | |
Right-of-use assets acquired under operating leases | 536 | | | 1,062 | |
Other financings | 240 | | | 115 | |
| | | |
| | | |
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: |
| September 30, |
(in millions) | 2021 | | 2020 |
Current assets: | | | |
Cash and cash equivalents | $ | 8,785 | | | $ | 16,477 | |
Restricted cash included in prepaid expenses and other | 162 | | | 189 | |
Noncurrent assets: | | | |
Cash restricted for airport construction | 713 | | | 1,680 | |
Total cash, cash equivalents and restricted cash equivalents | $ | 9,660 | | | $ | 18,346 | |
| | | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. |
Delta Air Lines, Inc. September 2021 March Form 10-Q 5
DELTA AIR LINES, INC.
Consolidated Statements of Stockholders' Equity
(Unaudited)
| | | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Treasury Stock | | | Common Stock | Additional Paid-In Capital | Retained Earnings / (Accumulated Deficit) | Accumulated Other Comprehensive Loss | Treasury Stock | |
(in millions, except per share data) | (in millions, except per share data) | Shares | Amount | Shares | Amount | Total | (in millions, except per share data) | Shares | Amount | Shares | Amount | Total |
Balance at December 31, 2020 | Balance at December 31, 2020 | 647 | | $ | 0 | | $ | 11,259 | | $ | (428) | | $ | (9,038) | | 9 | | $ | (259) | | $ | 1,534 | | Balance at December 31, 2020 | 647 | | $ | — | | $ | 11,259 | | $ | (428) | | $ | (9,038) | | 9 | | $ | (259) | | $ | 1,534 | |
Net loss | Net loss | — | | — | | — | | (1,177) | | — | | — | | — | | (1,177) | | Net loss | — | | — | | — | | (1,177) | | — | | — | | — | | (1,177) | |
| Other comprehensive income | Other comprehensive income | — | | — | | — | | — | | 78 | | — | | — | | 78 | | Other comprehensive income | — | | — | | — | | — | | 78 | | — | | — | | 78 | |
Common stock issued for employee equity awards(1) | Common stock issued for employee equity awards(1) | 2 | | — | | 23 | | — | | — | | 1 | | (20) | | 3 | | Common stock issued for employee equity awards(1) | 2 | | — | | 23 | | — | | — | | 1 | | (20) | | 3 | |
| Government grant warrant issuance | Government grant warrant issuance | — | | — | | 44 | | — | | — | | — | | — | | 44 | | Government grant warrant issuance | — | | — | | 44 | | — | | — | | — | | — | | 44 | |
Balance at March 31, 2021 | Balance at March 31, 2021 | 649 | | $ | 0 | | $ | 11,326 | | $ | (1,605) | | $ | (8,960) | | 10 | | $ | (279) | | $ | 482 | | Balance at March 31, 2021 | 649 | | $ | — | | $ | 11,326 | | $ | (1,605) | | $ | (8,960) | | 10 | | $ | (279) | | $ | 482 | |
Net income | | Net income | — | | — | | — | | 652 | | — | | — | | — | | 652 | |
| Other comprehensive income | | Other comprehensive income | — | | — | | — | | — | | 78 | | — | | — | | 78 | |
Common stock issued for employee equity awards(1) | | Common stock issued for employee equity awards(1) | 1 | | — | | 28 | | — | | — | | — | | (1) | | 27 | |
| Government grant warrant issuance | | Government grant warrant issuance | — | | — | | 42 | | — | | — | | — | | — | | 42 | |
Balance at June 30, 2021 | | Balance at June 30, 2021 | 650 | | $ | — | | $ | 11,396 | | $ | (953) | | $ | (8,882) | | 10 | | $ | (280) | | $ | 1,281 | |
Net income | | Net income | — | | — | | — | | 1,212 | | — | | — | | — | | 1,212 | |
| Other comprehensive income | | Other comprehensive income | — | | — | | — | | — | | 82 | | — | | — | | 82 | |
Common stock issued for employee equity awards(1) | | Common stock issued for employee equity awards(1) | — | | — | | 32 | | — | | — | | — | | (1) | | 31 | |
| Balance at September 30, 2021 | | Balance at September 30, 2021 | 650 | | $ | — | | $ | 11,428 | | $ | 259 | | $ | (8,800) | | 10 | | $ | (281) | | $ | 2,606 | |
(1)Treasury shares were withheld for payment of taxes, at a weighted average price per share of $38.35, $46.21 and $43.48 in the March 2021 quarter.quarter, June 2021 quarter and September 2021 quarter, respectively.
| | | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | | | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | |
(in millions, except per share data) | (in millions, except per share data) | Shares | Amount | Shares | Amount | Total | (in millions, except per share data) | Shares | Amount | Shares | Amount | Total |
Balance at December 31, 2019 | Balance at December 31, 2019 | 652 | | $ | 0 | | $ | 11,129 | | $ | 12,454 | | $ | (7,989) | | 9 | | $ | (236) | | $ | 15,358 | | Balance at December 31, 2019 | 652 | | $ | — | | $ | 11,129 | | $ | 12,454 | | $ | (7,989) | | 9 | | $ | (236) | | $ | 15,358 | |
Net loss | Net loss | — | | — | | — | | (534) | | — | | — | | — | | (534) | | Net loss | — | | — | | — | | (534) | | — | | — | | — | | (534) | |
Dividends declared | Dividends declared | — | | — | | — | | (257) | | — | | — | | — | | (257) | | Dividends declared | — | | — | | — | | (257) | | — | | — | | — | | (257) | |
Other comprehensive income | Other comprehensive income | — | | — | | — | | — | | 91 | | — | | — | | 91 | | Other comprehensive income | — | | — | | — | | — | | 91 | | — | | — | | 91 | |
Common stock issued for employee equity awards(1) | Common stock issued for employee equity awards(1) | 1 | | — | | 29 | | — | | — | | 1 | | (34) | | (5) | | Common stock issued for employee equity awards(1) | 1 | | — | | 29 | | — | | — | | 1 | | (34) | | (5) | |
Stock purchased and retired | Stock purchased and retired | (6) | | — | | (104) | | (240) | | — | | — | | — | | (344) | | Stock purchased and retired | (6) | | — | | (104) | | (240) | | — | | — | | — | | (344) | |
Balance at March 31, 2020 | Balance at March 31, 2020 | 647 | | $ | — | | $ | 11,054 | | $ | 11,423 | | $ | (7,898) | | 10 | | $ | (270) | | $ | 14,309 | | Balance at March 31, 2020 | 647 | | $ | — | | $ | 11,054 | | $ | 11,423 | | $ | (7,898) | | 10 | | $ | (270) | | $ | 14,309 | |
Net loss | | Net loss | — | | — | | — | | (5,717) | | — | | — | | — | | (5,717) | |
| Other comprehensive loss | | Other comprehensive loss | — | | — | | — | | — | | (39) | | — | | — | | (39) | |
Common stock issued for employee equity awards(1) | | Common stock issued for employee equity awards(1) | — | | — | | 38 | | — | | — | | — | | (1) | | 37 | |
| Government grant warrant issuance | | Government grant warrant issuance | — | | — | | 100 | | — | | — | | — | | — | | 100 | |
Balance at June 30, 2020 | | Balance at June 30, 2020 | 647 | | $ | — | | $ | 11,192 | | $ | 5,706 | | $ | (7,937) | | 10 | | $ | (271) | | $ | 8,690 | |
Net loss | | Net loss | — | | — | | — | | (5,379) | | — | | — | | — | | (5,379) | |
| Other comprehensive loss | | Other comprehensive loss | — | | — | | — | | — | | (2) | | — | | — | | (2) | |
Common stock issued for employee equity awards(1) | | Common stock issued for employee equity awards(1) | — | | — | | 35 | | — | | — | | — | | (1) | | 34 | |
| Government grant warrant issuance | | Government grant warrant issuance | — | | — | | 14 | | — | | — | | — | | — | | 14 | |
Balance at September 30, 2020 | | Balance at September 30, 2020 | 647 | | $ | — | | $ | 11,241 | | $ | 327 | | $ | (7,939) | | 10 | | $ | (272) | | $ | 3,357 | |
(1)Treasury shares were withheld for payment of taxes, at a weighted average price per share of $56.48, $25.56 and $28.29 in the March 2020 quarter.quarter, June 2020 quarter and September 2020 quarter, respectively.
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Delta Air Lines, Inc. September 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 consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by GAAP for complete financial statements. As a result, this Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying Notes in our Form 10-K for the year ended December 31, 2020.
Management believes the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including normal recurring items, considered necessary for a fair statement of results for the interim periods presented.
Due to impacts from the COVID-19 pandemic and the uncertain pace of recovery, seasonal variations in the demand for air travel, the volatility of aircraft fuel prices and other factors, operating results for the three and nine months ended March 31,September 30, 2021 are not necessarily indicative of operating results for the entire year.
We reclassified certain prior period amounts to conform to the current period presentation. Unless otherwise noted, all amounts disclosed are stated before consideration of income taxes.
Regional Carrier Expense
We previously allocated certain costs (such as landing fees and other rents, salaries and related costs and contracted services) to regional carrier expense in our Condensed Consolidated Statements of Operations and Comprehensive LossIncome/(Loss) ("income statement") based on relevant statistics (such as passenger counts). Beginning in the March 2021 quarter we are no longerceased performing this allocation and have reclassified the costs presented in prior periods to align with this presentation. This reclassification better reflects the nature of, and how management views, these regional carrier related expenses. This allocation was approximately $900 million in 2020, including $325approximately $200 million in the MarchSeptember 2020 quarter, and $1.4 billion in 2019, including $355approximately $360 million in the MarchSeptember 2019 quarter. The remaining amounts in regional carrier expense represent the accrual of payments to our regional carriers under capacity purchase agreements and the expenses of our wholly owned regional subsidiary, Endeavor Air, Inc.
Delta Air Lines, Inc. September 2021 March Form 10-Q 7
Notes to the Consolidated Financial Statements
NOTE 2. REVENUE RECOGNITION
Passenger Revenue
| | | | | | | | | | | |
|
| 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 | | | | |
| | | | | | | | | | | | | | | | | | | | |
|
| Three Months Ended September 30, | | Nine Months Ended September 30, | | |
(in millions) | 2021 | 2020 | | 2021 | 2020 | | | |
Ticket | $ | 6,237 | | $ | 1,634 | | | $ | 13,067 | | $ | 8,712 | | | | |
Loyalty travel awards | 544 | | 143 | | | 1,213 | | 731 | | | | |
Travel-related services | 410 | | 161 | | | 998 | | 742 | | | | |
Total passenger revenue | $ | 7,191 | | $ | 1,938 | | | $ | 15,278 | | $ | 10,185 | | | | |
We recognized approximately $822 million $1.8 billionand $2.8$3.0 billion in passenger revenue during the threenine months ended March 31,September 30, 2021 and 2020, respectively, that had been recorded in our air traffic liability balance at the beginning of those periods.
In the March 2021 quarter, we announced the extension of the validity of all passenger tickets and travel credits expiring in 2021purchased or purchasedexpiring in 2021 to December 31, 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 AmericaAdditionally, with the exception of Basic Economy tickets.tickets, we eliminated change fees for tickets originating in North America and waived change fees for those originating outside of North America. We also implemented a waiver that allows Basic Economy tickets purchased for travel in 2021, which are normally non-changeable, to be changed without paying a fee regardless of origin or destination.
Other Revenue
| | | | | | | | | | | |
|
| Three Months Ended March 31, | | |
(in millions) | 2021 | 2020 | | | |
Ancillary businesses and refinery | $ | 726 | | $ | 223 | | | | |
Loyalty program | 368 | | 474 | | | | |
Miscellaneous | 93 | | 174 | | | | |
Total other revenue | $ | 1,187 | | $ | 871 | | | | |
We estimate the value of tickets that will expire unused (“breakage”) and recognize revenue at the scheduled flight date. Our breakage estimates are primarily based on historical experience, ticket contract terms and customers’ travel behavior. Given the change in ticket validity terms made in 2021 and the uncertainty caused by the COVID-19 pandemic, our estimates of revenue that will be recognized from the air traffic liability for unused tickets may vary in future periods.
Ancillary Businesses and Other Revenue | | | | | | | | | | | | | | | | | | | | |
|
| Three Months Ended September 30, | | Nine Months Ended September 30, | | |
(in millions) | 2021 | 2020 | | 2021 | 2020 | | | |
Refinery | $ | 872 | | $ | 417 | | | $ | 2,189 | | $ | 709 | | | | |
Loyalty program | 453 | | 343 | | | 1,260 | | 1,086 | | | | |
Ancillary businesses | 215 | | 155 | | | 586 | | 476 | | | | |
Miscellaneous | 161 | | 67 | | | 388 | | 263 | | | | |
Total other revenue | $ | 1,701 | | $ | 982 | | | $ | 4,423 | | $ | 2,534 | | | | |
Refinery. Ancillary businesses and refinery includesThis represents refinery sales to third parties, aircraft maintenance services we provide to third parties and our vacation wholesale operations.which are at or near cost; accordingly, the margin on these sales is de minimis.
Loyalty Program. Our SkyMiles loyalty program allows customers to earn mileage credits ("miles") by flying on Delta, Delta Connection and other airlines that participate in the loyalty program. Customers can also earn miles through participating companies, such as credit card companies, hotels, car rental agencies and ridesharing companies, who purchase miles from us. Our most significant contract to sell miles relates to our co-brand credit card relationship with American Express. During the threenine months ended March 31,September 30, 2021 and 2020, total cash sales from marketing agreements related to our loyalty program were $760 million$2.9 billion and $992 million,$2.2 billion, respectively, which are allocated to travel and other performance obligations.
Ancillary Businesses. Ancillary businesses includes aircraft maintenance services we provide to third parties and our vacation wholesale operations.
Delta Air Lines, Inc. September 2021 Form 10-Q 8
Notes to the Consolidated Financial Statements
Current Activity of the Loyalty Program. Miles are combined in one homogeneous pool and are not separately identifiable. Therefore, the revenue is comprised of miles that were part of the loyalty program deferred revenue balance at the beginning of the period as well as miles that were issued during the period.
The table below presents the activity of the current and noncurrent loyalty program deferred revenue and includes miles earned through travel and miles sold to participating companies, which are primarily through marketing agreements.
| Loyalty program activity | Loyalty program activity | Loyalty program activity |
(in millions) | (in millions) | | 2021 | 2020 | (in millions) | | 2021 | 2020 |
Balance at January 1 | Balance at January 1 | | $ | 7,182 | | $ | 6,728 | | Balance at January 1 | | $ | 7,182 | | $ | 6,728 | |
Miles earned | Miles earned | | 354 | | 660 | | Miles earned | | 1,541 | | 1,132 | |
Travel miles redeemed | | (241) | | (543) | | |
Non-travel miles redeemed | | (10) | | (28) | | |
Balance at March 31 | | $ | 7,285 | | $ | 6,817 | | |
Miles redeemed for air travel | | Miles redeemed for air travel | | (1,213) | | (731) | |
Miles redeemed for non-air travel and other | | Miles redeemed for non-air travel and other | | (54) | | (40) | |
Balance at September 30 | | Balance at September 30 | | $ | 7,456 | | $ | 7,089 | |
The timing of mile redemptions can vary widely; however, the majority of miles have historically been redeemed within two years of being earned.
Delta Air Lines, Inc. 2021 March Form 10-Q 8
Notes to the Consolidated Financial Statements
Revenue by Geographic Region
Operating revenue for the airline segment is recognized in a specific geographic region based on the origin, flight path and destination of each flight segment. A significant portion of the refinery segment's revenues typically consists of fuel sales to support the airline, which is eliminated in the Condensed Consolidated Financial Statements. The remaining operating revenue for the refinery segment is included in the domestic region. Our passenger and operating revenue by geographic region is summarized in the following tables:
| Passenger revenue by geographic region | Passenger revenue by geographic region | Passenger revenue by geographic region |
| | Passenger Revenue | | Passenger Revenue |
| | Three Months Ended March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
(in millions) | (in millions) | 2021 | 2020 | | (in millions) | 2021 | 2020 | | 2021 | 2020 | |
Domestic | Domestic | $ | 2,280 | | $ | 5,601 | | | Domestic | $ | 5,759 | | $ | 1,647 | | | $ | 12,517 | | $ | 7,812 | | |
Atlantic | Atlantic | 142 | | 818 | | | Atlantic | 730 | | 132 | | | 1,160 | | 1,014 | | |
Latin America | Latin America | 264 | | 765 | | | Latin America | 564 | | 97 | | | 1,313 | | 879 | | |
Pacific | Pacific | 62 | | 385 | | | Pacific | 138 | | 62 | | | 288 | | 480 | | |
Total | Total | $ | 2,748 | | $ | 7,569 | | | Total | $ | 7,191 | | $ | 1,938 | | | $ | 15,278 | | $ | 10,185 | | |
| Operating revenue by geographic region | Operating revenue by geographic region | Operating revenue by geographic region |
| | Operating Revenue | | Operating Revenue |
| | Three Months Ended March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
(in millions) | (in millions) | 2021 | 2020 | | (in millions) | 2021 | 2020 | | 2021 | 2020 | |
Domestic | Domestic | $ | 3,368 | | $ | 6,267 | | | Domestic | $ | 7,311 | | $ | 2,585 | | | $ | 16,572 | | $ | 10,116 | | |
Atlantic | Atlantic | 267 | | 994 | | | Atlantic | 954 | | 240 | | | 1,688 | | 1,353 | | |
Latin America | Latin America | 381 | | 863 | | | Latin America | 653 | | 126 | | | 1,620 | | 1,015 | | |
Pacific | Pacific | 134 | | 468 | | | Pacific | 236 | | 111 | | | 549 | | 638 | | |
Total | Total | $ | 4,150 | | $ | 8,592 | | | Total | $ | 9,154 | | $ | 3,062 | | | $ | 20,429 | | $ | 13,122 | | |
Delta Air Lines, Inc. September 2021 March Form 10-Q 9
Notes to the Consolidated Financial Statements
NOTE 3. FAIR VALUE MEASUREMENTS
Assets Measured at Fair Value on a Recurring Basis | | | | | | | | | | | | | | |
(in millions) | September 30, 2021 | Level 1 | Level 2 | Level 3 |
Cash equivalents | $ | 6,098 | | $ | 6,098 | | $ | — | | $ | — | |
Restricted cash equivalents | 874 | | 874 | | — | | — | |
Short-term investments | 4,417 | | 2,291 | | 2,126 | | — | |
Long-term investments | 1,659 | | 1,525 | | 37 | | 97 | |
| | | | |
| | | | |
| | | | |
| | | | | | | | | | | | | | |
(in millions) | March 31, 2021 | Level 1 | Level 2 | Level 3 |
Cash equivalents | $ | 6,004 | | $ | 6,004 | | $ | 0 | | $ | 0 | |
Restricted cash equivalents | 1,436 | | 1,436 | | 0 | | 0 | |
Short-term investments | 5,575 | | 3,564 | | 2,011 | | 0 | |
Long-term investments | 1,673 | | 895 | | 557 | | 221 | |
| | | | |
| | | | |
| | | | |
| (in millions) | (in millions) | December 31, 2020 | Level 1 | Level 2 | Level 3 | (in millions) | December 31, 2020 | Level 1 | Level 2 | Level 3 |
Cash equivalents | Cash equivalents | $ | 5,755 | | $ | 5,755 | | $ | 0 | | $ | 0 | | Cash equivalents | $ | 5,755 | | $ | 5,755 | | $ | — | | $ | — | |
Restricted cash equivalents | Restricted cash equivalents | 1,747 | | 1,747 | | 0 | | 0 | | Restricted cash equivalents | 1,747 | | 1,747 | | — | | — | |
Short-term investments | Short-term investments | 5,789 | | 3,919 | | 1,870 | | 0 | | Short-term investments | 5,789 | | 3,919 | | 1,870 | | — | |
Long-term investments | Long-term investments | 1,417 | | 948 | | 38 | | 431 | | Long-term investments | 1,417 | | 948 | | 38 | | 431 | |
|
Cash Equivalents and Restricted Cash Equivalents. Cash equivalents generally consist of money market funds. Restricted cash equivalents are recorded in prepaid expenses and other and cash restricted for airport construction on theour Consolidated Balance Sheet ("balance sheet") and. Restricted cash equivalents generally consist of money market funds, time deposits, commercial paper and negotiable certificates of deposit, which primarily relate to proceeds from debt issued to finance, among other things, a portion of the construction costs for our new terminal facilities at New York's LaGuardia Airport. The fair value of these cash equivalents is based on a market approach using prices generated by market transactions involving identical or comparable assets.
