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Delta Air Lines (DAL)

Filed: 14 Jul 21, 7:25am

Exhibit 99.1

 

 

 

CONTACT:Investor RelationsCorporate Communications
 404-715-2170404-715-2554
 InvestorRelations@delta.comMedia@delta.com

 

 

 

Delta Air Lines Announces June Quarter 2021 Financial Results

 

 

June quarter 2021 GAAP pre-tax income of $776 million and earnings per share of $1.02 on total revenue of $7.1 billion

June quarter 2021 adjusted pre-tax loss of $881 million and adjusted loss per share of $1.07 on adjusted operating revenue of $6.3 billion

With an improving demand environment, achieved a solid pre-tax profit in the month of June and recently announced the opportunistic addition of seven A350s and 29 737-900ERs to our fleet

 

ATLANTA, Jul. 14, 2021 – Delta Air Lines (NYSE:DAL) today reported financial results for the June quarter 2021 and provided its outlook for the September quarter 2021. Highlights of the June quarter 2021 results, including both GAAP and adjusted metrics, are on page six and are incorporated here.

 

“With the best employees and operation in the industry and an accelerating demand environment, we achieved significant milestones in the quarter including a solid pre-tax profit in the month of June, positive free cash flow for the June quarter, and our people and our brand being recognized with the top spot in the J.D. Power 2021 Airline Study,” said Ed Bastian, Delta’s chief executive officer. “Looking forward, we are harnessing the power of our differentiated brand and resilient competitive advantages to drive towards sustainable profitability in the second half of 2021 and enable long-term value creation.” 

 

“Domestic leisure travel is fully recovered to 2019 levels and there are encouraging signs of improvement in business and international travel. With the recovery picking up steam, we are making investments to support our industry-leading operation. We are also opportunistically acquiring aircraft and creating upside flexibility to accelerate our capacity restoration in 2022 and beyond in a capital-disciplined manner,” he said.

 

June Quarter Financial Results

 

Adjusted pre-tax loss of $881 million excludes $1.5 billion of benefit related to the first and second payroll support program extensions (PSP2 and PSP3, respectively) and mark-to-market adjustments on our investments
Adjusted operating revenue of $6.3 billion, which excludes refinery sales, declined 49 percent on 39 percent lower sellable capacity (see Note A) versus June quarter 2019
Total operating expense, which includes $1.5 billion of benefit related to PSP2 and PSP3, decreased $4.1 billion relative to the June quarter 2019. Adjusted for the benefit related to the PSP programs and third-party refinery sales, total operating expense decreased $3.3 billion or 32 percent in the June quarter 2021 versus the comparable 2019 period
Generated $1.9 billion of operating cash flow, $1.5 billion of free cash flow and $195 million of free cash flow, adjusted in the June quarter
At the end of the June quarter, the company had $17.8 billion in liquidity, including cash and cash equivalents, short-term investments and undrawn revolving credit facilities. The company had total debt and finance lease obligations of $29.1 billion with adjusted net debt of $18.3 billion

 

 

 

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September Quarter 2021 Outlook

 

 3Q21 Forecast
Capacity 1Down 28% - 30%
Total Revenue 1, 2Down 30% - 35%
Fuel Price ($/gal) 2$2.05 - $2.15
CASM-Ex 1, 2Up 11% - 14%
Capital Expenditures~$800 million
Adjusted Net Debt 2~$19.0 billion
 

1 Compared to September quarter 2019

2 Non-GAAP measure

 

 

Revenue Environment

 

“With accelerating demand for air travel and growing affinity for Delta’s best-in-class products, June quarter adjusted operating revenue improved 76 percent from the March quarter. Increasing customer engagement is evident with spend on the American Express co-brand credit card already exceeding 2019 levels and a record number of new customers signing up for SkyMiles accounts during the June month,” said Glen Hauenstein, Delta’s president. “I am excited to see this momentum continuing in the September quarter as business travel rebounds and international markets continue to reopen.”

 

“We have the industry’s best domestic and global network, an increasingly efficient and simplified fleet, a de-commoditized product, a highly valued brand, and the industry’s best employees,” Hauenstein continued. “Combined with our more efficient cost structure, we are on a path to improve on pre-pandemic margins and generate sustainable free cash flow.”