Short-Term Investments. Short-term investments consist of U.S. government and agency securities. The fair values of these investments are based on a market approach using industry standard valuation techniques that incorporate observable inputs such as quoted market prices, interest rates, benchmark curves, credit ratings of the security and other observable information.
At March 31,As of September 30, 2021, the estimated fair value of our short-term investments was $5.6 billion, which approximates cost.$4.4 billion. Of these investments, $4.7$3.7 billion are expected to mature in one year or less, with the remainder maturing during 2022.by the first half of 2023. 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 MarchSeptember 2021 quarter, due to its agreement to merge with Aspirational Consumer Lifestyle CorpWheels Up Experience Inc. ("Aspirational"Wheels Up"), a publicly-traded special purpose acquisition company, became publicly traded and, as of September 30, 2021, our investment in Wheels Up wasis classified as Level 2.1. In the June 2021 quarter, Clear Secure, Inc. ("CLEAR") became publicly traded and our investment is classified as Level 1. 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 4, "Investments," for further information on our equity investments.
Delta Air Lines, Inc. 2021 March Form 10-Q 10
Notes to the Consolidated Financial Statements
NOTE 4. INVESTMENTS
We have developed strategic relationships with a number of airlines and airline services companies through joint ventures and other forms of cooperation and support, including equity investments. Our equity investments reinforce our commitment to these relationships and generally enhance our ability to offer input to the investee on strategic issues and direction, in some cases through representation on the board of directors.
Changes in the valuation of investments accounted for at fair value are recorded in gain/(loss) on investments, net in our income statement within non-operating expense and are driven by changes in stock prices, other valuation techniques for investments in companies without publicly-traded shares and foreign currency fluctuations. We recorded gains of $262 million and losses of $112 million on our fair value investments during the three months ended March 31, 2021 and 2020, respectively.
Delta Air Lines, Inc. September 2021 Form 10-Q 10
Notes to the Consolidated Financial Statements
Our share of Unifi Aviation's financial results is recorded in contracted services in our income statement as this entity is integral to the operations of our business by providing services at our airport locations, while our share of other equity method investees' financial results is recorded in impairments and equity method losses in our income statement under non-operating expense. If an investment accounted for under the equity method experiences a loss in value that is determined to be other than temporary, we will reduce our carrying value of the investment to fair value and record the loss in impairments and equity method losses in our income statement.
| | | | | | | | | | | | | | | | | | | | | | | |
Equity investments ownership interest and carrying value |
| Accounting Treatment | | Ownership Interest | | Carrying Value |
(in millions) | | | 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 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Equity investments ownership interest and carrying value |
| Accounting Treatment | | Ownership Interest | | Carrying Value |
(in millions) | | | September 30, 2021 | December 31, 2020 | | September 30, 2021 | December 31, 2020 |
Wheels Up | Fair Value | | 21 | % | 24 | % | | $ | 343 | | $ | 210 | |
Hanjin-KAL | Fair Value | | 13 | % | 13 | % | | 456 | | 512 | |
Air France-KLM | Fair Value | | 6 | % | 9 | % | | 184 | | 235 | |
China Eastern | Fair Value | | 3 | % | 3 | % | | 179 | | 201 | |
CLEAR | Fair Value | | 6 | % | 6 | % | | 340 | | 120 | |
Unifi Aviation | Equity Method | | 49 | % | 49 | % | | 167 | | 154 | |
Other investments | Various | | | | | 250 | | 233 | |
Equity investments | | | | | | $ | 1,919 | | $ | 1,665 | |
Wheels Up. In FebruaryJuly 2021, Wheels Up entered intobecame a definitive agreement to become publicly-traded viacompany through a merger with Aspirational. The transaction is expectedAspirational Consumer Lifestyle Corp ("Aspirational"). Aspirational subsequently changed its name to close inWheels Up Experience Inc. and its common stock trades on the June 2021 quarter.New York Stock Exchange under the symbol UP. We account for our investment usingunder the fair value option as this election better reflectsand are using the economicsstock price to recognize fair value adjustments beginning in the September 2021 quarter.
CLEAR. In the June 2021 quarter, CLEAR completed an initial public offering of ourClass A common stock, which trades on the New York Stock Exchange under the symbol YOU. We own shares of Alclear Holdings, LLC, which are convertible on a one-to-one basis for the Class A common stock of CLEAR. Our 6% ownership interest is determined on a fully exchanged and we have recordedconverted basis. We account for our investment primarily based on Aspirational’sunder the fair value method and are using the stock price and information included in its public filings.to recognize fair value adjustments.
Other Investments. This category includes various investments that are accounted for at fair value or under the equity method, depending on our ownership interest and the level of influence conveyed by our investment. Included in this categorytherein are our investments in Grupo Aeroméxico, LATAM Airlines Group S.A. ("LATAM") and Virgin Atlantic, all of which are undergoing in-court or out-of-court restructurings, and the carrying values of these investments have been reduced to and remain 0 at March 31,zero as of September 30, 2021. In order to support our relationships with these carriers, we have provided them with strategic and operational assistance through their restructurings. We haveAs of September 30, 2021, we had notes payable of $480approximately $525 million, which arewere recorded in current maturities of debt and finance leases, and receivables from those partnerscarriers recorded within other noncurrent assets, including $185 million related to our option to purchase certain obligations of a lender under Grupo Aeroméxico's restructuring process and that lender’s right to require us to purchase that portion of its obligations.
GOL. During 2020, we loaned GOL Linhas Aéreas Inteligentes, the parent company of GOL Linhas Aéreas (operating as GOL), $250 million to be used exclusively to repay the term loan we had previously guaranteed. In the June 2021 quarter, GOL repaid the outstanding balance of March 31, 2021.this loan in full.
Delta Air Lines, Inc. September 2021 March Form 10-Q 11
Notes to the Consolidated Financial Statements
NOTE 5. DEBT
| Summary of outstanding debt by category | 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 | September 30, | December 31, |
(in millions) | (in millions) | Dates | March 31, 2021 | 2021 | 2020 | (in millions) | Dates | September 30, 2021 | 2021 | 2020 |
Unsecured notes | Unsecured notes | 2021 | to | 2029 | 2.90% | to | 7.38% | $ | 5,350 | | $ | 5,350 | | Unsecured notes | 2022 | to | 2029 | 2.90% | to | 7.38% | $ | 4,460 | | $ | 5,350 | |
Unsecured Payroll Support Program Loan | 2030 | 1.00% | 1,648 | | 1,648 | | |
Unsecured Payroll Support Program Extension Loan | 2031 | 1.00% | 828 | | 0 | | |
Unsecured Payroll Support Program Loans | | Unsecured Payroll Support Program Loans | 2030 | to | 2031 | 1.00% | 3,496 | | 1,648 | |
| Financing arrangements secured by SkyMiles assets: | 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 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 | | SkyMiles Term Loan(1)(2) | 2023 | to | 2027 | 4.75% | 2,865 | | 3,000 | |
Financing arrangements secured by slots, gates and/or routes: | 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 Senior Secured Notes | 2025 | 7.00% | 2,823 | | 3,500 | |
2020 Term Loan | 2020 Term Loan | n/a | 0 | | 1,493 | | 2020 Term Loan | n/a | — | | 1,493 | |
2018 Revolving Credit Facility(2) | 2018 Revolving Credit Facility(2) | 2021 | to | 2023 | Undrawn | 0 | | 0 | | 2018 Revolving Credit Facility(2) | 2022 | to | 2023 | Undrawn | — | | — | |
Financing arrangements secured by aircraft: | Financing arrangements secured by aircraft: | | | Financing arrangements secured by aircraft: | | |
Certificates(1) | Certificates(1) | 2021 | to | 2028 | 2.00% | to | 8.02% | 2,518 | | 2,633 | | Certificates(1) | 2021 | to | 2028 | 2.00% | to | 8.00% | 1,990 | | 2,633 | |
Notes(1)(2) | Notes(1)(2) | 2021 | to | 2033 | 0.77% | to | 5.75% | 1,350 | | 1,284 | | Notes(1)(2) | 2021 | to | 2033 | 0.70% | to | 5.75% | 1,208 | | 1,284 | |
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 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 | | 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 financings(1)(2) | 2021 | to | 2030 | 2.25% | to | 8.00% | 592 | | 412 | |
Other revolving credit facilities(2) | Other revolving credit facilities(2) | 2021 | to | 2022 | Undrawn | 0 | | 0 | | Other revolving credit facilities(2) | 2022 | Undrawn | — | | — | |
Total secured and unsecured debt | Total secured and unsecured debt | | 27,699 | | 28,214 | | Total secured and unsecured debt | | 26,328 | | 28,214 | |
Unamortized (discount)/premium and debt issue cost, net and other | Unamortized (discount)/premium and debt issue cost, net and other | | (226) | | (240) | | Unamortized (discount)/premium and debt issue cost, net and other | | (227) | | (240) | |
Total debt | Total debt | | 27,473 | | 27,974 | | Total debt | | 26,101 | | 27,974 | |
Less: current maturities | Less: current maturities | | (2,671) | | (1,443) | | Less: current maturities | | (2,024) | | (1,443) | |
Total long-term debt | Total long-term debt | | $ | 24,802 | | $ | 26,531 | | Total long-term debt | | $ | 24,077 | | $ | 26,531 | |
(1)Due in installments.
(2)Certain financings are comprised of variable rate debt. All variable rates are equal to LIBOR (generally subject to a floor) or another index rate in each case plus a specified margin.
Unsecured Payroll Support Program Extension Loans
A summary of the amounts received and warrants issued under the initial payroll support program under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") and the program extensions is set forth in the following table:
| | | | | | | | | | | | | | | | | |
Summary of payroll support program activity |
(in millions) | Total | Grant | Loan | Number of Warrants | Percentage of Outstanding Shares at September 30, 2021 |
Payroll Support Program (PSP1) | $ | 5,594 | | $ | 3,946 | | $ | 1,648 | | 6.8 | | 1.1 | % |
Payroll Support Program Extension (PSP2) | 3,290 | | 2,333 | | 957 | | 2.4 | | 0.4 | % |
Payroll Support Program 3 (PSP3) | 3,069 | | 2,178 | | 891 | | 1.9 | | 0.3 | % |
Total | $ | 11,953 | | $ | 8,457 | | $ | 3,496 | | 11.1 | | 1.8 | % |
Grants received were recognized in government grant recognition in our income statement over the periods that the funds were intended to compensate. The PSP1 grant was recognized during 2020 and grants received from PSP2 and PSP3 have been fully recognized as of the end of September 2021.
Delta Air Lines, Inc. September 2021 Form 10-Q 12
Notes to the Consolidated Financial Statements
Payroll Support Program Extension (PSP2). 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 SecurityCARES Act ("CARES Act") providing an additional $15 billion in grants and loans to be used forthe airline employee wages, salaries and benefits.industry. In January 2021, we entered into a payroll support program extension agreement with the U.S. Department of the Treasury. InDuring the Marchsix months ended June 30, 2021, quarter, we received $2.9a total of $3.3 billion in payroll support payments under this extension agreement, which must be usedwe were required to use exclusively for the payment of employee wages, salaries and benefits and iswere 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.
These support payments consisted of approximately $2.0$2.3 billion in a grant and $828$957 million in an unsecured 10-year low interest loan. In return, we entered into a promissory note for the loan and issued warrants to the U.S. Department of the Treasury to acquire approximately 2.4 million shares of Delta common stock. The loan bears interest at an annual rate of 1.00% for the first five years and the applicable Secured Overnight Financing Rate ("SOFR") plus 2.00% in the final five years. 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. TheseThe 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$905 million of noncurrent debt, net of discount, and $44$52 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)Payroll Support Program 3 (PSP3). 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 secondfurther extension of the payroll support program providing an additional $14 billion in grants and loans to be used forthe airline employee wages, salaries and benefits. We expect to enterindustry. In April 2021, we entered into similar agreements as those discussed abovea Payroll Support Program 3 Agreement with the U.S. Department of the Treasury. Based onDuring the share of fundsJune 2021 quarter, we received from the first extensiona total of the$3.1 billion in payroll support program,payments under this agreement, which we were required to use exclusively for the payment of employee wages, salaries and the similar structures of both extensions, we estimate that we will receive approximately $2.7 billion, consisting of $1.9 billion in a grantbenefits 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 bewas conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs from the date of the agreement through September 30, 2021 or the date on which assistance provided underwe have expended all of the agreement is exhausted,payroll support, whichever is later. Other conditions would include prohibitions on share repurchases and dividends through September 30, 2022 and certain limitations on executive compensation until April 1, 2023.
These support payments consisted of $2.2 billion in a grant and $891 million in an unsecured 10-year low interest loan. In return, we expect to enterentered into a promissory note for the amount of the loan and to issueissued warrants to the U.S. Department of the Treasury to acquire approximately 1.9 million shares of Delta common stockstock. The loan bears interest at an annual rate of 1.00% for the first five years and the applicable SOFR plus 2.00% in the final five years. The warrants have an amountinitial exercise price of $47.80 per share, subject to be determined consistent withadjustment in certain cases, and a five-year term. We have recorded the structurevalue of the prior warrant issuances.promissory note and warrants on a relative fair value basis as $857 million of noncurrent debt, net of discount, and $34 million in additional paid in capital, respectively.
2020 Term Loan
In 2020 we entered into a $1.5 billion term loan secured by certain slots, gates and routes. In the March 2021 quarter, we repaid in full the term loan, which was scheduled to mature in April 2023, and incurred a $56 million loss on extinguishment of debt, which is recorded in miscellaneous, netloss on extinguishment of debt in non-operating expense in theour income statement.
Enhanced Equipment Trust Certificates ("EETCs") Prepayments
In the June 2021 quarter, we repaid in full approximately $450 million of various EETCs which were scheduled to mature between 2022 and 2023, and incurred a $26 million loss on extinguishment of debt, which is recorded in loss on extinguishment of debt in non-operating expense in our income statement.
Delta Air Lines, Inc. September 2021 Form 10-Q 13
Notes to the Consolidated Financial Statements
Early Settlement of Outstanding Notes
In July 2021, we completed a cash tender offer for an aggregate purchase price of $1.0 billion, excluding accrued and unpaid interest, of our outstanding 7.0% Senior Secured Notes due 2025 (the "2025 Notes"), 7.375% Notes due 2026 (the "2026 Notes") and 4.5% Senior Secured Notes due 2025 (the "2025 SkyMiles Notes"). As a result of the tender offer, we purchased 2025 Notes, included as 2020 Senior Secured Notes in the table above, with principal amount of $677 million for approximately $800 million and 2026 Notes, included in Unsecured Notes in the table above, with principal amount of $169 million for approximately $200 million. We did not purchase any of the 2025 SkyMiles Notes under the tender offer. In addition to the early settlement of the principal amount of the purchased notes, we recorded a loss of $166 million on extinguishment of debt in non-operating expense in our income statement.
Throughout the September 2021 quarter we also repurchased $262 million of various secured certificates, unsecured notes and a portion of the SkyMiles Term Loan on the open market. These payments resulted in a $17 million loss on extinguishment of debt.
Availability Under Revolving Facilities
As of March 31,September 30, 2021, we had approximately $2.6 billion undrawn and available under our revolving credit facilities. In addition, we had outstanding letters of credit as of March 31,September 30, 2021, including approximately $400$300 million that reduced the availability under our revolving credit facilities and approximately $300 million that did not affect the availability of our revolving credit facilities.
Fair Value of Debt
Market risk associated with our fixed- and variable-rate debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates. The fair value of debt, shown below, is principally based on reported market values, recently completed market transactions and estimates based on interest rates, maturities, credit risk and where applicable, underlying collateral. Debt is primarily classified as Level 2 within the fair value hierarchy.
| | | | | | | | |
Fair value of outstanding debt |
(in millions) | March 31, 2021 | December 31, 2020 |
Net carrying amount | $ | 27,473 | | $ | 27,974 | |
Fair value | $ | 29,500 | | $ | 29,800 | |
| | | | | | | | |
Fair value of outstanding debt |
(in millions) | September 30, 2021 | December 31, 2020 |
Net carrying amount | $ | 26,101 | | $ | 27,974 | |
Fair value | $ | 28,300 | | $ | 29,800 | |
Covenants
Our debt agreements contain various affirmative, negative and financial covenants. We were in compliance with the covenants in theseour debt agreements at March 31,September 30, 2021.
Delta Air Lines, Inc. September 2021 March Form 10-Q 1314
Notes to the Consolidated Financial Statements
NOTE 6. EMPLOYEE BENEFIT PLANS
| Employee benefit plans 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) | 2021 | 2020 | | 2021 | 2020 | (in millions) | 2021 | 2020 | | 2021 | 2020 |
Three Months Ended March 31, | | |
Three Months Ended September 30, | | Three Months Ended September 30, | |
Service cost | Service cost | $ | 0 | | $ | 0 | | | $ | 21 | | $ | 24 | | Service cost | $ | — | | $ | — | | | $ | 21 | | $ | 24 | |
Interest cost | Interest cost | 146 | | 175 | | | 29 | | 28 | | Interest cost | 146 | | 175 | | | 29 | | 30 | |
Expected return on plan assets | Expected return on plan assets | (375) | | (343) | | | (9) | | (11) | | Expected return on plan assets | (381) | | (343) | | | (9) | | (11) | |
Amortization of prior service credit | Amortization of prior service credit | 0 | | 0 | | | (2) | | (2) | | Amortization of prior service credit | — | | — | | | (2) | | (2) | |
Recognized net actuarial loss | Recognized net actuarial loss | 89 | | 75 | | | 15 | | 10 | | Recognized net actuarial loss | 88 | | 74 | | | 15 | | 10 | |
Special termination benefits | | Special termination benefits | — | | — | | | — | | 1,260 | |
| Settlements | | Settlements | 1 | | 30 | | | — | | — | |
Net periodic (benefit) cost | Net periodic (benefit) cost | $ | (140) | | $ | (93) | | | $ | 54 | | $ | 49 | | Net periodic (benefit) cost | $ | (146) | | $ | (64) | | | $ | 54 | | $ | 1,311 | |
| Nine Months Ended September 30, | | Nine Months Ended September 30, | |
Service cost | | Service cost | $ | — | | $ | — | | | $ | 64 | | $ | 72 | |
Interest cost | | Interest cost | 437 | | 526 | | | 88 | | 86 | |
Expected return on plan assets | | Expected return on plan assets | (1,142) | | (1,030) | | | (26) | | (33) | |
Amortization of prior service credit | | Amortization of prior service credit | — | | — | | | (5) | | (7) | |
Recognized net actuarial loss | | Recognized net actuarial loss | 266 | | 223 | | | 42 | | 32 | |
Special termination benefits | | Special termination benefits | — | | — | | | — | | 1,260 | |
Settlements | | Settlements | 1 | | 33 | | | — | | — | |
Net periodic (benefit) cost | | Net periodic (benefit) cost | $ | (438) | | $ | (248) | | | $ | 163 | | $ | 1,410 | |
Service cost is recorded in salaries and related costs in our income statement, while all other components are recorded within miscellaneous, net under non-operating expense.
We have no minimum funding requirements for our defined benefit pension plans in 2021, however we voluntarily contributed $1.0$1.5 billion to these plans in April 2021.the June 2021 quarter.
Delta Air Lines, Inc. September 2021 Form 10-Q 15
Notes to the Consolidated Financial Statements
NOTE 7. COMMITMENTS AND CONTINGENCIES
Aircraft Purchase Commitments
Our future aircraft purchase commitments totaled approximately $13.4$16.9 billion at March 31,September 30, 2021. Also, as of September 30, 2021, we had commitments under leases that had not yet commenced of $795 million. These leases will commence between 2021 and 2024 with lease terms ranging from 7 to 12 years.
| | | | | |
Aircraft purchase commitments |
(in millions) | Total |
Three months ending December 31, 2021 | $ | 550 | |
2022 | 3,670 | |
2023 | 3,100 | |
2024 | 3,260 | |
2025 | 2,880 | |
Thereafter | 3,430 | |
Total | $ | 16,890 | |
Our future aircraft purchase commitments included the following aircraft at September 30, 2021:
| | | | | |
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 | |
| | | | | |
Aircraft purchase commitments by fleet type | |
Aircraft Type | Purchase Commitments |
A220-100 | 4 | |
A220-300 | 41 | |
A321-200 | 4 | |
A321-200neo | 155 | |
A330-900neo | 26 | |
A350-900(1) | 26 | |
B-737-900ER | 27 | |
Total | 283 | |
(1)Includes 6 A350-900 lease commitments in 2021 incremental to our order book with Airbus.
Aircraft Orders
During the June and September 2021 quarters, we agreed with Airbus to add incremental aircraft to our order book by converting options for 55 A321neo aircraft into firm orders and replenishing 25 of our options. We expect to take delivery of our first A321neo in the first half of 2022, with deliveries of these aircraft continuing through 2027. Additionally, we agreed to move up 2 A350-900 deliveries and 1 A330-900neo delivery to occur in the second half of 2022.
During the June 2021 quarter, we agreed to acquire 29 B-737-900 aircraft and enter into leases for 7 A350-900 aircraft. Additionally, during the September 2021 quarter, we agreed to enter into leases for 2 incremental A350-900 aircraft. We began taking delivery of these preowned aircraft in the September 2021 quarter and deliveries are expected to continue through the first quarter of 2022. Phased entry into service is expected through the summer of 2023.
Legal Contingencies
We are involved in various legal proceedings related to employment practices, environmental issues, antitrust matters and other matters concerning our business. We record liabilities for losses from legal proceedings when we determine that it is probable that the outcome in a legal proceeding will be unfavorable and the amount of loss can be reasonably estimated. Although the outcome of the legal proceedings in which we are involved cannot be predicted with certainty, we believe that the resolution of current matters will not have a material adverse effect on our Condensed Consolidated Financial Statements.
Delta Air Lines, Inc. September 2021 March Form 10-Q 1416
Notes to the Consolidated Financial Statements
Other Contingencies
General Indemnifications
We are the lessee under many commercial real estate leases. It is common in these transactions for us, as the lessee, to agree to indemnify the lessor and the lessor's related parties for tort, environmental and other liabilities that arise out of or relate to our use or occupancy of the leased premises. This type of indemnity would typically make us responsible to indemnified parties for liabilities arising out of the conduct of, among others, contractors, licensees and invitees at, or in connection with, the use or occupancy of the leased premises. This indemnity often extends to related liabilities arising from the negligence of the indemnified parties but usually excludes any liabilities caused by either their sole or gross negligence or their willful misconduct.
Our aircraft and other equipment lease and financing agreements typically contain provisions requiring us, as the lessee or obligor, to indemnify the other parties to those agreements, including certain of those parties' related persons, against virtually any liabilities that might arise from the use or operation of the aircraft or other equipment.
We believe that our insurance would cover most of our exposure to liabilities and related indemnities associated with the commercial real estate leases and aircraft and other equipment lease and financing agreements described above. While our insurance does not typically cover environmental liabilities, we have insurance policies in place as required by applicable environmental laws.
Some of our aircraft and other financing transactions include provisions that require us to make payments to preserve an expected economic return to the lenders if that economic return is diminished due to specified changes in laws or regulations. In some of these financing transactions, we also bear the risk of changes in tax laws that would subject payments to non-U.S. lenders to withholding taxes.
We cannot reasonably estimate our potential future payments under the indemnities and related provisions described above because we cannot predict (1) when and under what circumstances these provisions may be triggered and (2) the amount that would be payable if the provisions were triggered because the amounts would be based on facts and circumstances existing at such time.
Other
We have certain contracts for goods and services that require us to pay a penalty, acquire inventory specific to us or purchase contract-specific equipment, as defined by each respective contract, if we terminate the contract without cause prior to its expiration date. Because these obligations are contingent on our termination of the contract without cause prior to its expiration date, no obligation would exist unless such a termination occurs.
NOTE 8. ACCUMULATED OTHER COMPREHENSIVE LOSS
| Components of accumulated other comprehensive loss | Components of accumulated other comprehensive loss | Components of accumulated other comprehensive loss |
(in millions) | (in millions) | Pension and Other Benefit Liabilities(2) | Other | Total | (in millions) | Pension and Other Benefit Liabilities(2) | Other | Total |
Balance at January 1, 2021 (net of tax effect of $1,764) | Balance at January 1, 2021 (net of tax effect of $1,764) | $ | (9,078) | | $ | 40 | | $ | (9,038) | | 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) | | |
Changes in value (net of tax effect of $1) | | Changes in value (net of tax effect of $1) | 3 | | — | | 3 | |
Reclassifications into earnings (net of tax effect of $71)(1) | | Reclassifications into earnings (net of tax effect of $71)(1) | 235 | | — | | 235 | |
Balance at September 30, 2021 (net of tax effect of $1,692) | | Balance at September 30, 2021 (net of tax effect of $1,692) | $ | (8,840) | | $ | 40 | | $ | (8,800) | |
| | | | | | | | | | | |
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) | |
| | | | | | | | | | | |
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 $31) | (102) | | 17 | | (85) | |
Reclassifications into earnings (net of tax effect of $149)(1) | 218 | | (83) | | 135 | |
Balance at September 30, 2020 (net of tax effect of $1,431) | $ | (7,979) | | $ | 40 | | $ | (7,939) | |
(1)Amounts reclassified from AOCIaccumulated other comprehensive loss for pension and other benefit liabilities are recorded in miscellaneous, net in non-operating expense in our income statement.
(2)Includes approximately $750 million of deferred income tax expense primarily related to pension and other benefit obligations that will not be recognized in net income until these obligations are fully extinguished. We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to results from operations.
Delta Air Lines, Inc. September 2021 March Form 10-Q 1517
Notes to the Consolidated Financial Statements
NOTE 9. SEGMENTS
Refinery Operations
Our refinery segment operates for the benefit of the airline segment by providing jet fuel to the airline segment from its own production and through jet fuel obtained through agreements with third parties. The refinery's production consists of jet fuel, as well as non-jet fuel products. 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 and nine months ended March 31,September 30, 2021 and 2020 was $503$629 million and $831$1.7 billion, respectively, compared to $249 million and $1.1 billion for the three and nine months ended September 30, 2020, 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.
| Financial information by segment | Financial information by segment | Financial information by segment |
(in millions) | (in millions) | Airline | Refinery | | Intersegment Sales/Other | | Consolidated | (in millions) | Airline | Refinery | | Intersegment Sales/Other | | Consolidated |
Three Months Ended March 31, 2021 | | |
Three Months Ended September 30, 2021 | | Three Months Ended September 30, 2021 | |
Operating revenue: | | Operating revenue: | $ | 8,282 | | $ | 1,696 | | | $ | 9,154 | |
Sales to airline segment | | Sales to airline segment | | $ | (183) | | (1) | |
Exchanged products | | Exchanged products | | (629) | | (2) | |
Sales of refined products | | Sales of refined products | | (12) | | (3) | |
Operating income | | Operating income | 2,108 | | 97 | | | — | | | 2,205 | |
Interest expense, net | | Interest expense, net | 312 | | 2 | | | — | | | 314 | |
Depreciation and amortization | | Depreciation and amortization | 501 | | 24 | | | (24) | | (4) | 501 | |
Restructuring charges | | Restructuring charges | 33 | | — | | | — | | | 33 | |
Total assets, end of period | | Total assets, end of period | 70,771 | | 2,012 | | | — | | | 72,783 | |
Net fair value obligations, end of period(5) | | Net fair value obligations, end of period(5) | — | | (547) | | | — | | | (547) | |
Capital expenditures | | Capital expenditures | 818 | | 12 | | | — | | | 830 | |
| Three Months Ended September 30, 2020 | | Three Months Ended September 30, 2020 | |
Operating revenue: | Operating revenue: | $ | 3,610 | | $ | 1,047 | | | $ | 4,150 | | Operating revenue: | $ | 2,645 | | $ | 669 | | | $ | 3,062 | |
Sales to airline segment | Sales to airline segment | | $ | 0 | | (1) | | Sales to airline segment | | $ | — | | (1) | |
Exchanged products | Exchanged products | | (503) | | (2) | | Exchanged products | | (249) | | (2) | |
Sales of refined products | Sales of refined products | | (4) | | (3) | | Sales of refined products | | (3) | | (3) | |
Operating loss | Operating loss | (1,273) | | (125) | | | 0 | | | (1,398) | | Operating loss | (6,358) | | (28) | | | — | | | (6,386) | |
Interest expense, net | Interest expense, net | 360 | | 1 | | | 0 | | | 361 | | Interest expense, net | 288 | | 3 | | | — | | | 291 | |
Depreciation and amortization | Depreciation and amortization | 492 | | 24 | | | (24) | | (4) | 492 | | Depreciation and amortization | 545 | | 25 | | | (25) | | (4) | 545 | |
Restructuring charges | | Restructuring charges | 5,345 | | — | | | — | | | 5,345 | |
Total assets, end of period | Total assets, end of period | 71,505 | | 1,578 | | | 0 | | | 73,083 | | Total assets, end of period | 77,558 | | 1,518 | | | — | | | 79,076 | |
Fair value obligations, end of period(5) | 0 | | (346) | | | 0 | | | (346) | | |
Net fair value obligations, end of period(5) | | Net fair value obligations, end of period(5) | — | | (68) | | | — | | | (68) | |
Capital expenditures | Capital expenditures | 425 | | 13 | | | 0 | | | 438 | | Capital expenditures | 130 | | 3 | | | — | | | 133 | |
| 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.minimis.
(4)Refinery segment operating results, including depreciation and amortization, are included within aircraft fuel and related taxes in our income statement.
(5)The fair values of these obligations, which are related to renewable fuel compliance costs, are based on quoted market prices and other observable information and are classified as Level 2 in the fair value hierarchy.
At September 30, 2021 we had a gross fair value obligation of $625 million and related assets of $78 million. At September 30, 2020 we had a gross fair value obligation of $80 million and related assets of $12 million. We expect to use the assets in settling a portion of our obligations.
Delta Air Lines, Inc. September 2021 March Form 10-Q 1618
Notes to the Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | |
Financial information by segment |
(in millions) | Airline | Refinery | | Intersegment Sales/Other | | Consolidated |
Nine Months Ended September 30, 2021 | | | | | | |
Operating revenue: | $ | 18,240 | | $ | 4,177 | | | | | $ | 20,429 | |
Sales to airline segment | | | | $ | (292) | | (1) | |
Exchanged products | | | | (1,667) | | (2) | |
Sales of refined products | | | | (29) | | (3) | |
Operating income (loss) | 1,809 | | (186) | | | — | | | 1,623 | |
Interest expense, net | 1,009 | | 5 | | | — | | | 1,014 | |
Depreciation and amortization | 1,494 | | 72 | | | (72) | | (4) | 1,494 | |
Restructuring charges | (3) | | — | | | — | | | (3) | |
Capital expenditures | 1,994 | | 35 | | | — | | | 2,029 | |
| | | | | | |
Nine Months Ended September 30, 2020 | | | | | | |
Operating revenue: | $ | 12,413 | | $ | 2,366 | | | | | $ | 13,122 | |
Sales to airline segment | | | | $ | (214) | | (1) | |
Exchanged products | | | | (1,144) | | (2) | |
Sales of refined products | | | | (299) | | (3) | |
Operating loss | (11,498) | | (113) | | | — | | | (11,611) | |
Interest expense, net | 564 | | — | | | — | | | 564 | |
Depreciation and amortization | 1,813 | | 74 | | | (74) | | (4) | 1,813 | |
Restructuring charges | 7,798 | | — | | | — | | | 7,798 | |
Capital expenditures | 1,336 | | 15 | | | — | | | 1,351 | |
(1)Represents transfers, valued on a market price basis, from the refinery to the airline segment for use in airline operations. We determine market price by reference to the market index for the primary delivery location, which is New York Harbor, for jet fuel from the refinery.
(2)Represents value of products delivered under our exchange agreements, as discussed above, determined on a market price basis.
(3)These sales were at or near cost; accordingly, the margin on these sales is de minimis.
(4)Refinery segment operating results, including depreciation and amortization, are included within aircraft fuel and related taxes in our income statement.
NOTE 10. LOSSEARNINGS/(LOSS) PER SHARE
We calculate basic lossearnings/(loss) per share and diluted loss(loss) per share by dividing net lossincome/(loss) by the weighted average number of common shares outstanding, excluding restricted shares. AntidilutiveWe calculate diluted earnings per share by dividing net income by the weighted average number of common shares outstanding plus the dilutive effect of outstanding share-based awards, including stock options, restricted stock awards and warrants. Antidilutive common stock equivalents excluded from the diluted lossearnings per share calculation are not material. The following table shows the computation of basic and diluted lossearnings/(loss) per share:
| | | | | | | | | | | |
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) | | | | |
| | | | | | | | | | | | | | | | | |
Basic and diluted earnings/(loss) per share |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions, except per share data) | 2021 | 2020 | | 2021 | 2020 |
Net income/(loss) | $ | 1,212 | | $ | (5,379) | | | $ | 688 | | $ | (11,630) | |
| | | | | |
Basic weighted average shares outstanding | 637 | | 635 | | | 636 | | 636 | |
Dilutive effect of share-based awards | 4 | | — | | | 5 | | — | |
Diluted weighted average shares outstanding | 641 | | 635 | | | 641 | | 636 | |
| | | | | |
Basic earnings/(loss) per share | $ | 1.90 | | $ | (8.47) | | | $ | 1.08 | | $ | (18.30) | |
Diluted earnings/(loss) per share | $ | 1.89 | | $ | (8.47) | | | $ | 1.07 | | $ | (18.30) | |
Delta Air Lines, Inc. September 2021 March Form 10-Q 1719
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes included in our 2020 Annual Report on Form 10-K.
Our business and operating results for 2021 continue to be significantly impacted by the COVID-19 pandemic. However, as described further below, we have seen improvement in our business duringbeginning in March 2021 and progressing through the MarchSeptember 2021 quarter, which we expect to continue throughout 2021.continue. Given the drastic and unprecedented impact of the pandemic on our operating results in 2020, we believe that for the financial overview discussion below, a comparison of our results in 2021 to 2019 allows for ana better understanding of the full impact of the COVID-19 pandemic and the progress of our recovery. Throughout the remainder of this management's discussion and analysis, we present results for the three and nine months ended September 30, 2021, 2020 and 2019, and our commentary on results of operations, financial conditions and liquidity includes comparisons of 2021 results to both 2020 and 2019 results.2019.
MarchSeptember 2021 Quarter Financial Overview
Our pre-tax lossincome for the MarchSeptember 2021 quarter was $1.5 billion, including the $1.2$1.8 billion benefit related to recognition of a portion of the first payroll support program extensionremaining PSP3 grant during the quarter. This represents a $2.5 billion$415 million decrease in pre-tax income compared to the MarchSeptember 2019 quarter primarily resulting fromdue to a 60% decrease27% reduction in revenue.operating revenue, partially offset by the recognition of the remaining PSP3 grant. Pre-tax loss,income, adjusted (a non-GAAP financial measure) was $2.9 billion,$216 million, a decrease of $3.8$1.8 billion compared to the MarchSeptember 2019 quarter.
Revenue. Compared to the MarchSeptember 2019 quarter, our operating revenuedecreased $6.3$3.4 billion, or 60%27%, due primarily to reduced demand resulting from the COVID-19 pandemic.
Operating Expense. Total operating expense in the MarchSeptember 2021 quarter decreased $3.9$3.5 billion, or 41%34%, compared to the MarchSeptember 2019 quarter, primarily resulting from recognition of the remaining PSP3 grant, lower volume-related expenses, mainly fuel and passenger commissions and other selling expenses, recognition of the first payroll support program extension grantlower salaries and related costs and profit sharing, and significant cost reduction measures taken across all aspects of our operation in response to the COVID-19 pandemic. These decreases were partially offset by an increase in expenses related to refinery sales to third parties, reflected in ancillary business and refinery expense. Total operating expense, adjusted (a non-GAAP financial measure) for the MarchSeptember 2021 quarter decreased $3.1$2.6 billion, or 33%25%, compared to the MarchSeptember 2019 quarter.
Non-Operating Results. Total non-operating expense was $117$673 million in the MarchSeptember 2021 quarter, $43$549 million higher than the MarchSeptember 2019 quarter, primarily due to higher interest expense as a result of our increased debt due to financing arrangements entered into duringin 2020, partially offset bylosses on debt extinguishment and mark-to-market gainslosses on certain of our equity investments.
Cash Flow. Our cash, cash equivalents, short-term investments and aggregate principal amount committed and available to be drawn under our revolving credit facilities ("liquidity") at March 31,as of September 30, 2021 was $16.6$15.8 billion. During the MarchSeptember 2021 quarter, operating activities provided $691 million, which included $2.0 billion from the first payroll support program extension grant.generated $151 million. Also during the quarter, we incurred $60investing activities used $384 million, of investing cash outflows, primarily fromfor capital expenditures, partially offset by net redemptions of short-term investments. Capital expenditures primarily related to the purchase of aircraft, fleet modifications, our airport redevelopment projects the purchaseand technology enhancements. These activities resulted in $463 million of aircraft and fleet modifications, partially offset by the net redemption of short-term investments. These results generated $710 millionofnegative free cash flow (a non-GAAP financial measure) in the MarchSeptember 2021 quarter. Additionally,Also, during the MarchSeptember 2021 quarter we repaid $1.8had cash outflows of approximately $1.6 billion onrelated to repayments of our debt and finance leases, of which $1.5including approximately $1.3 billion wasfor early repayment ofrepayments and the term loan secured by certain of our slots, gates and routes and issued $924 million of debt primarily in connection with the first payroll support program extension.remainder from scheduled maturities.