 

Adjusted operating revenue of $6.3 billion for the June quarter improved 76 percent from March quarter 2021. Compared to the same period in 2019, adjusted operating revenue declined 49 percent, an improvement from the company’s guidance update in June of down 50 to 52 percent. Passenger revenue declined 53 percent in the June quarter 2021 compared to June quarter 2019 on 32 percent lower scheduled capacity and 39 percent lower sellable capacity, which included the blocking of the middle seat through the month of April 2021.

 

Total unit revenue, adjusted was 45.4 percent higher than the March quarter 2021 as adjusted operating revenue grew 76 percent on a 21 percent increase in scheduled capacity over the same period. Compared to the March quarter 2021, system yields improved 4.8 percent and load factors improved 24 points.

 

Revenue-related Highlights:

 

·Booking curve normalized as customers made future travel plans: Average daily net cash sales, defined as tickets purchased less tickets refunded, doubled compared to the March quarter and were 20 percent higher than our initial internal forecast. For the month of June, our average daily net cash sales were 70 percent restored to 2019 levels and roughly 10 points ahead of revenue recovery as consumers continue to make future travel plans.
·Premium cabins outperformed main cabin where demand is strongest: Domestic and short-haul Latin premium revenue outperformed main cabin revenue recovery by 5 to 10 points during the quarter. This recovery is expected to be reflected at a system level as premium revenue in other entities continues to improve with the return of business and international travel at scale.
·Pace of corporate recovery accelerated during the quarter: Corporate volumes experienced steady improvement through the quarter, doubling from 20 percent recovered in March to 40 percent recovered in June, driven by increased vaccination rates, the re-opening of offices and improvements in demand in business-heavy markets like New York and Boston.

 

 

 

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·Non-ticket revenue demonstrated resilience: Non-ticket revenue continued to demonstrate resilience, with cargo revenue up 35 percent versus the June quarter 2019 and total loyalty revenue down 30 percent, a 17 percent and 43 percent improvement from the March quarter 2021, respectively.
·Remuneration from American Express returned to 2019 levels in June: American Express remuneration in the quarter was more than 90 percent recovered compared to June quarter 2019 levels as co-brand card spend surpassed 2019 levels while co-brand card acquisitions were nearly fully restored. For the month of June, remuneration exceeded 2019 levels and is expected to remain at or above 2019 levels in the second half.

 

Cost Performance

 

“The cost performance in the first half of the year was strong as we continue to restore the business efficiently. September quarter non-fuel CASM is expected to be between 11 percent and 14 percent above the same period in 2019 as the significantly improving demand environment is driving some welcome cost pressures with an increase in rebuild and selling-related costs,” said Gary Chase, Delta’s interim co-chief financial officer.  “As we continue to leverage our network restoration, we remain on a path to achieve non-fuel CASM below 2019 levels by the fourth quarter,” he said.

 

Total adjusted operating expense for the June quarter decreased $3.3 billion excluding $1.5 billion in benefits from PSP2 and PSP3. Expense performance was driven by an $811 million, or 36 percent reduction in fuel expense, adjusted versus the June quarter 2019, a 34 percent reduction in maintenance expense, and lower volume- and revenue-related expenses. Salaries and related costs and profit sharing of $2.3 billion were down 31 percent compared to the June quarter 2019.

 

Fuel efficiency (see Note A) improved 7.1 percent in the June quarter versus the same period in 2019, with nearly five points of the improvement a result of our fleet renewal efforts, with the remaining improvement temporary in nature due to reduced airport congestion and lower load factors. Adjusted fuel price of $2.12 per gallon was up 11.1 percent compared to the March quarter 2021 and higher than initial guidance in April on increased market prices and losses at the refinery equivalent to 23¢ per gallon.