The above non-GAAP financial measures referenced above for pre-tax loss,income, adjusted, operating expense, adjusted, and free cash flow are defined and reconciled in "Supplemental Information" below.
Delta Air Lines, Inc. September 2021 Form 10-Q 20
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 plan to achieve airline carbon neutrality plan seeks to balance immediate actions (such asincludes the purchase and retirement of carbon offset credits from projects that maintain, protect and expand forests) and long-term solutions (such as well as increased use of sustainable aviation fuel and improved fuel efficiency from fleet renewal and operational initiatives. In the first nine months of 2021, we incurred $69 million of expense related to carbon sequestration technologies). We plan to spend more thanoffset credits. This amount consists of $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 $20as well as an additional $39 million onfor the purchase and retirement of carbon offset credits thatrelated to a portion of our airline segment's 2021 carbon emissions. In September 2021, we purchasedcommitted to setting net zero 2050 and retired duringinterim goals through the March 2021 quarter.Science Based Targets initiative ("SBTi") for our airline operations using recently released SBTi criteria and guidance for the aviation sector.
Delta Air Lines, Inc. September 2021 March Form 10-Q 1821
Item 2. MD&A - Results of Operations
Results of Operations - Three Months Ended March 31,September 30, 2021, 2020 and 2019
Operating Revenue
| | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | 2021 vs. 2020 % Increase (Decrease) | 2021 vs. 2019 % Increase (Decrease) |
(in millions)(1) | 2021 | 2020 | 2019 |
Ticket - Main cabin | $ | 1,399 | | $ | 3,798 | | $ | 4,721 | | | (63) | % | (70) | % |
Ticket - Business cabin and premium products | 878 | | 2,713 | | 3,267 | | | (68) | % | (73) | % |
Loyalty travel awards | 241 | | 543 | | 692 | | | (56) | % | (65) | % |
Travel-related services | 230 | | 515 | | 574 | | | (55) | % | (60) | % |
Total passenger revenue | $ | 2,748 | | $ | 7,569 | | $ | 9,254 | | | (64) | % | (70) | % |
Cargo | 215 | | 152 | | 192 | | | 41 | % | 12 | % |
Other | 1,187 | | 871 | | 1,026 | | | 36 | % | 16 | % |
Total operating revenue | $ | 4,150 | | $ | 8,592 | | $ | 10,472 | | | (52) | % | (60) | % |
| | | | | | |
TRASM (cents) | 10.34 | ¢ | 14.59 | ¢ | 16.78 | ¢ | | (29) | % | (38) | % |
Third-party refinery sales(2) | (1.35) | | — | | (0.08) | | | NM | NM |
Delta Private Jets adjustment(2) | — | | — | | (0.07) | | | NM | (100) | % |
TRASM, adjusted | 9.00 | ¢ | 14.59 | ¢ | 16.63 | ¢ | | (38) | % | (46) | % |
| | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | 2021 vs. 2020 % Increase (Decrease)(2) | 2021 vs. 2019 % Increase (Decrease)(2) |
(in millions)(1) | 2021 | 2020 | 2019 |
Ticket - Main cabin | $ | 3,742 | | $ | 1,057 | | $ | 6,021 | | | 254 | % | (38) | % |
Ticket - Business cabin and premium products | 2,495 | | 577 | | 4,008 | | | 332 | % | (38) | % |
Loyalty travel awards | 544 | | 143 | | 732 | | | 280 | % | (26) | % |
Travel-related services | 410 | | 161 | | 649 | | | 155 | % | (37) | % |
Total passenger revenue | $ | 7,191 | | $ | 1,938 | | $ | 11,410 | | | 271 | % | (37) | % |
Cargo | 262 | | 142 | | 189 | | | 85 | % | 39 | % |
Other | 1,701 | | 982 | | 961 | | | 73 | % | 77 | % |
Total operating revenue | $ | 9,154 | | $ | 3,062 | | $ | 12,560 | | | 199 | % | (27) | % |
| | | | | | |
TRASM (cents) | 16.93 | ¢ | 10.82 | ¢ | 16.58 | ¢ | | 56 | % | 2 | % |
Third-party refinery sales(3) | (1.61) | | (1.47) | | (0.01) | | | 10 | % | NM |
Delta Private Jets adjustment(3) | — | | — | | (0.06) | | | — | % | (100) | % |
TRASM, adjusted | 15.31 | ¢ | 9.35 | ¢ | 16.51 | ¢ | | 64 | % | (7) | % |
(1)This reconciliationTotal amounts in the table above may not calculate exactly due to rounding.
(2)Certain variances are labeled as not meaningful ("NM") throughout management's discussion and analysis.
(3)For additional information on adjustments to TRASM, see "Supplemental Information" below.
Operating Revenue
Compared to the MarchSeptember 2019 quarter, our operating revenue decreased $6.3$3.4 billion, or 60%27%, due primarily to reduced demand resulting from the COVID-19 pandemic. The decreasedecline in operating revenue, on a 36%29% decrease in capacity, resulted in a 38% decrease2% increase in total revenue per available seat mile ("TRASM") and a 46%7% decrease in TRASM, adjusted compared to the MarchSeptember 2019 quarter. The
Our operating revenue declinesincreased $6.1 billion compared to the MarchSeptember 2020 quarter are attributabledue to these same factors, with the impactcontinued recovery in demand that began in the September 2020 quarter, following the depth of the COVID-19 pandemic largely limited toimpact in the month of MarchJune 2020 quarter. The increase in 2020.operating revenue, which outpaced the 91% increase in capacity, resulted in a 56% increase in TRASM and a 64% increase in TRASM, adjusted.
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, including third-party refinery sales recorded in other revenue, during the March 2021 quarter.each period.
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, butremains uncertain; however, with continued distribution of effective vaccines and easing of travel advisories and restrictions, we believe customer confidence will continue to grow, leading to increased demand for the remainder of 2021, subject to seasonality-driven impacts. The September 2021 quarter started with July monthly revenue increasing over the prior month at a higher rate than our historical seasonality-based change. However, we experienced a temporary pause in demand in August and early September due to a rise in COVID-19 cases attributable to a variant of the COVID-19 virus. We expect domestic leisure travel to remain near 2019 levels, while we are experiencing a delay in the spring and summerreturn of 2021. The increase in passenger revenue from February 2021business travel as many companies are pausing or delaying return to March 2021 is indicative of this increasing demand.office plans. We expect widespread vaccinationcontinue to result in sustained demand improvement going forward, with recovery ofexpect domestic demand preceding the recovery ofto lead international demand recovery. We believe international demand recovery will continue to be uneven in most regions.the remainder of 2021 and the beginning of 2022. We continue to monitor risks to the pace of recovery from COVID-19 variants, the impact of vaccine programs and travel advisories and restrictions. We are planning for our system capacity to be approximately 20% lower in the December 2021 quarter than the December 2019 quarter.
We have historically generated cargo revenuesrevenue 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 MarchSeptember 2021 quarter compared to the March 2020 and MarchSeptember 2019 quarters, in contrastquarter. Compared to the decreases experiencedSeptember 2020 quarter, our cargo revenue in passenger revenue.the September 2021 quarter increased due to continued higher yields as well as higher volume.
Delta Air Lines, Inc. September 2021 March Form 10-Q 1922
Item 2. MD&A - Results of Operations
Passenger Revenue by Geographic Region
| | | Increase (Decrease) vs. Three Months Ended March 31, 2020 | | Increase (Decrease) vs. Three Months Ended September 30, 2020 |
(in millions) | (in millions) | Three Months Ended March 31, 2021 | Passenger Revenue | RPMs (Traffic) | ASMs (Capacity) | Passenger Mile Yield | PRASM | Load Factor | (in millions) | Three Months Ended September 30, 2021 | Passenger Revenue | RPMs (Traffic) | ASMs (Capacity) | Passenger Mile Yield | PRASM | Load Factor |
Domestic | Domestic | $ | 2,280 | | (59) | % | (50) | % | (27) | % | (18) | % | (44) | % | (23) | | pts | Domestic | $ | 5,759 | | 250 | % | 242 | % | 74 | % | 2 | % | 101 | % | 41 | | pts |
Atlantic | Atlantic | 142 | | (83) | % | (84) | % | (63) | % | 7 | % | (53) | % | (40) | | pts | Atlantic | 730 | | 455 | % | 559 | % | 179 | % | (16) | % | 99 | % | 41 | | pts |
Latin America | Latin America | 264 | | (65) | % | (53) | % | (6) | % | (27) | % | (63) | % | (40) | | pts | Latin America | 564 | | 482 | % | 469 | % | 226 | % | 2 | % | 79 | % | 34 | | pts |
Pacific | Pacific | 62 | | (84) | % | (91) | % | (58) | % | 75 | % | (61) | % | (60) | | pts | Pacific | 138 | | 121 | % | 73 | % | 50 | % | 28 | % | 47 | % | 4 | | pts |
Total | Total | $ | 2,748 | | (64) | % | (58) | % | (32) | % | (13) | % | (47) | % | (28) | | pts | Total | $ | 7,191 | | 271 | % | 273 | % | 91 | % | — | % | 94 | % | 39 | | pts |
| | | Increase (Decrease) vs. Three Months Ended March 31, 2019 | | Increase (Decrease) vs. Three Months Ended September 30, 2019 |
(in millions) | (in millions) | Three Months Ended March 31, 2021 | Passenger Revenue | RPMs (Traffic) | ASMs (Capacity) | Passenger Mile Yield | PRASM | Load Factor | (in millions) | Three Months Ended September 30, 2021 | Passenger Revenue | RPMs (Traffic) | ASMs (Capacity) | Passenger Mile Yield | PRASM | Load Factor |
Domestic | Domestic | $ | 2,280 | | (66) | % | (57) | % | (27) | % | (21) | % | (53) | % | (34) | | pts | Domestic | $ | 5,759 | | (28) | % | (20) | % | (16) | % | (10) | % | (15) | % | (4) | | pts |
Atlantic | Atlantic | 142 | | (87) | % | (87) | % | (68) | % | 1 | % | (59) | % | (47) | | pts | Atlantic | 730 | | (65) | % | (65) | % | (56) | % | 1 | % | (20) | % | (18) | | pts |
Latin America | Latin America | 264 | | (69) | % | (59) | % | (11) | % | (26) | % | (65) | % | (46) | | pts | Latin America | 564 | | (16) | % | (15) | % | (7) | % | (1) | % | (10) | % | (8) | | pts |
Pacific | Pacific | 62 | | (89) | % | (94) | % | (69) | % | 77 | % | (65) | % | (68) | | pts | Pacific | 138 | | (80) | % | (90) | % | (67) | % | 101 | % | (39) | % | (60) | | pts |
Total | Total | $ | 2,748 | | (70) | % | (65) | % | (36) | % | (15) | % | (54) | % | (38) | | pts | Total | $ | 7,191 | | (37) | % | (36) | % | (29) | % | (2) | % | (12) | % | (9) | | pts |
Passenger revenue decreased $4.8 billion, or 64%, compared toIn the March 2020 quarter. Passenger revenue per available seat mile ("PRASM") decreased 47%, and passenger mile yield decreased 13% on 32% lower capacity. Load factor decreased 28 points from the March 20202021 quarter, to 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 2021purchased or purchasedexpiring in 2021 to December 31, 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 AmericaAdditionally, with the exception of Basic Economy tickets.tickets, we eliminated change fees for tickets originating in North America and waived change fees for those originating outside of North America. We also implemented a waiver that allows Basic Economy tickets purchased for travel in 2021, which are normally non-changeable, to be changed without paying a fee regardless of origin or destination. We do not expect these policy changesthe updated change fee policies to materially affect our revenue in future periods.periods; however, our estimates of revenue that will be recognized for unused tickets may vary in future periods due to the extension of the validity of passenger tickets and travel credits.
Domestic
PassengerDomestic passenger unit revenue related to our domestic region("PRASM") for the MarchSeptember 2021 quarter decreased 53%15% with capacity down 27%16% compared to the MarchSeptember 2019 quarter as a result of reduced demand due to the COVID-19 pandemic and our policy to block middle seats on flights through April 30, 2021.pandemic. The revenue declineincrease in the September 2021 quarter compared to the MarchSeptember 2020 quarter is attributable to these same factors, with the impactlow levels of capacity and demand during the pandemic largely limitedSeptember 2020 quarter due to the month of MarchCOVID-19 pandemic and the ongoing recovery in 2020.the September 2021 quarter.
We are planning for improvement toThe September 2021 quarter began with domestic leisure demand near September 2019 quarter levels. This strong demand moderated slightly in the demand environment, primarily from leisure customers, to continue throughout 2021, though still lower than the comparable periods in 2019. Throughout the lattersecond half of the March 2021 quarter we have seendue to a rise in COVID-19 cases attributable to a variant of the virus. However, as cases begin to decline, leisure customerand business bookings continue to improve, ending the quarter down approximately only 25% from March 2019 quarter levels.are increasing. We also remain optimistic about the ultimate recovery of business traveltravel; however, in the September 2021 quarter we experienced a pause in the recovery of this demand. We expect this demand to improve modestly in the December 2021 quarter but accelerate in the first half of 2022 as more corporate offices reopen; we are, however, unable to fully predict the timing or extentpace of that recovery. As a result, we are planning for our domestic capacity to be approximately 20% lower in the June 2021 quarter than the June 2019 quarter.
Delta Air Lines, Inc. 2021 March Form 10-Q 20
Item 2. MD&A - Results of Operations
International
PassengerInternational passenger revenue related to our international regionsfor the September 2021 quarter decreased 81%58% with capacity down 51%50% compared to the MarchSeptember 2019 quarter, with similar declines comparedquarter. Compared to the MarchSeptember 2020 quarter.quarter passenger revenue has increased as travel to certain destinations has resumed or increased. The reductionsdecreases in revenue and capacity presented incompared to the tables above wereSeptember 2019 quarter resulted from continued reduced demand, including as a result of continued reduced demand and government travel directives and quarantines significantly limiting or suspending air travel due to the COVID-19 pandemic. Additionally, while some countries have removed or eased travel restrictions, many countries have implementedmaintained or reinstituted international testing requirements and travel restrictions, which has slowedhave restrained demand in the short-term but isare expected to enable the long-term recovery of international air travel.
Delta Air Lines, Inc. September 2021 Form 10-Q 23
Item 2. MD&A - Results of Operations
We are monitoring the Biden administration's recent announcement that will lift travel restrictions on all fully vaccinated foreign visitors to the United States beginning in November 2021. This action will make travel to the U.S. by many foreign nationals possible for the first time in 18 months. Despite this policy change, we expect thisthe significantly lower international demand environment to continue for an extended period,at least into early 2022, with improvement expected after the recovery inpace continuing to trail domestic travel. As a result, we are planning for our international capacity to be approximately 50% lower in the June 2021 quarter than the June 2019 quarter. In each of the international regions, we continue to monitor government travel directives and customer demand and will continue to adjust flight schedules accordingly.
The Atlantic and Pacific regions continue to be the most impacted by the restrictions described above. In December 2020,However, in the September 2021 quarter, we becamehave continued our service to certain countries in the first U.S. airlineAtlantic region based on their lifting or easing of travel restrictions. These countries include Croatia, France, Germany, Greece, Iceland, Italy, the Netherlands, Portugal and Spain. Travel in the Pacific region is largely limited to offer flights between the U.S. and Europe that allow customers to avoid quarantine upon arrival after testing negative for the virus prior toessential travel, and upon arrival in Amsterdamwe expect only small demand improvements until vaccine distribution improves 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.government restrictions ease.
The Latin America region has shown the most recovery of the international regions, with improvingcontinued demand improvement for leisure destinations in the Caribbean, Mexico and Central America. Capacity in the Latin America region in the September 2021 quarter has increased to near September 2019 quarter levels and as demand continues to return we expect revenue to return to those levels as well. We expect thatthis trend to continue intothrough the Juneremainder of 2021 quarter with the recovery in the Atlantic and Pacific regions lagging behind Latin America.
Other Revenue
| | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | 2021 vs. 2020 % Increase (Decrease) | 2021 vs. 2019 % Increase (Decrease) |
(in millions) | 2021 | 2020 | 2019 |
Ancillary businesses and refinery | $ | 726 | | $ | 223 | | $ | 369 | | | NM | 97 | % |
Loyalty program | 368 | | 474 | | 474 | | | (22) | % | (22) | % |
Miscellaneous | 93 | | 174 | | 183 | | | (47) | % | (49) | % |
Total other revenue | $ | 1,187 | | $ | 871 | | $ | 1,026 | | | 36 | % | 16 | % |
| | | | | | |
| | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | 2021 vs. 2020 % Increase (Decrease) | 2021 vs. 2019 % Increase (Decrease) |
(in millions) | 2021 | 2020 | 2019 |
Refinery | $ | 872 | | $ | 417 | | $ | 6 | | | 109 | % | NM |
Loyalty program | 453 | | 343 | | 485 | | | 32 | % | (7) | % |
Ancillary businesses | 215 | | 155 | | 285 | | | 39 | % | (25) | % |
Miscellaneous | 161 | | 67 | | 185 | | | 140 | % | (13) | % |
Total other revenue | $ | 1,701 | | $ | 982 | | $ | 961 | | | 73 | % | 77 | % |
| | | | | | |
Ancillary Businesses and Refinery. Ancillary businesses and refinery includesThis represents refinery sales to third parties, aircraft maintenance services we provide to third parties and our vacation wholesale operations. Refineryparties. These sales, to third parties, which are at or near cost, increased approximately $540$455 million and $490$866 million compared to the MarchSeptember 2020 and MarchSeptember 2019 quarters, respectively. The increase in third-party refinery sales compared to the September 2019 quarter resulted from the refinery's shift to producing and selling more non-jet fuel products due to the decline in demand for jet fuel.fuel compared to pre-pandemic levels. The increase compared to the September 2020 quarter was driven by higher pricing during the September 2021 quarter, with lower production and demand for both jet and non-jet fuel products in the September 2020 quarter. See "Refinery Segment" below for additional details on the refinery's operations, including third-party refinery sales was partially offset by declinesrecorded in other 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.during each period.
Loyalty Program. Loyalty program revenues relate to brand usage by third parties and other performance obligations embedded in miles sold, including redemption of miles for non-travel awards. These revenues are mainly driven by customer spend on American Express cards and new cardholder acquisitions. Revenues from our relationship with American Express increased in the September 2021 quarter compared to the September 2020 period and were effectively flat compared to the September 2019 period. During the September 2021 quarter, co-brand card spend surpassed September 2019 levels and card acquisitions were nearly recovered to September 2019 levels.
Ancillary Businesses. Ancillary businesses revenue includes aircraft maintenance services we provide to third parties and our vacation wholesale operations. Compared to the September 2019 quarter, revenue from aircraft maintenance services we provide to third parties decreased due to the reduction in flights operated worldwide. Compared to the September 2020 quarter, these revenues increased due to higher levels of flying. The September 2019 quarter results also included $47 million of revenue from Delta Private Jets, which declined at a less severe rate than air travel.was combined with Wheels Up in January 2020 and is no longer reflected in ancillary businesses.
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 MarchSeptember 2019 quartersquarter due to the impact of, and our response to, the COVID-19 pandemic, including reduced capacity andcapacity. However, compared to the temporary closureSeptember 2020 quarter, these transactions have increased due to the general recovery in our business that continued to materialize in the September 2021 quarter. Our full network of certain lounges. We expect to reopen nearly alllounges was reopened by the end of our lounges by July 2021.
Delta Air Lines, Inc. September 2021 March Form 10-Q 2124
Item 2. MD&A - Results of Operations
Operating Expense
| | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | 2021 vs. 2020 % Increase (Decrease) | 2021 vs. 2019 % Increase (Decrease) |
(in millions) | 2021 | 2020 | 2019 |
Salaries and related costs | $ | 2,202 | | $ | 2,862 | | $ | 2,732 | | | (23) | % | (19) | % |
Aircraft fuel and related taxes | 1,017 | | 1,595 | | 1,978 | | | (36) | % | (49) | % |
Ancillary businesses and refinery | 706 | | 219 | | 351 | | | NM | NM |
Contracted services | 519 | | 748 | | 709 | | | (31) | % | (27) | % |
Landing fees and other rents | 493 | | 550 | | 524 | | | (10) | % | (6) | % |
Depreciation and amortization | 492 | | 678 | | 615 | | | (27) | % | (20) | % |
Regional carrier expense | 401 | | 577 | | 538 | | | (31) | % | (25) | % |
Aircraft maintenance materials and outside repairs | 294 | | 469 | | 476 | | | (37) | % | (38) | % |
Passenger service | 118 | | 273 | | 288 | | | (57) | % | (59) | % |
Passenger commissions and other selling expenses | 110 | | 398 | | 474 | | | (72) | % | (77) | % |
Aircraft rent | 104 | | 100 | | 102 | | | 4 | % | 2 | % |
Restructuring charges | (44) | | — | | — | | | NM | NM |
Government grant recognition | (1,186) | | — | | — | | | NM | NM |
Profit sharing | — | | — | | 220 | | | NM | (100) | % |
Other | 322 | | 533 | | 445 | | | (40) | % | (28) | % |
Total operating expense | $ | 5,548 | | $ | 9,002 | | $ | 9,452 | | | (38) | % | (41) | % |
| | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | 2021 vs. 2020 % Increase (Decrease) | 2021 vs. 2019 % Increase (Decrease) |
(in millions) | 2021 | 2020 | 2019 |
Salaries and related costs | $ | 2,566 | | $ | 2,012 | | $ | 2,976 | | | 28 | % | (14) | % |
Aircraft fuel and related taxes | 1,552 | | 486 | | 2,239 | | | 219 | % | (31) | % |
Ancillary businesses and refinery | 1,079 | | 561 | | 279 | | | 92 | % | 287 | % |
Contracted services | 634 | | 419 | | 760 | | | 51 | % | (17) | % |
Depreciation and amortization | 501 | | 545 | | 631 | | | (8) | % | (21) | % |
| | | | | | |
Landing fees and other rents | 524 | | 458 | | 566 | | | 14 | % | (7) | % |
Regional carrier expense | 453 | | 290 | | 543 | | | 56 | % | (17) | % |
Aircraft maintenance materials and outside repairs | 433 | | 106 | | 424 | | | 308 | % | 2 | % |
Passenger commissions and other selling expenses | 308 | | 100 | | 597 | | | 208 | % | (48) | % |
Passenger service | 226 | | 92 | | 360 | | | 146 | % | (37) | % |
Aircraft rent | 105 | | 99 | | 110 | | | 6 | % | (5) | % |
Restructuring charges | 33 | | 5,345 | | — | | | (99) | % | NM |
Government grant recognition | (1,822) | | (1,315) | | — | | | 39 | % | NM |
Profit sharing | — | | — | | 517 | | | — | % | (100) | % |
Other | 357 | | 250 | | 487 | | | 43 | % | (27) | % |
Total operating expense | $ | 6,949 | | $ | 9,448 | | $ | 10,489 | | | (26) | % | (34) | % |
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 decreasedremain significantly lower in the MarchSeptember 2021 quarter compared tothan in the March 2020 andSeptember 2019 quarters.quarter. Operating expense decreased primarily due to recognition of the voluntary separation programs described below, the manyremaining PSP3 grant, lower volume-related expenses, mainly fuel and passenger commissions and other selling expenses, lower salaries and related costs and profit sharing, and significant cost reduction measures and programs implementedtaken across all aspects of our operation in response to the COVID-19 pandemic andpandemic. During the reduction in volume and selling-related costs. DuringSeptember 2021 quarter, as distribution of effective vaccines continues,continued, travel restrictions and advisories easeeased and customer confidence continuescontinued to grow despite the negative impact of a variant of the COVID-19 virus, we expectsaw revenue and capacity to return and related operating expense toline items 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 fully restored.
The discussion below is focused largely on the changes in certain operating expense line items compared to the MarchSeptember 2020 and MarchSeptember 2019 quarters that were not primarily driven by the reductionchange in capacity or revenue. These include many of thewhat are expected to be structural cost reduction measures and programs we implemented in response to the COVID-19 pandemic.
Salaries and Related Costs. The decrease in salaries and related costs compared to the March 2020 and March 2019 quarters is primarily due to actionsActions taken as a result of decreased demand for air travel due to the COVID-19 pandemic.pandemic had a significant impact on salaries and related costs, leading to a decrease compared to the September 2019 quarter. In the second half of 2020, approximately 18,000 employees elected to participate in voluntary separation programs, reducingwhich initially reduced our workforce by approximately 20%. Additionally,, though some of those positions have subsequently been filled. Since the beginning of 2021, we have hired approximately 13,0008,000 employees took voluntary unpaid leaves of absence during the March 2021 quarter.in certain areas, including flight operations and reservations and customer care, in order to support our operations as demand and capacity return.
Beginning in March 2020 and continuing through December 2020, salaries were reduced by 100% for our CEO and 50% for our other officers. In addition, work hours were reduced by 25% for all other management and most front-line employee work groups. On January 1, 2021, employees were restored to full work hours and we plan to recallhave recalled approximately 1,700 pilots between Marchfrom inactive status back to active service. Additionally, approximately 40,000 employees took voluntary unpaid leaves of absence during the September 2020 quarter. These actions resulted in higher salaries and October that had been placed on inactive status.
related costs in the September 2021 quarter compared to the September 2020 quarter.
Delta Air Lines, Inc. September 2021 March Form 10-Q 2225
Item 2. MD&A - Results of Operations
Aircraft Fuel and Related Taxes. Fuel expense decreased$961 $687 million compared to the MarchSeptember 2019 quarter primarily due to a 43%32% decrease in consumption, andpartially offset by a 18% decrease in the market price of jet fuel. Fuel expense decreased $578 million compared to the March 2020 quarter primarily due to a 38% decrease in consumption and an 11% decrease1% increase in the market price of jet fuel. Consumption decreased ondue to a combination of reduced capacity and improved fuel efficiency on an available seat mile basis.
Fuel expense increased $1.1 billion compared to the September 2020 quarter primarily due to a 102% increase in consumption on a comparable increase in capacity, and a 75% increase in the market price of jet fuel.
Additionally, during the MarchSeptember 2021 quarter, we purchased and retired approximately $20$29 million of carbon offset credits, which relate to approximately 60%a portion of the 13 million metric tons of2021 carbon emissions generated by our airline segment from March 1 to December 31, 2020.segment. In the table below, these costs are shown in environmental sustainability impact.
The table below also shows the impact of hedging and the refinery on fuel expense and average price per gallon.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
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) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Fuel expense and average price per gallon |
| Average Price Per Gallon |
| Three Months Ended September 30, | 2021 vs. 2019 Increase (Decrease) | Three Months Ended September 30, | 2021 vs. 2019 Increase (Decrease) |
(in millions, except per gallon data) | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 |
Fuel purchase cost(1) | $ | 1,601 | | $ | 449 | | $ | 2,313 | | $ | (712) | | $ | 2.03 | | $ | 1.16 | | $ | 2.00 | | $ | 0.03 | |
Environmental sustainability impact | 29 | | — | | — | | 29 | | 0.04 | | — | | — | | 0.04 | |
Fuel hedge impact | 19 | | 9 | | (25) | | 44 | | 0.02 | | 0.02 | | (0.02) | | 0.04 | |
Refinery segment impact | (97) | | 28 | | (49) | | (48) | | (0.12) | | 0.07 | | (0.04) | | (0.08) | |
Total fuel expense | $ | 1,552 | | $ | 486 | | $ | 2,239 | | $ | (687) | | $ | 1.97 | | $ | 1.25 | | $ | 1.94 | | $ | 0.03 | |
(1)Market price for jet fuel at airport locations, including related taxes and transportation costs.
Ancillary Businesses and Refinery. Ancillary businesses and refinery includes expenses associated with refinery sales to third parties, aircraft maintenance services we provide to third parties and our vacation wholesale operations. Increased expenses were primarily related to refinery sales to third parties, which are at or near cost. 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$455 million and approximately $490$866 million compared to the MarchSeptember 2020 and MarchSeptember 2019 quarters, respectively. The increase in third-party refinery costssales compared to the September 2019 quarter resulted from the refinery's shift to producing and selling more non-jet fuel products due to the decline in demand for jet fuel compared to pre-pandemic levels. The increase compared to the September 2020 quarter was partially offsetdriven by higher pricing during the September 2021 quarter, with lower production and demand for both jet and non-jet fuel products in the September 2020 quarter. Compared to the September 2019 quarter, expenses related to aircraft maintenance services we provide to third parties decreased due to the reduction in flights operated worldwide.worldwide; however, compared to the September 2020 quarter these expenses increased due to higher levels of flying. In addition, $44$43 million of costs related to services performed by Delta Private Jets in the MarchSeptember 2019 quarter were recorded in ancillary businesses and refinery prior to the combination of that business with Wheels Up in January 2020.
Depreciation and Amortization. Depreciation and amortization decreased compared to the September 2020 and September 2019 quarters primarily due to the aircraft that were retired or impaired during 2020.
Regional Carrier Expense. Regional carrier expense decreased compared to the March 2020 and MarchSeptember 2019 quartersquarter due to lower utilization of these carriers as a result of the overall reduced capacity.capacity and increased compared to the September 2020 quarter due to an increase in utilization as a result of the increased demand discussed above.
We previously allocated certain costs (such as landing fees and other rents, salaries and related costs and contracted services) to regional carrier expense in our income statement based on relevant statistics (such as passenger counts). Beginning in the March 2021 quarter we are no longerceased performing this allocation and have reclassified the costs presented in prior periods to align with this presentation. This reclassification better reflects the nature of, and how management views, these regional carrier related expenses. This allocation was approximately $900 million in 2020, including $325approximately $200 million in the MarchSeptember 2020 quarter, and $1.4 billion in 2019, including $355approximately $360 million in the MarchSeptember 2019 quarter. The remaining amounts in regional carrier expense represent the accrual of payments to our regional carriers under capacity purchase agreements and the expenses of our wholly owned regional subsidiary, Endeavor Air, Inc.
Aircraft Maintenance Materials and Outside Repairs. Maintenance expense increased compared to both the September 2019 and September 2020 quarters as we returned aircraft to service and to support our operational reliability. The increase compared to the September 2020 quarter was particularly pronounced due to the significantly reduced capacity during the September 2020 quarter and the large number of aircraft we had parked during that time.
Delta Air Lines, Inc. September 2021 Form 10-Q 26
Item 2. MD&A - Results of Operations
Aircraft Rent. Most aircraft operating lease expenses are recorded in aircraft rent and are contractually fixed. Therefore, the change in aircraft rent did not decline aswas more muted than our other operating expense line items, didwhen compared to the MarchSeptember 2019 and September 2020 and March 2019 quarters.
Restructuring charges.Charges. During 2020, we recorded restructuring charges including certain accruals,for items such as fleet impairments and voluntary early retirement and separation programs following strategic business decisions in response to the COVID-19 pandemic. In the MarchSeptember 2021 quarter, we recognized $44$33 million of net adjustments to increase certain of those restructuring charges, representing changes in our estimates.
Government Grant Recognition. In JanuaryDuring the nine months ended September 30, 2021, we entered intoreceived a total of $6.4 billion under payroll support program extension agreementagreements with the U.S. Department of the Treasury. In the March 2021 quarter,Treasury, which we received $2.9 billion in payroll support payments, which must be usedwere required to use exclusively for the payment of employee wages, salaries and benefits. The support payments included a grant of $2.0grants totaling $4.5 billion that is beingwere recognized as contra-expense in 2021 over the period that the funds are expected to benefit. We expect towere used. Following the recognition of $2.7 billion during the six months ended June 30, 2021, we fully recognizerecognized the grant proceeds from this first payroll support program extension by the endremaining $1.8 billion of the JunePSP3 grant during the three months ended September 30, 2021. The amount recognized in the September 2021 quarter.
Delta Air Lines, Inc. 2021 March Form 10-Q 23
Item 2. MD&A - Results of Operations
We additionally expectquarter exceeded the amount recognized from PSP1 during the September 2020 quarter due 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 recognizedincrease in eligible salaries and related costs, as 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.discussed above. See Note 5 of the Notes to the Condensed Consolidated Financial Statements for additional information on the payroll support program extensions.
Delta Air Lines, Inc. September 2021 Form 10-Q 27
Item 2. MD&A - Results of Operations
Results of Operations - Nine Months Ended September 30, 2021, 2020 and 2019
Operating Revenue | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | 2021 vs. 2020 % Increase (Decrease) | 2021 vs. 2019 % Increase (Decrease) |
(in millions)(1) | 2021 | 2020 | 2019 |
Ticket - Main cabin | $ | 7,939 | | $ | 5,229 | | $ | 16,680 | | | 52 | % | (52) | % |
Ticket - Business cabin and premium products | 5,128 | | 3,483 | | 11,306 | | | 47 | % | (55) | % |
Loyalty travel awards | 1,213 | | 731 | | 2,174 | | | 66 | % | (44) | % |
Travel-related services | 998 | | 742 | | 1,872 | | | 35 | % | (47) | % |
Total passenger revenue | $ | 15,278 | | $ | 10,185 | | $ | 32,032 | | | 50 | % | (52) | % |
Cargo | 728 | | 403 | | 567 | | | 81 | % | 28 | % |
Other | 4,423 | | 2,534 | | 2,969 | | | 75 | % | 49 | % |
Total operating revenue | $ | 20,429 | | $ | 13,122 | | $ | 35,568 | | | 56 | % | (43) | % |
| | | | | | |
TRASM (cents) | 14.31 | ¢ | 13.42 | ¢ | 16.94 | ¢ | | 7 | % | (16) | % |
Third-party refinery sales(2) | (1.53) | | (0.73) | | (0.05) | | | 110 | % | NM |
Delta Private Jets Adjustment | — | | — | | (0.07) | | | — | % | (100) | % |
TRASM, adjusted | 12.78 | ¢ | 12.70 | ¢ | 16.83 | ¢ | | 1 | % | (24) | % |
(1)Total amounts in the table above may not calculate exactly due to rounding.
(2)For additional information on adjustments to TRASM, see "Supplemental Information" below.
Unless otherwise discussed below, the changes in operating revenue line items, as well as the underlying reasons for these changes, compared to the nine months ended September 30, 2020 and September 30, 2019, respectively, are consistent with the discussion above under Results of Operations - Three Months Ended September 30, 2021, 2020 and 2019.
Operating Revenue
Compared to the nine months ended September 30, 2019, our operating revenue decreased $15.1 billion, or 43%, due to reduced demand resulting from the COVID-19 pandemic. The decrease in operating revenue, on a 32% decrease in capacity, resulted in a 16% decrease in TRASM and a 24% decrease in TRASM, adjusted compared to the nine months ended September 30, 2019.
Compared to the nine months ended September 30, 2020, our operating revenue increased $7.3 billion, or 56%, due to increased demand in 2021 compared to 2020. The increase in operating revenue, on a 46% increase in capacity, generated a 7% increase in TRASM and a 1% increase in TRASM, adjusted compared to the nine months ended September 30, 2020.
See "Refinery Segment" below for additional details on the refinery's operations, including third-party refinery sales recorded in other revenue, during each period.
Passenger Revenue by Geographic Region | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Increase (Decrease) vs. Nine Months Ended September 30, 2020 |
(in millions) | Nine Months Ended September 30, 2021 | Passenger Revenue | RPMs (Traffic) | ASMs (Capacity) | Passenger Mile Yield | PRASM | Load Factor |
Domestic | $ | 12,517 | | 60 | % | 80 | % | 47 | % | (11) | % | 9 | % | 13 | | pts |
Atlantic | 1,160 | | 14 | % | 16 | % | 29 | % | (2) | % | (11) | % | (6) | | pts |
Latin America | 1,313 | | 49 | % | 70 | % | 100 | % | (12) | % | (25) | % | (11) | | pts |
Pacific | 288 | | (40) | % | (66) | % | (4) | % | 79 | % | (37) | % | (39) | | pts |
Total | $ | 15,278 | | 50 | % | 62 | % | 46 | % | (7) | % | 3 | % | 6 | | pts |
Delta Air Lines, Inc. September 2021 Form 10-Q 28
Item 2. MD&A - Results of Operations
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Increase (Decrease) vs. Nine Months Ended September 30, 2019 |
(in millions) | Nine Months Ended September 30, 2021 | Passenger Revenue | RPMs (Traffic) | ASMs (Capacity) | Passenger Mile Yield | PRASM | Load Factor |
Domestic | $ | 12,517 | | (45) | % | (35) | % | (20) | % | (16) | % | (31) | % | (16) | | pts |
Atlantic | 1,160 | | (77) | % | (77) | % | (63) | % | (1) | % | (37) | % | (31) | | pts |
Latin America | 1,313 | | (43) | % | (35) | % | (8) | % | (11) | % | (37) | % | (25) | | pts |
Pacific | 288 | | (85) | % | (92) | % | (68) | % | 92 | % | (53) | % | (65) | | pts |
Total | $ | 15,278 | | (52) | % | (48) | % | (32) | % | (8) | % | (30) | % | (20) | | pts |
Domestic
Domestic passenger unit revenue for the nine months ended September 30, 2021 decreased 31% with capacity down 20% compared to the nine months ended September 30, 2019 as a result of reduced demand due to the COVID-19 pandemic and our policy to block middle seats on flights through April 30, 2021. The revenue increase in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 is attributable to the low levels of capacity and demand during the prior year period due to the COVID-19 pandemic and the ongoing recovery in the nine months ended September 30, 2021.
International
International passenger revenue for the nine months ended September 30, 2021 decreased 70% with capacity down 52% compared to the nine months ended September 30, 2019. Compared to the nine months ended September 30, 2020, international passenger revenue increased 16% with an increase in capacity of 43%. The underlying reasons for these changes are consistent with the discussion above under Results of Operations - Three Months Ended September 30, 2021, 2020 and 2019.
Other Revenue | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | 2021 vs. 2020 % Increase (Decrease) | 2021 vs. 2019 % Increase (Decrease) |
(in millions) | 2021 | 2020 | 2019 |
Refinery | $ | 2,189 | | $ | 709 | | $ | 94 | | | 209 | % | NM |
Loyalty program | 1,260 | | 1,086 | | 1,443 | | | 16 | % | (13) | % |
Ancillary businesses | 586 | | 476 | | 896 | | | 23 | % | (35) | % |
Miscellaneous | 388 | | 263 | | 536 | | | 48 | % | (28) | % |
Total other revenue | $ | 4,423 | | $ | 2,534 | | $ | 2,969 | | | 75 | % | 49 | % |
Refinery. This represents refinery sales to third parties. These sales, which are at or near cost, increased by $1.5 billion and $2.1 billion compared to the nine months ended September 30, 2020 and September 30, 2019, respectively. See "Refinery Segment" below for additional details on the refinery's operations, including third-party refinery sales recorded in other revenue, during each period.
Ancillary Businesses. Ancillary businesses revenue includes aircraft maintenance services we provide to third parties and our vacation wholesale operations. Results for the nine months ended September 30, 2019 included approximately $150 million of revenue from Delta Private Jets, which was combined with Wheels Up in January 2020 and is no longer reflected in ancillary businesses.
Delta Air Lines, Inc. September 2021 Form 10-Q 29
Item 2. MD&A - Results of Operations
Operating Expense | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | 2021 vs. 2020 % Increase (Decrease) | 2021 vs. 2019 % Increase (Decrease) |
(in millions) | 2021 | 2020 | 2019 |
Salaries and related costs | $ | 7,096 | | $ | 7,000 | | $ | 8,555 | | | 1 | % | (17) | % |
Aircraft fuel and related taxes | 4,056 | | 2,453 | | 6,508 | | | 65 | % | (38) | % |
Ancillary businesses and refinery | 2,724 | | 1,181 | | 945 | | | 131 | % | 188 | % |
Contracted services | 1,723 | | 1,536 | | 2,200 | | | 12 | % | (22) | % |
Depreciation and amortization | 1,494 | | 1,813 | | 1,960 | | | (18) | % | (24) | % |
Landing fees and other rents | 1,477 | | 1,430 | | 1,638 | | | 3 | % | (10) | % |
Regional carrier expense | 1,258 | | 1,204 | | 1,622 | | | 4 | % | (22) | % |
Aircraft maintenance materials and outside repairs | 1,014 | | 618 | | 1,334 | | | 64 | % | (24) | % |
Passenger commissions and other selling expenses | 640 | | 548 | | 1,668 | | | 17 | % | (62) | % |
Passenger service | 520 | | 456 | | 988 | | | 14 | % | (47) | % |
Aircraft rent | 313 | | 295 | | 318 | | | 6 | % | (2) | % |
Restructuring charges | (3) | | 7,798 | | — | | | (100) | % | NM |
Government grant recognition | (4,512) | | (2,595) | | — | | | 74 | % | NM |
Profit sharing | — | | — | | 1,256 | | | — | % | (100) | % |
Other | 1,006 | | 996 | | 1,357 | | | 1 | % | (26) | % |
Total operating expense | $ | 18,806 | | $ | 24,733 | | $ | 30,349 | | | (24) | % | (38) | % |
Unless otherwise discussed below, the changes in operating expense line items, as well as the underlying reasons for these changes, compared to the nine months ended September 30, 2020 and September 30, 2019, respectively, are consistent with the discussion above under Results of Operations - Three Months Ended September 30, 2021, 2020 and 2019.
Aircraft Fuel and Related Taxes. Fuel expense decreased $2.5 billion compared to the nine months ended September 30, 2019 primarily due to a 37% decrease in consumption and an 8% decrease in the market price of jet fuel. Consumption decreased due to a combination of reduced capacity and improved fuel efficiency on an available seat mile basis.
Fuel expense increased $1.6 billion compared to the nine months ended September 30, 2020 due to a 41% increase in consumption and a 15% increase in the market price per gallon of jet fuel. Consumption increased with capacity during the nine months ended September 30, 2021 as described above; however, the impact was partially mitigated by improved fuel efficiency on an available seat mile basis.
Additionally, during the nine months ended September 30, 2021, we purchased and retired $69 million of carbon offset credits, which relate to 13 million metric tons of carbon emissions generated by our airline segment from March 1 to December 31, 2020 as well as a portion of our 2021 carbon emissions. In the table below, these costs are shown in environmental sustainability impact.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Fuel expense and average price per gallon |
| Average Price Per Gallon |
| Nine Months Ended September 30, | 2021 vs. 2019 Increase (Decrease) | Nine Months Ended September 30, | 2021 vs. 2019 Increase (Decrease) |
(in millions, except per gallon data) | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 |
Fuel purchase cost(1) | $ | 3,781 | | $ | 2,324 | | $ | 6,568 | | $ | (2,787) | | $ | 1.87 | | $ | 1.62 | | $ | 2.04 | | $ | (0.17) | |
Environmental sustainability impact | 69 | | — | | — | | 69 | | 0.03 | | — | | — | | 0.03 | |
Fuel hedge impact | 20 | | 16 | | (8) | | 28 | | 0.01 | | 0.01 | | — | | 0.01 | |
Refinery segment impact | 186 | | 113 | | (52) | | 238 | | 0.09 | | 0.08 | | (0.01) | | 0.10 | |
Total fuel expense | $ | 4,056 | | $ | 2,453 | | $ | 6,508 | | $ | (2,452) | | $ | 2.00 | | $ | 1.71 | | $ | 2.03 | | $ | (0.03) | |
(1)Market price for jet fuel at airport locations, including related taxes and transportation costs.
Delta Air Lines, Inc. September 2021 Form 10-Q 30
Item 2. MD&A - Results of Operations
Ancillary Businesses and Refinery. The changes in ancillary business and refinery expenses were primarily related to refinery sales to third parties, which increased by $1.5 billion and $2.1 billion compared to the nine months ended September 30, 2020 and September 30, 2019, respectively. In addition, approximately $130 million of costs related to services performed by Delta Private Jets in the nine months ended September 30, 2019 were recorded in ancillary businesses and refinery prior to the combination of that business with Wheels Up in January 2020.
Restructuring Charges. During 2020, we recorded restructuring charges for items such as fleet impairments and voluntary early retirement and separation programs following strategic business decisions in response to the COVID-19 pandemic. In the nine months ended September 30, 2021, we recognized $3 million of net adjustments to decrease certain of those restructuring charges, representing changes in our estimates.
Non-Operating Results | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | 2021 vs. 2020 | 2021 vs. 2019 | | |
(in millions) | 2021 | 2020 | 2019 | Favorable (Unfavorable) | Favorable (Unfavorable) | | | |
Interest expense, net | $ | (314) | | $ | (291) | | $ | (70) | | $ | (23) | | $ | (244) | | | | |
Impairments and equity method (losses)/gains | (49) | | (114) | | 27 | | 65 | | (76) | | | | |
Gain/(loss) on investments, net | (223) | | (95) | | (35) | | (128) | | (188) | | | | |
Loss on extinguishment of debt | (183) | | — | | — | | (183) | | (183) | | | | |
Miscellaneous, net | 96 | | 27 | | (46) | | 69 | | 142 | | | | |
Total non-operating expense, net | $ | (673) | | $ | (473) | | $ | (124) | | $ | (200) | | $ | (549) | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | 2021 vs. 2020 | 2021 vs. 2019 | | |
(in millions) | 2021 | 2020 | 2019 | Favorable (Unfavorable) | Favorable (Unfavorable) | | | |
Interest expense, net | $ | (361) | | $ | (79) | | $ | (83) | | $ | (282) | | $ | (278) | | | | |
Impairments and equity method losses | (54) | | (260) | | (54) | | 206 | | — | | | | |
Gain/(loss) on investments, net | 262 | | (112) | | 100 | | 374 | | 162 | | | | |
Miscellaneous, net | 36 | | 254 | | (37) | | (218) | | 73 | | | | |
Total non-operating expense, net | $ | (117) | | $ | (197) | | $ | (74) | | $ | 80 | | $ | (43) | | | | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | 2021 vs. 2020 | 2021 vs. 2019 |
(in millions) | 2021 | 2020 | 2019 | Favorable (Unfavorable) | Favorable (Unfavorable) |
Interest expense, net | $ | (1,014) | | $ | (564) | | $ | (228) | | $ | (450) | | $ | (786) | |
Impairments and equity method losses | (102) | | (2,432) | | (44) | | 2,330 | | (58) | |
Gain/(loss) on investments, net | 251 | | (199) | | (17) | | 450 | | 268 | |
Loss on extinguishment of debt | (266) | | — | | — | | (266) | | (266) | |
Miscellaneous, net | 301 | | 327 | | (130) | | (26) | | 431 | |
Total non-operating expense, net | $ | (830) | | $ | (2,868) | | $ | (419) | | $ | 2,038 | | $ | (411) | |
Interest expense, net. Interest expense increased compared to the prior year periods as a result of financing arrangements entered into during 2020. See Note 5 of the Notes to the Condensed Consolidated Financial Statements for additional information on recent financings. As a result of the increase in our outstanding debt since the onset of the COVID-19 pandemic, interest expense, net was $314 million in the MarchSeptember 2021 quarter was $361 million. However, weand $1.0 billion in the nine months ended September 30, 2021. We have begun reducing the total amount of interest expense by paying downpre-paying our debt in addition to periodic amortization payments and scheduled maturities.This began with early repayments made during the December 2020 quarter and continued with the early repayment of our $1.5 billion secured term loan in the March 2021 quarter. We expect interest expensequarter, approximately $450 million of various EETCs in the June 2021 quarter, and approximately $850 million of certain notes through a cash tender offer and $262 million of other secured certificates, unsecured notes and a portion of the SkyMiles Term Loan through repurchases on the open market in the September 2021 quarter. Interest expense, net on our outstanding debt as of September 30, 2021 is expected to be approximately $350 million.$310 million during the December 2021 quarter. We continue to seek selective opportunities to pre-pay our debt, in addition to periodic amortization and scheduled maturities, during the remainder of 2021 and beyond.
Impairments and equity method losses. Impairments and equity method losses reflectsin 2020 reflected our share of LATAM's and Grupo Aeroméxico's equity method results prior to their respective bankruptcy filings, and our share of Virgin Atlantic's equity method results.results and the impairments reducing the basis of these investments to zero during the June 2020 quarter. See Note 4 of the Notes to the Condensed Consolidated Financial Statements for additional information on our equity investments.
Gain/(loss) on investments, net. Gain/(loss) on investments, net reflects the gains and losses on our equity investments measured at fair value on a recurring basis. The 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.investments measured at fair value on a recurring basis.
Delta Air Lines, Inc. September 2021 Form 10-Q 31
Item 2. MD&A - Non-Operating Results
Loss on extinguishment of debt. Loss on extinguishment of debt reflects the losses incurred in the early repayment of the notes, outstanding term loan and EETCs mentioned above. See Note 5 of the Notes to the Condensed Consolidated Financial Statements for additional information on the early repayment of debt.
Miscellaneous, net. Miscellaneous, net primarily includes pension and related benefit/(expense), foreign exchange gains/(losses) and charitable contributions. The Marchnine months ended September 30, 2020 quarter included the $240 million gain recognized as a result of the combination of Delta Private Jets with Wheels Up in January 2020.
Income Taxes
During 2021 interim periods, we will calculateare calculating our income tax expense by applying to any pre-tax loss/incomeincome/(loss) an effective tax rate determined as if the year to date period is the annual period. Using this method, for the three and nine months ended March 31,September 30, 2021, our effective tax rate was 22%.21% and 13%, respectively. We believe that, at this time, this method for determining the effective tax rate is more reliable than projecting an annual effective tax rate due to the uncertainty of estimating annual pre-tax loss/incomeincome/(loss) due to the impact of the 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 subsidiaries Monroe Energy, LLC and MIPC, LLC (collectively, "Monroe") primarily produces gasoline, diesel and jet fuel. Monroe exchanges the non-jet fuel products the refinery produces with third parties for jet fuel consumed in our airline operations. Historically, the jet fuel produced and procured through exchanging gasoline and diesel fuel produced by the refinery provided approximately 200,000 barrels per day, or approximately 75%, of our pre-COVID-19 pandemic consumption, for use in our airline operations. We believe that the jet fuel supply resulting from the refinery's operation contributes to reducing the market price of jet fuel and thus lowers our cost of jet fuel compared to what it otherwise would be.
The refinery’s production has also been altered by the dramatic change in economic conditions caused by the COVID-19 pandemic. During the Marchnine months ended September 30, 2021, quarter, the refinery operatedprogressively increased operations, ending the period at 60% – 90% of normalclose to pre-pandemic production levels, largely duewhich we expect to the significant decrease in the demand for jet fuel, and expects production levels at the high end of that rangecontinue during the JuneDecember 2021 quarter, subject to market conditions. Additionally, due to the decrease in demand for jet fuel, the refinery has shifted production to more non-jet fuel products. We plan to continue to exchange those non-jet fuel products for jet fuel to the extent needed based on jet fuel demand.
| Refinery segment financial information | Refinery segment financial information | Refinery segment financial information |
| | Three Months Ended March 31, | 2021 vs. 2020 | 2021 vs. 2019 | | Three Months Ended September 30, | 2021 vs. 2020 | 2021 vs. 2019 |
(in millions, except per gallon data) | (in millions, except per gallon data) | 2021 | 2020 | 2019 | % Increase (Decrease) | (in millions, except per gallon data) | 2021 | 2020 | 2019 | % Increase (Decrease) |
Exchange products | Exchange products | $ | 503 | | $ | 831 | | $ | 732 | | (39) | % | (31) | % | Exchange products | $ | 629 | | $ | 249 | | $ | 1,143 | | 153 | % | (45) | % |
Sales of refined products | Sales of refined products | 4 | | 143 | | 232 | | (97) | % | (98) | % | Sales of refined products | 12 | | 3 | | 52 | | 300 | % | (77) | % |
Sales to airline segment | Sales to airline segment | — | | 210 | | 271 | | NM | Sales to airline segment | 183 | | — | | 304 | | NM | (40) | % |
Third party refinery sales | Third party refinery sales | 540 | | — | | 48 | | NM | Third party refinery sales | 872 | | 417 | | 6 | | 109 | % | NM |
Operating revenue | Operating revenue | $ | 1,047 | | $ | 1,184 | | $ | 1,283 | | (12) | % | (18) | % | Operating revenue | $ | 1,696 | | $ | 669 | | $ | 1,505 | | 154 | % | 13 | % |
| Operating (loss)/income | $ | (125) | | $ | 29 | | $ | (34) | | NM | |
Operating income (loss) | | Operating income (loss) | $ | 97 | | $ | (28) | | $ | 49 | | NM | 98 | % |
Refinery segment impact on average price per fuel gallon | Refinery segment impact on average price per fuel gallon | $ | 0.23 | | $ | (0.03) | | $ | 0.04 | | NM | Refinery segment impact on average price per fuel gallon | $ | (0.12) | | $ | 0.07 | | $ | (0.04) | | NM | 200 | % |
Delta Air Lines, Inc. September 2021 Form 10-Q 32
Item 2. MD&A - Refinery Segment
| | | | | | | | | | | | | | | | | |
|
| Nine Months Ended September 30, | 2021 vs. 2020 | 2021 vs. 2019 |
(in millions, except per gallon data) | 2021 | 2020 | 2019 | % Increase (Decrease) | % Increase (Decrease) |
Exchange products | $ | 1,667 | | $ | 1,144 | | $ | 2,953 | | 46 | % | (44) | % |
Sales of refined products | 29 | | 299 | | 360 | | (90) | % | (92) | % |
Sales to airline segment | 292 | | 214 | | 882 | | 36 | % | (67) | % |
Third party refinery sales | 2,189 | | 709 | | 94 | | 209 | % | NM |
Operating revenue | $ | 4,177 | | $ | 2,366 | | $ | 4,289 | | 77 | % | (3) | % |
| | | | | |
Operating (loss) income | $ | (186) | | $ | (113) | | $ | 52 | | 65 | % | NM |
Refinery segment impact on average price per fuel gallon | $ | 0.09 | | $ | 0.08 | | $ | (0.01) | | 13 | % | NM |
Refinery revenues increased compared to the three months ended September 30, 2019 due to increased sales to third parties and increased compared to the three and nine months ended September 30, 2020 due to higher pricing and increased production and demand experienced since the prior year period. The refinery revenues slightly decreased compared to the March 2020 and Marchnine months ended September 30, 2019 quarters due to lower refinery run rates during the quarter, as well asand lower pricing for refined products. The operating lossproducts in the first half of 2021. Operating income was higher in the Marchthree months ended September 30, 2021 quarter as compared to the March 2019 quarter, which was mainly driven by the reduction in revenueprior periods due to increased production and an increase inpricing, and lower Renewable Identification Numbers ("RINs") compliance costs discussed below. The operating loss was higher in the nine months ended September 30, 2021 as compared to the prior periods, mainly driven by an increase in RINs compliance costs discussed below, andwhich was partially offset by cost savings resulting from decreased production levels.levels compared to the nine months ended September 2019.
A refinery is subject to annual U.S. Environmental Protection Agency requirements to blend renewable fuels into the gasoline and on-road diesel fuel it produces. Alternatively, a refinery may purchase RINs from third parties in the secondary market. The Monroe refinery purchases the majority of its RINs requirement in the secondary market. Observable RINs prices increased throughoutthrough the Marchfirst half of 2021, quarter, withand declined during the September 2021 quarter. Monroe incurring $158incurred $44 million and $453 million in RINs compliance costs during the Marchthree and nine months ended September 30, 2021 quarter as compared to $27$25 million and $15$78 million in the Marchthree and nine months ended September 30, 2020, and March 2019 quarters, respectively.
For more information regarding the refinery's results, see Note 9 of the Notes to the Condensed Consolidated Financial Statements.
Delta Air Lines, Inc. September 2021 March Form 10-Q 2533
Item 2. MD&A - Operating Statistics
Operating Statistics | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | 2021 vs. 2020 % Increase (Decrease) | 2021 vs. 2019 % Increase (Decrease) | | |
Consolidated(1) | 2021 | 2020 | 2019 | | |
Revenue passenger miles (in millions) ("RPM") | 43,057 | | 11,545 | | 66,862 | | 273 | | % | (36) | | % | | | | |
Available seat miles (in millions) ("ASM") | 54,083 | | 28,290 | | 75,742 | | 91 | | % | (29) | | % | | | | |
Passenger mile yield | 16.70 | ¢ | 16.78 | ¢ | 17.07 | ¢ | — | | % | (2) | | % | | | | |
Passenger revenue per available seat mile ("PRASM") | 13.30 | ¢ | 6.85 | ¢ | 15.06 | ¢ | 94 | | % | (12) | | % | | | | |
Total revenue per available seat mile ("TRASM") | 16.93 | ¢ | 10.82 | ¢ | 16.58 | ¢ | 56 | | % | 2 | | % | | | | |
TRASM, adjusted(2) | 15.31 | ¢ | 9.35 | ¢ | 16.51 | ¢ | 64 | | % | (7) | | % | | | | |
Cost per available seat mile ("CASM") | 12.85 | ¢ | 33.40 | ¢ | 13.85 | ¢ | (62) | | % | (7) | | % | | | | |
CASM-Ex(2) | 11.67 | ¢ | 15.96 | ¢ | 10.15 | ¢ | (27) | | % | 15 | | % | | | | |
| | | | | | | | | | | |
Passenger load factor | 80 | % | 41 | % | 88 | % | 39 | | pts | (8) | | pts | | | | |
Fuel gallons consumed (in millions) | 789 | | 391 | | 1,154 | | 102 | | % | (32) | | % | | | | |
Average price per fuel gallon(3) | $ | 1.97 | | $ | 1.25 | | $ | 1.94 | | 58 | | % | 2 | | % | | | | |
Average price per fuel gallon, adjusted(2)(3) | $ | 1.94 | | $ | 1.25 | | $ | 1.96 | | 55 | | % | (1) | | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | 2021 vs. 2020 % Increase (Decrease) | 2021 vs. 2019 % Increase (Decrease) | | |
Consolidated(1) | 2021 | 2020 | 2019 | | |
Revenue passenger miles (in millions) | 17,948 | | 43,062 | | 51,617 | | (58) | | % | (65) | | % | | | | |
Available seat miles (in millions) | 40,118 | | 58,885 | | 62,416 | | (32) | | % | (36) | | % | | | | |
Passenger mile yield | 15.31 | ¢ | 17.58 | ¢ | 17.93 | ¢ | (13) | | % | (15) | | % | | | | |
PRASM | 6.85 | ¢ | 12.85 | ¢ | 14.83 | ¢ | (47) | | % | (54) | | % | | | | |
TRASM | 10.34 | ¢ | 14.59 | ¢ | 16.78 | ¢ | (29) | | % | (38) | | % | | | | |
TRASM, adjusted(2) | 9.00 | ¢ | 14.59 | ¢ | 16.63 | ¢ | (38) | | % | (46) | | % | | | | |
CASM | 13.83 | ¢ | 15.30 | ¢ | 15.14 | ¢ | (10) | | % | (9) | | % | | | | |
CASM-Ex(2) | 13.01 | ¢ | 12.58 | ¢ | 11.49 | ¢ | 3 | | % | 13 | | % | | | | |
CASM, adjusted(2) | 15.61 | ¢ | 15.30 | ¢ | 14.99 | ¢ | 2 | | % | 4 | | % | | | | |
Passenger load factor | 45 | % | 73 | % | 83 | % | (28) | | pts | (38) | | pts | | | | |
Fuel gallons consumed (in millions) | 545 | | 880 | | 962 | | (38) | | % | (43) | | % | | | | |
Average price per fuel gallon(3) | $ | 1.87 | | $ | 1.81 | | $ | 2.06 | | 3 | | % | (9) | | % | | | | |
Average price per fuel gallon, adjusted(2)(3) | $ | 1.91 | | $ | 1.82 | | $ | 2.04 | | 5 | | % | (6) | | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | 2021 vs. 2020 % Increase (Decrease) | 2021 vs. 2019 % Increase (Decrease) |
Consolidated(1) | 2021 | 2020 | 2019 |
Revenue passenger miles (in millions) | 94,290 | | 58,229 | | 181,652 | | 62 | | % | (48) | | % |
Available seat miles (in millions) | 142,730 | | 97,771 | | 209,911 | | 46 | | % | (32) | | % |
Passenger mile yield | 16.20 | ¢ | 17.49 | ¢ | 17.63 | ¢ | (7) | | % | (8) | | % |
PRASM | 10.70 | ¢ | 10.42 | ¢ | 15.26 | ¢ | 3 | | % | (30) | | % |
TRASM | 14.31 | ¢ | 13.42 | ¢ | 16.94 | ¢ | 7 | | % | (16) | | % |
TRASM, adjusted(2) | 12.78 | ¢ | 12.70 | ¢ | 16.83 | ¢ | 1 | | % | (24) | | % |
CASM | 13.18 | ¢ | 25.30 | ¢ | 14.46 | ¢ | (48) | | % | (9) | | % |
CASM-Ex(2) | 11.96 | ¢ | 16.74 | ¢ | 10.66 | ¢ | (29) | | % | 12 | | % |
| | | | | | | |
Passenger load factor | 66 | % | 60 | % | 87 | % | 6 | | pts | (21) | | pts |
Fuel gallons consumed (in millions) | 2,023 | | 1,437 | | 3,215 | | 41 | | % | (37) | | % |
Average price per fuel gallon(3) | $ | 2.00 | | $ | 1.71 | | $ | 2.03 | | 17 | | % | (1) | | % |
Average price per fuel gallon, adjusted(2)(3) | $ | 1.99 | | $ | 1.70 | | $ | 2.02 | | 17 | | % | (1) | | % |
(1)Includes the operations of our regional carriers under capacity purchase agreements.
(2)Non-GAAP financial measuremeasures defined and reconciled to TRASM, CASM and average fuel price per gallon, respectively, in "Supplemental Information" below.
(3)Includes the impact of fuel hedge activity, refinery segment results and environmental sustainability activity.
Delta Air Lines, Inc. September 2021 March Form 10-Q 2634
Item 2. MD&A - Fleet Information
Fleet Information
Our operating aircraft fleet, purchase commitments and options at March 31,September 30, 2021 are summarized in the following table. As described above, we have been experiencing a recovery in demand from the COVID-19 pandemic, which has led to an increase in our capacity and utilization of March 31,our aircraft. Accordingly, as of September 30, 2021, less than 10%5% of our mainline and regional aircraft were temporarily parked.parked compared to 30% as of September 30, 2020.
| Mainline aircraft information by fleet type | Mainline aircraft information by fleet type | Mainline aircraft information by fleet type |
| | Current Fleet(1) | | Commitments(2) | | Current Fleet(1) | | Commitments(2) |
Fleet Type | Fleet Type | Owned | Finance Lease | Operating Lease | Total | Average Age (Years) | | Purchase | Options | Fleet Type | Owned | Finance Lease | Operating Lease | Total | Average Age (Years) | | Purchase | Options |
B-717-200 | B-717-200 | 9 | | 30 | | 11 | | 50 | | 20.0 | | | B-717-200 | 9 | | 37 | | 8 | | 54 | | 20.3 | | |
B-737-800 | B-737-800 | 73 | | 4 | | — | | 77 | | 19.6 | | B-737-800 | 73 | | 4 | | — | | 77 | | 20.1 | |
B-737-900ER | B-737-900ER | 81 | | — | | 49 | | 130 | | 4.6 | | B-737-900ER | 83 | | — | | 49 | | 132 | | 5.1 | | 27 | | |
B-757-200 | B-757-200 | 93 | | 7 | | — | | 100 | | 23.6 | | | | B-757-200 | 99 | | 1 | | — | | 100 | | 24.2 | | | |
B-757-300 | B-757-300 | 16 | | — | | — | | 16 | | 18.1 | | B-757-300 | 16 | | — | | — | | 16 | | 18.6 | |
B-767-300ER | B-767-300ER | 36 | | — | | — | | 36 | | 24.4 | | B-767-300ER | 40 | | — | | — | | 40 | | 25.1 | |
B-767-400ER | B-767-400ER | 21 | | — | | — | | 21 | | 20.3 | | B-767-400ER | 21 | | — | | — | | 21 | | 20.8 | |
A220-100 | A220-100 | 37 | | 4 | | — | | 41 | | 1.5 | | 4 | | | A220-100 | 37 | | 4 | | — | | 41 | | 2.0 | | 4 | | |
A220-300 | A220-300 | 7 | | — | | — | | 7 | | 0.4 | | 43 | | 50 | | A220-300 | 9 | | — | | — | | 9 | | 0.8 | | 41 | | 50 | |
A319-100 | A319-100 | 55 | | — | | 2 | | 57 | | 19.1 | | A319-100 | 55 | | 2 | | — | | 57 | | 19.6 | |
A320-200 | A320-200 | 51 | | — | | 4 | | 55 | | 25.1 | | A320-200 | 52 | | 4 | | — | | 56 | | 25.7 | |
A321-200 | A321-200 | 55 | | 22 | | 36 | | 113 | | 2.6 | | 14 | | | A321-200 | 65 | | 22 | | 36 | | 123 | | 2.9 | | 4 | | |
A321-200neo | A321-200neo | — | | — | | — | | — | | — | | 100 | | 100 | | A321-200neo | — | | — | | — | | — | | — | | 155 | | 70 | |
A330-200 | A330-200 | 11 | | — | | — | | 11 | | 16.0 | | A330-200 | 11 | | — | | — | | 11 | | 16.5 | |
A330-300 | A330-300 | 28 | | — | | 3 | | 31 | | 12.2 | | A330-300 | 28 | | — | | 3 | | 31 | | 12.7 | |
A330-900neo | A330-900neo | 3 | | 1 | | 4 | | 8 | | 1.2 | | 29 | | | A330-900neo | 3 | | 3 | | 5 | | 11 | | 1.3 | | 26 | | |
A350-900 | A350-900 | 13 | | — | | 2 | | 15 | | 2.7 | | 20 | | | A350-900 | 13 | | — | | 5 | | 18 | | 3.1 | | 26 | | |
Total | Total | 589 | | 68 | | 111 | | 768 | | 13.7 | | 210 | | 150 | | Total | 614 | | 77 | | 106 | | 797 | | 13.9 | | 283 | | 120 | |
(1)Excludes certain aircraft we own or lease or that are operated by regional carriers on our behalf shown in the table below.
(2)Purchase commitments include one A330-900neosix A350-900 lease commitmentcommitments in 2021 incremental to our order book with Airbus.
The table below summarizes the aircraft operated by regional carriers on our behalf at March 31,September 30, 2021.
| Regional aircraft information by carrier | |
Regional aircraft information by fleet type and carrier | | Regional aircraft information by fleet type and 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) | 45 | | 13 | | 101 | | — | | — | | 159 | | Endeavor Air, Inc.(1) | 47 | | 13 | | 113 | | — | | — | | 173 | |
SkyWest Airlines, Inc. | SkyWest Airlines, Inc. | — | | 5 | | 40 | | — | | 68 | | 113 | | SkyWest Airlines, Inc. | — | | 5 | | 40 | | — | | 71 | | 116 | |
Republic Airline, Inc. | — | | — | | — | | 18 | | 41 | | 59 | | |
Republic Airways, Inc. | | Republic Airways, Inc. | — | | — | | — | | 8 | | 46 | | 54 | |
Total | Total | 45 | | 18 | | 141 | | 18 | | 109 | | 331 | | Total | 47 | | 18 | | 153 | | 8 | | 117 | | 343 | |
(1)Endeavor Air, Inc. is a wholly owned subsidiary of Delta.
Delta Air Lines, Inc. September 2021 March Form 10-Q 2735
Item 2. MD&A - Financial Condition and Liquidity
Financial Condition and Liquidity
As of March 31,September 30, 2021, we had $16.6$15.8 billion in cash, cash equivalents, short-term investments and aggregate principal amount committed and available to be drawn under our revolving credit facilities. We expect to meet our liquidity needs for the next twelve months with cash and cash equivalents, short-term investments, government assistance under the payroll support program extensions, restricted cash equivalents and cash flows from operations. We expect to meet our long-term liquidity needs with cash flows from operations and financing arrangements. We are continuing to evaluate the appropriate level of liquidity to maintain following the COVID-19 pandemic though, at least in the near term, we expect this level to be higher than the liquidity maintained prior to the pandemic.
Sources and Uses of Liquidity
Operating Activities
Operating activities in the threenine months ended March 31,September 30, 2021 provided $691 million$2.7 billion compared to using $2.5 billion and providing $1.9$7.5 billion in the threenine months ended March 31, 2019.September 30, 2020 and 2019, respectively. As described above, we are planning forexperiencing a domestic demand recovery throughout 2021, with sustained demand improvement expected duringand expect this to continue through the second halfend of 2021. If the demand environment evolvescontinues to evolve in thatthis manner, we expect to generate positive cash flows from operations, including funds received from the government support programs described in "Financing Activities" below, during 2021.
Our operating cash flow is impacted by the following factors:
Seasonality of Advance Ticket Sales. We sell tickets for air travel in advance of the customer's travel date. When we receive a cash payment at the time of sale, we record the cash received on advance sales as deferred revenue in air traffic liability. The air traffic liability typically increases during the winter and spring months as advanced ticket sales grow prior to the summer peak travel season and decreases during the summer and fall months. However, the current reduction in demand for air travel due to the COVID-19 pandemic has resulted in a lower level of advance bookings and the associated cash received than we have historically experienced.experienced, which has impacted the typical seasonal trend of air traffic liability since March 2020.
Domestic demand has improved throughoutsince the latter half of the March 2021 quarter as consumers gainedhave regained confidence to travel and began buying ticketsincreased ticket purchases for travel further in advance. New bookings for travel departures beyond 60 days nearly equaled our historical booking patterns, driving an extensionWe experienced a small moderation in demand growth in August and September 2021 due to a rise in COVID-19 cases attributable to a variant of the booking curve and reversing a three-quarter trendCOVID-19 virus; however, in the month of decline in our air traffic liability. Travel credits represented approximately 50% of theSeptember 2021, domestic leisure bookings approached September 2019 levels. Our air traffic liability remains above historical September quarter levels with travel credits representing approximately 40% of the balance as of March 31,September 30, 2021. See Note 2 of the Notes to the Condensed Consolidated Financial Statements for additional information on travel credits and our air traffic liability.
Fuel. Fuel expense represented approximately 18%22% of our total operating expense for the threenine months ended March 31,September 30, 2021. The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations. During the nine months ended September 30, 2021, our average fuel price per gallon was slightly below the same period of 2019, but fuel prices have recently increased and our average fuel price per gallon is projected to be higher in the December 2021 quarter than the nine months ended September 30, 2021. As demand increasescontinues to increase and capacity returns, we expect fuel consumption in the December 2021 quarter to increase compared to the comparable period ofDecember 2020 quarter, although we still expect it to be lower than the comparable period in 2019.December 2019 quarter.
Employee Benefit Obligations. We sponsor defined benefit pension plans for eligible employees and retirees. These plans are closed to new entrants and are frozen for future benefit accruals. Our funding obligations for these plans are governed by the Employee Retirement Income Security Act, as modified by the Pension Protection Act of 2006. We have no minimum funding requirements for our defined benefit pension plans in 2021. However, we voluntarily contributed $1.0$1.5 billion to these plans during Aprilthe June 2021 and we are evaluating up to $1.0 billion of additional voluntary contributions later in the year.quarter. At this level of funding, investment returns are expected to satisfy future benefit payments, which we believe would eliminate further material voluntary or required cash contributions to the plans, under the terms of the Pension Protection Act of 2006. Further, based on this level of funding, we have modified, and continue to evaluate, the asset allocation mix to reduce the investment risk of the portfolio and protect the plans' funded status. Estimates of future funding requirements are based on various assumptions and could vary materially from actual funding requirements. Assumptions include, among other things, the actual and projected market performance of assets, statutory requirements and demographic data for participants.
Voluntary Separation Programs. In 2020, we recorded a $3.4 billion charge associated with voluntary early retirement and separation programs and other employee benefit charges. Approximately $150In the nine months ended September 30, 2021, $435 million of this charge was disbursed in cash payments to participants in the March 2021 quarter.addition to $720 million disbursed in 2020. We anticipate that a total of approximately $600 million in cash payments will be made to participants in 2021 and approximately $500 million in 2022 with the remaining payments in 20222023 and beyond.
Delta Air Lines, Inc. September 2021 Form 10-Q 36
Item 2. MD&A - Financial Condition and Liquidity
Government Support Programs. See "Financing Activities" below for discussion of the impact to our liquidity from the payroll support program extensions. The $4.5 billion of grants received during the nine months ended September 30, 2021 are included in our operating cash flow.
Delta Air Lines, Inc. 2021 March Form 10-Q 28
Item 2. MD&A - Financial Condition and Liquidity
Investing Activities
Short-Term Investments. During the threenine months ended March 31,September 30, 2021, we redeemed a net of $210 million$1.4 billion in short-term investments. See Note 3 of the Notes to the Condensed Consolidated Financial Statements for further information on these investments.
Capital Expenditures. Our capital expenditures were $438 million$2.0 billion and $1.4$3.9 billion for the threenine months ended March 31,September 30, 2021 and 2019, respectively. Our capital expenditures during the threenine months ended March 31,September 30, 2021 were primarily related to our airport redevelopment projects, the purchases of aircraft, fleet modifications, our airport redevelopment projects and technology enhancements.
We have committed to future aircraft purchases and have obtained, but are under no obligation to use, long-term financing commitments for a substantial portion of the purchase price of the aircraft. Excluding the New York-LaGuardia airport project discussed below, our expected 2021 capital expenditures of approximately $2.5$3.2 billion, which may vary depending on financing decisions, will be primarily for aircraft, including deliveries and advance deposit payments, as well as aircraftfleet modifications and technology enhancements.
New York-LaGuardia Redevelopment. As part of the terminal redevelopment project at LaGuardia Airport, we are partnering with the Port Authority of New York and New Jersey (“Port Authority”) to replace Terminals C and D with a new state-of-the-art terminal facility. Construction is underway and will be phased to limit passenger inconvenience and, dueinconvenience. Due to an acceleration effort that commenced in 2020, completion is now expected inby 2025.
We currently expect our project costs to be approximately $3.5 billion and we bear the risks of project construction, including any potential cost over-runs. Using funding primarily provided by existing financing arrangements, we expect to spend approximately $900 million on this project during 2021, of which $218$709 million was incurred in the threenine months ended March 31,September 30, 2021.
Financing Activities
Debt and Finance Leases. In the threenine months ended March 31,September 30, 2021, we repaidhad cash outflows of approximately $1.8$4.7 billion onrelated to repayments of our debt and finance leases, of which $1.5including approximately $3.3 billion wasfor the early repayment of the term loan secured by certain of our slots, gates and routes.routes, various EETCs, certain notes through a cash tender offer and other various unsecured notes, secured certificates and SkyMiles term loan. We plancontinue to continue paying downseek selective opportunities to pre-pay our debt, in addition to periodic amortization and scheduled maturities, during the remainder of 2021.2021 and beyond.
The principal amount of our debt and finance leases was $29.3$28.0 billion at March 31,September 30, 2021.
Government Support Programs. The Consolidated Appropriations Act, 2021 was enacted on December 27, 2020, and included an extension of the payroll support program created under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") providing an additional $15 billion in grants and loans to 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. InDuring the Marchsix months ended June 30, 2021, quarter, we received $2.9a total of $3.3 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 theunder this 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.
agreement. These support payments consisted of approximately $2.0$2.3 billion in a grant and $828$957 million in an unsecured 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 millionloan and issued warrants to the U.S. Department of the Treasury to acquire approximately 2.12.4 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, andstock.
In April 2021, we entered into a five-year term. We have recordedPayroll Support Program 3 Agreement with the valueU.S. Department of the Treasury. During the June 2021 quarter, we received a total of $3.1 billion in payroll support payments under this agreement. These support payments consisted of $2.2 billion in a grant and $891 million in an unsecured 10-year low interest loan. In return, we entered into a promissory note for the loan and issued warrants to the U.S. Department of the Treasury to acquire approximately 1.9 million shares of Delta common stock.
For more information on a relative fair value basis as $784 millionthese programs, see Note 5 of noncurrent debt, net of discount, and $44 million in additional paid in capital, respectively.the Notes to the Condensed Consolidated Financial Statements.
Delta Air Lines, Inc. September 2021 March Form 10-Q 2937
Item 2. MD&A - Financial Condition and Liquidity
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 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.
Undrawn Lines of Credit
As of March 31,September 30, 2021, we had approximately $2.6 billion undrawn and available under our revolving credit facilities. In addition, we had outstanding letters of credit as of March 31,September 30, 2021, including approximately $400$300 million that reduced the availability under our revolving credit facilities and approximately $300 million that did not affect the availability of our revolving credit facilities.
Covenants
We were in compliance with the covenants in theseour debt agreements at March 31,September 30, 2021.
Critical Accounting Estimates
For information regarding our Critical Accounting Estimates, see the "Critical Accounting Estimates" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K.
Delta Air Lines, Inc. September 2021 March Form 10-Q 3038
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.GAAP ("non-GAAP financial measures"). Under the Securities and Exchange Commission rules, non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results. The reconciliations presented below of the non-GAAP measures used in this Form 10-Q may not calculate exactly due to rounding.
Pre-tax income/(loss)/income,, adjusted
The following table shows a reconciliation of pre-tax income/(loss)/income (a GAAP measure) to pre-tax income/(loss)/income,, adjusted (a non-GAAP financial measure). In the current period, pre-tax Pre-tax income/(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,for items such as fleet impairments and voluntary early retirement and separation programs following strategic business decisions in response to the COVID-19 pandemic. In the MarchSeptember 2021 quarter, we recognized $44$33 million of adjustments to certain of those restructuring charges, representing changes in our estimates.
•Government grant recognition. We recognized $1.2$1.8 billion of the grant proceeds from the first payroll support program extensionextensions as a contra-expense.contra-expense during the September 2021 quarter. We are recognizingrecognized the grant proceeds as contra-expense based on the periods that the funds arewere intended to compensate and expect to usehave fully used all proceeds from the first payroll support program extension byextensions as of the end of the JuneSeptember 2021 quarter.
•Impairments and equity method losses. These adjustments relate to recording our share of the losses recorded by our equity method investees.
•Pension settlement charges. These charges were recognized in connection with the voluntary early retirement and separation programs that were offered to our employees in the September 2020 quarter.
•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.debt.
We also regularly adjust pre-tax income/(loss)/income for the following items to determine pre-tax income/(loss)/income,, adjusted for the reasons described below.
•MTM adjustments and settlements on hedges. Mark-to-market ("MTM") adjustments are defined as fair value changes recorded in periods other than the settlement period. Such fair value changes are not necessarily indicative of the actual settlement value of the underlying hedge in the contract settlement period. Settlements represent cash received or paid on hedge contracts settled during the applicable period.
•Equity investment MTM adjustments. We adjust for our proportionate share of our equity method investee, Virgin Atlantic’s, hedge portfolio MTM adjustments (recorded in non-operating expense) to allow investors to understand and analyze our core operational performance in the periods shown.
•MTM adjustments on investments. Unrealized gains/losses result from our equity investments that are accounted for at fair value in non-operating expense. These gains/losses are driven by changes in stock prices, foreign currency fluctuations and other valuation techniques for investments in companies without publicly-traded shares.shares and foreign currency fluctuations. Adjusting for these gains/losses allows investors to better understand and analyze our core operational performance in the periods shown.
•Delta Private Jets adjustment. Because we combined Delta Private Jets with Wheels Up in January 2020, we have excluded the impact of Delta Private Jets from 2019 results for comparability.
Delta Air Lines, Inc. September 2021 March Form 10-Q 3139
Item 2. MD&A - Supplemental Information
| Pre-tax (loss)/income, adjusted reconciliation | |
Pre-tax income/(loss), adjusted reconciliation | | Pre-tax income/(loss), adjusted reconciliation |
| | Three Months Ended March 31, | | Three Months Ended September 30, |
(in millions) | (in millions) | 2021 | 2020 | 2019 | (in millions) | 2021 | 2020 | 2019 |
Pre-tax (loss)/income | $ | (1,515) | | $ | (607) | | $ | 946 | | |
Pre-tax income/(loss) | | Pre-tax income/(loss) | $ | 1,532 | | $ | (6,859) | | $ | 1,947 | |
Adjusted for: | Adjusted for: | | Adjusted for: | |
Restructuring charges | Restructuring charges | (44) | | — | | — | | Restructuring charges | 33 | | 5,345 | | — | |
Government grant recognition | Government grant recognition | (1,186) | | — | | — | | Government grant recognition | (1,822) | | (1,315) | | — | |
Impairments and equity method losses | Impairments and equity method losses | 54 | | — | | — | | Impairments and equity method losses | 49 | | 114 | | — | |
Pension settlement charges | | Pension settlement charges | — | | 30 | | — | |
Loss on extinguishment of debt | Loss on extinguishment of debt | 56 | | — | | — | | Loss on extinguishment of debt | 183 | | — | | — | |
MTM adjustments and settlements on hedges | MTM adjustments and settlements on hedges | (23) | | (7) | | 8 | | MTM adjustments and settlements on hedges | 19 | | (3) | | (25) | |
Equity investment MTM adjustments | Equity investment MTM adjustments | — | | 69 | | (21) | | Equity investment MTM adjustments | — | | — | | 10 | |
MTM adjustments on investments | MTM adjustments on investments | (262) | | 123 | | (100) | | MTM adjustments on investments | 223 | | 99 | | 35 | |
Delta Private Jets adjustment | Delta Private Jets adjustment | — | | — | | (1) | | Delta Private Jets adjustment | — | | — | | 1 | |
Pre-tax (loss)/income, adjusted | $ | (2,919) | | $ | (422) | | $ | 831 | | |
Pre-tax income/(loss), adjusted | | Pre-tax income/(loss), adjusted | $ | 216 | | $ | (2,589) | | $ | 1,968 | |
|
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, operatingOperating expense, adjusted excludes restructuring charges and government grant recognition, which, as discussed above under the heading pre-tax income/(loss)/income,, adjusted, are directly related to the impact of the COVID-19 pandemic and our response. We also adjust operating expense for MTM adjustments and settlements on hedges and the impact of Delta Private Jets for the same reasons described above under the heading pre-tax income/(loss)/income,, adjusted. We also adjust operating expense for the following item for the reasonsreason described below.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 | Operating expense, adjusted reconciliation | | Operating expense, adjusted reconciliation | |
| | Three Months Ended March 31, | | | Three Months Ended September 30, | |
(in millions) | (in millions) | 2021 | | 2020 | 2019 | | (in millions) | 2021 | | 2020 | 2019 | |
Operating expense | Operating expense | $ | 5,548 | | | $ | 9,002 | | $ | 9,452 | | | Operating expense | $ | 6,949 | | | $ | 9,448 | | $ | 10,489 | | |
Adjusted for: | Adjusted for: | | | | | Adjusted for: | | | | |
Restructuring charges | Restructuring charges | 44 | | | — | | — | | | Restructuring charges | (33) | | | (5,345) | | — | | |
Government grant recognition | Government grant recognition | 1,186 | | | — | | — | | | Government grant recognition | 1,822 | | | 1,315 | | — | | |
MTM adjustments and settlements on hedges | MTM adjustments and settlements on hedges | 23 | | | 7 | | (8) | | | MTM adjustments and settlements on hedges | (19) | | | 3 | | 25 | | |
Third-party refinery sales | Third-party refinery sales | (540) | | | — | | (48) | | | Third-party refinery sales | (872) | | | (417) | | (6) | | |
Delta Private Jets adjustment | Delta Private Jets adjustment | — | | | — | | (42) | | | Delta Private Jets adjustment | — | | | — | | (49) | | |
Operating expense, adjusted | Operating expense, adjusted | $ | 6,261 | | | $ | 9,009 | | $ | 9,354 | | | Operating expense, adjusted | $ | 7,846 | | | $ | 5,004 | | $ | 10,460 | | |
|
Delta Air Lines, Inc. September 2021 March Form 10-Q 3240
Item 2. MD&A - Supplemental Information
Fuel Expense,expense, adjusted and Average fuel price per gallon, adjusted
The following table shows a reconciliation of fuel expense (a GAAP measure) to fuel expense, adjusted (a non-GAAP financial measure). We adjust for MTM adjustments and settlements on hedges and the impact of Delta Private Jets for the same reasons described under the heading pre-tax income/(loss)/income,, adjusted.
| Fuel expense, adjusted reconciliation | Fuel expense, adjusted reconciliation | Fuel expense, adjusted reconciliation |
| | Average Price Per Gallon | | | Average Price Per Gallon | |
| | Three Months Ended March 31, | Three Months Ended March 31, | | | Three Months Ended September 30, | Three Months Ended September 30, | |
(in millions, except per gallon data) | (in millions, except per gallon data) | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | | (in millions, except per gallon data) | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | |
Total fuel expense | Total fuel expense | $ | 1,017 | | $ | 1,595 | | $ | 1,978 | | $ | 1.87 | | $ | 1.81 | | $ | 2.06 | | | Total fuel expense | $ | 1,552 | | $ | 486 | | $ | 2,239 | | $ | 1.97 | | $ | 1.25 | | $ | 1.94 | | |
Adjusted for: | | Adjusted for: | | |
MTM adjustments and settlements on hedges | MTM adjustments and settlements on hedges | 23 | | 7 | | (8) | | 0.04 | | 0.01 | | (0.01) | | | MTM adjustments and settlements on hedges | (19) | | 3 | | 25 | | (0.02) | | 0.01 | | 0.02 | | |
Delta Private Jets adjustment | Delta Private Jets adjustment | — | | — | | (7) | | — | | — | | (0.01) | | | Delta Private Jets adjustment | — | | — | | (7) | | — | | — | | (0.01) | | |
Total fuel expense, adjusted | Total fuel expense, adjusted | $ | 1,040 | | $ | 1,602 | | $ | 1,963 | | $ | 1.91 | | $ | 1.82 | | $ | 2.04 | | | Total fuel expense, adjusted | $ | 1,533 | | $ | 489 | | $ | 2,257 | | $ | 1.94 | | $ | 1.25 | | $ | 1.96 | | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | Average Price Per Gallon | | | |
| Nine Months Ended September 30, | Nine Months Ended September 30, | | |
(in millions, except per gallon data) | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | | | |
Total fuel expense | $ | 4,056 | | $ | 2,453 | | $ | 6,508 | | $ | 2.00 | | $ | 1.71 | | $ | 2.03 | | | | |
Adjusted for: | | | | | | | | | |
MTM adjustments and settlements on hedges | (20) | | (4) | | 8 | | (0.01) | | (0.01) | | — | | | | |
Delta Private Jets adjustment | — | | — | | (22) | | — | | — | | (0.01) | | | | |
Total fuel expense, adjusted | $ | 4,037 | | $ | 2,449 | | $ | 6,494 | | $ | 1.99 | | $ | 1.70 | | $ | 2.02 | | | | |
TRASM, adjusted
The following table shows a reconciliation of TRASM (a GAAP measure) to TRASM, adjusted (a non-GAAP financial measure). We adjust TRASM for refinery sales to third parties for the same reason described above under the heading operating expense, adjusted. We adjust for the impact of Delta Private Jets for the same reason described above under the heading pre-tax income/(loss)/income,, adjusted.
| TRASM, adjusted reconciliation | TRASM, adjusted reconciliation | TRASM, adjusted reconciliation |
| | Three Months Ended March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| | 2021 | 2020 | 2019 | | | 2021 | 2020 | 2019 | | 2021 | 2020 | 2019 | |
TRASM (cents) | TRASM (cents) | 10.34 | ¢ | 14.59 | ¢ | 16.78 | ¢ | | TRASM (cents) | 16.93 | ¢ | 10.82 | ¢ | 16.58 | ¢ | | 14.31 | ¢ | 13.42 | ¢ | 16.94 | ¢ | |
Adjusted for: | Adjusted for: | | | Adjusted for: | | |
Third-party refinery sales | Third-party refinery sales | (1.35) | | — | | (0.08) | | | Third-party refinery sales | (1.61) | | (1.47) | | (0.01) | | | (1.53) | | (0.73) | | (0.05) | | |
Delta Private Jets adjustment | Delta Private Jets adjustment | — | | — | | (0.07) | | | Delta Private Jets adjustment | — | | — | | (0.06) | | | — | | — | | (0.07) | | |
TRASM, adjusted | TRASM, adjusted | 9.00 | ¢ | 14.59 | ¢ | 16.63 | ¢ | | TRASM, adjusted | 15.31 | ¢ | 9.35 | ¢ | 16.51 | ¢ | | 12.78 | ¢ | 12.70 | ¢ | 16.83 | ¢ | |
Delta Air Lines, Inc. September 2021 March Form 10-Q 3341
Item 2. MD&A - Supplemental Information
CASM-Ex
The following table shows a reconciliation of operating cost per available seat mile ("CASM") (a GAAP measure) to CASM-Ex (a non-GAAP financial measure). In the current period, CASM-Ex excludes restructuring charges and government grant recognition, which, as discussed above under the heading pre-tax income/(loss)/income,, adjusted, are directly related to the impact of the COVID-19 pandemic and our response. We adjustedadjust for refinery sales to third parties for the same reason described above under the heading operating expense, adjusted. We adjust for the impact of Delta Private Jets for the same reason described above under the heading pre-tax income/(loss)/income,, adjusted. We also adjust CASM for the following items to determine CASM-Ex for the reasons described below.below:
•Aircraft fuel and related taxes. The volatility in fuel prices impacts the comparability of year-over-year financial performance. The adjustment for aircraft fuel and related taxes allows investors to better understand and analyze our non-fuel costs and year-over-year financial performance.
•Profit sharing. We adjust for profit sharing because this adjustment allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.
| CASM-Ex reconciliation | CASM-Ex reconciliation | CASM-Ex reconciliation |
| | Three Months Ended March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| | 2021 | 2020 | 2019 | | | 2021 | 2020 | 2019 | | 2021 | 2020 | 2019 | |
CASM (cents) | CASM (cents) | 13.83 | ¢ | 15.30 | ¢ | 15.14 | ¢ | | CASM (cents) | 12.85 | ¢ | 33.40 | ¢ | 13.85 | ¢ | | 13.18 | ¢ | 25.30 | ¢ | 14.46 | ¢ | |
Adjusted for: | Adjusted for: | | | Adjusted for: | | |
Restructuring charges | Restructuring charges | 0.11 | | — | | — | | | Restructuring charges | (0.06) | | (18.89) | | — | | | — | | (7.98) | | — | | |
Government grant recognition | Government grant recognition | 2.96 | | — | | — | | | Government grant recognition | 3.37 | | 4.65 | | — | | | 3.16 | | 2.65 | | — | | |
Aircraft fuel and related taxes | Aircraft fuel and related taxes | (2.54) | | (2.72) | | (3.17) | | | Aircraft fuel and related taxes | (2.87) | | (1.72) | | (2.96) | | | (2.84) | | (2.51) | | (3.10) | | |
Third-party refinery sales | Third-party refinery sales | (1.35) | | — | | (0.08) | | | Third-party refinery sales | (1.61) | | (1.47) | | (0.01) | | | (1.53) | | (0.73) | | (0.05) | | |
Profit sharing | Profit sharing | — | | — | | (0.35) | | | Profit sharing | — | | — | | (0.68) | | | — | | — | | (0.60) | | |
Delta Private Jets adjustment | Delta Private Jets adjustment | — | | — | | (0.05) | | | Delta Private Jets adjustment | — | | — | | (0.05) | | | — | | — | | (0.06) | | |
CASM-Ex | CASM-Ex | 13.01 | ¢ | 12.58 | ¢ | 11.49 | ¢ | | CASM-Ex | 11.67 | ¢ | 15.96 | ¢ | 10.15 | ¢ | | 11.96 | ¢ | 16.74 | ¢ | 10.66 | ¢ | |
|
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 for the same reason described above under the heading pre-tax (loss)/income, adjusted. We adjust for refinery sales to third parties for the same reason described above under the heading operating expense, adjusted.
| | | | | | | | | | | |
CASM, adjusted reconciliation |
| Three Months Ended 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 | ¢ |
Delta Air Lines, Inc. September 2021 March Form 10-Q 3442
Item 2. MD&A - Supplemental Information
Free Cash Flow
The following table shows a reconciliation of net cash provided by/(used in) operating activities (a GAAP measure) to free cash flow (a non-GAAP financial measure). 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(redemptions)/purchases of short-term investments. Net redemptions(redemptions)/purchases of short-term investments represent the net purchase and sale activity of investments and marketable securities in the period, including gains and losses. We adjust for this activity to provide investors a better understanding of the company's free cash flow generated by our operations.
•Strategic investments and related. Cash flows related to our investments in and related transactions with other airlines are included in our GAAP investing activities. We adjust for this activity because it provides a more meaningful comparison to our airline industry peers.
•Net cash flows related to certain airport construction projects and other. Cash flows related to certain airport construction projects are included in our GAAP operating activities and capital expenditures. We have adjusted for these items, which were primarily funded by cash restricted for airport construction, to provide investors a better understanding of the company's free cash flow and capital expenditures that are core to our operational performance in the periods shown.
| Free cash flow reconciliation | Free cash flow reconciliation | Free cash flow reconciliation |
| | Three Months Ended March 31, | | Three Months Ended September 30, |
(in millions) | (in millions) | 2021 | 2020 | 2019 | (in millions) | 2021 | 2020 | 2019 |
Net cash provided by operating activities | $ | 691 | | $ | 358 | | $ | 1,942 | | |
Net cash provided by/(used in) operating activities | | Net cash provided by/(used in) operating activities | $ | 151 | | $ | (2,575) | | $ | 2,245 | |
Net cash used in investing activities | Net cash used in investing activities | (60) | | (2,971) | | (1,096) | | Net cash used in investing activities | (384) | | (1,144) | | (1,125) | |
Adjusted for: | Adjusted for: | | Adjusted for: | |
Net redemptions of short-term investments | (210) | | — | | (206) | | |
Net (redemptions)/purchases of short-term investments | | Net (redemptions)/purchases of short-term investments | (452) | | 745 | | — | |
Strategic investments and related | Strategic investments and related | (19) | | 2,099 | | — | | Strategic investments and related | — | | 235 | | 81 | |
Net cash flows related to certain airport construction projects and other | Net cash flows related to certain airport construction projects and other | 308 | | 353 | | 111 | | Net cash flows related to certain airport construction projects and other | 222 | | 208 | | 221 | |
Total free cash flow | $ | 710 | | $ | (161) | | $ | 751 | | |
Free cash flow | | Free cash flow | $ | (463) | | $ | (2,531) | | $ | 1,422 | |
|
Delta Air Lines, Inc. September 2021 March Form 10-Q 3543
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 Interim Co-ChiefChief Financial Officers,Officer, 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 Interim Co-ChiefChief Financial Officers,Officer, concluded that the controls and procedures were effective as of March 31,September 30, 2021 to ensure that material information was accumulated and communicated to our management, including our Chief Executive Officer and Interim Co-ChiefChief Financial Officers,Officer, as appropriate to allow timely decisions regarding required disclosure.
During the three months ended March 31,September 30, 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 known material risk factors, 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.
Delta Air Lines, Inc. September 2021 March Form 10-Q 3644
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 MarchSeptember 2021 quarter. The table 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.
| | | | | | | | | | | | | | |
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 | | |
| | | | | | | | | | | | | | |
Shares purchased / withheld from employee awards during the September 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 |
July 2021 | 11,558 | | $ | 44.50 | | 11,558 | | $ | — | |
August 2021 | 2,562 | | $ | 40.19 | | 2,562 | | $ | — | |
September 2021 | 7,652 | | $ | 43.03 | | 7,652 | | $ | — | |
Total | 21,772 | | | 21,772 | | |
Delta Air Lines, Inc. September 2021 March Form 10-Q 3745
ITEM 6. EXHIBITS
(a) Exhibits
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,September 30, 2021, formatted in Inline XBRL (included in Exhibit 101)
___________________________
* Incorporated by reference.
Portions of this exhibit have been redacted pursuant to item 601(b)(10)(iv) of Regulation S-K.
Delta Air Lines, Inc. September 2021 March Form 10-Q 3846
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 15,October 13, 2021 | |
Delta Air Lines, Inc. September 2021 March Form 10-Q 3947