 

CASM, adjusted was up 0.5 percent compared to June quarter 2019. CASM-Ex was 9.0 percent higher than the June quarter 2019 on 32 percent less capacity. The company saw four points of CASM-Ex pressure related to rebuild expense, including accelerated maintenance, training and hiring to prepare for summer 2022 flying. Additionally, the company made the decision to reward our employees for winning the J.D. Power Award for #1 North American Airline with travel passes, which drove 1.3 points of non-cash CASM-Ex expense in the quarter. CASM-Ex declined 12.3 percent sequentially from operating leverage on a 21 percent increase in scheduled capacity and realized savings from the employee retention tax credit and third-party rate reductions.

 

Non-operating expense for the June quarter was down $181 million compared to the June quarter 2019, driven primarily by mark-to-market gains on certain of our investments, partially offset by higher interest expense.

 

Balance Sheet, Cash and Liquidity

 

“Improving financial performance and a strong liquidity position enable us to use cash on the balance sheet to reduce leverage, and restore our financial flexibility,” Chase said. “Strengthening our financial foundation remains a top priority at Delta as we position for the future and deliver value to our owners,” he said.

 

At the end of the June quarter, the company had total debt and finance lease obligations of $29.1 billion with adjusted net debt of $18.3 billion, $7.8 billion higher than December 2019. The company’s total debt had a weighted average interest rate of 4.3 percent at June quarter-end. In addition to maturities and normal amortizations of nearly $875 million, the company prepaid approximately $450 million in aircraft-related debt during the quarter.

 

As previously announced, Delta voluntarily contributed $1.5 billion into its pension plans during the quarter. By year-end 2021, the company expects the plans to be fully funded on a Pension Protection Act (PPA) basis based on terms included in the American Rescue Plan Act of 2021 and to achieve GAAP funding of 90 percent. At this level of funding, investment returns are expected to satisfy future benefit payments, which the company believes will eliminate any need for material cash contributions to the pension plans going forward. With the plans frozen to new participants, Delta began to reduce the investment risk of the plans during the quarter to protect the funded status.

 

 

 

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Since October 2020, Delta has reduced its financial obligations by $11 billion, freeing $6 billion in collateral and driving $500 million in annualized pension and interest expense savings.

 

Cash generated from operations during the quarter was $1.9 billion, including the benefit from the payroll support programs. Free cash flow was $1.5 billion, with free cash flow, adjusted of $195 million for the quarter. With consumer travel demand returning at an accelerated rate, the company’s Air Traffic Liability increased approximately $1.5 billion quarter-over-quarter to $6.9 billion, approximately $300 million higher than at June quarter 2019. Travel credits represent 35 percent of the Air Traffic Liability and represent approximately 5 percent of average daily bookings.

 

Delta ended the June quarter with $17.8 billion in liquidity, including $2.6 billion in undrawn revolver capacity.

 

Aircraft Acquisition

 

The company recently announced it will add seven A350s and 29 737-900ER pre-owned aircraft to its fleet. This follows the announcement in April to exercise 25 A321neo options. The A350s and 737-900ERs will enter service over the next 24 months, starting in summer 2022. These fleet decisions align with the fleet renewal strategy and will drive improved unit costs going forward by replacing older, less efficient aircraft.  The company will lease the seven A350s and acquire the 29 737-900ERs, driving incremental capex of approximately $700 million in the second half of this year.  The company now anticipates full year 2021 total gross capex of approximately $3.2 billion. 

 

Other Highlights from the June quarter

 

Culture and People

Achieved the No. 1 spot in the J.D. Power 2021 North America Airline Study for customer satisfaction, underscoring the professionalism, care and humanity Delta people delivered during one of the most challenging periods for air travel in modern history
Honored by Glassdoor’s Employees’ Choice Awards for Top 10 CEOs of 2021 – CEO, Ed Bastian received a 97 percent approval rating
Recognized by Disability:IN and The American Association of People with Disabilities as a “Best Place to Work for Disability Inclusion” for the sixth year running
In keeping with our key priority of protecting employees, vaccinated more than 70 percent of employees as of June 30, 2021 which allowed the company to fully reopen its headquarters in June
Partnered with Georgia to host the state’s largest COVID vaccination site supporting the state’s vaccination efforts
Accelerated the funding of the pension plans with $1.5 billion in voluntary contributions in the June quarter, which is now expected to be fully funded on a PPA basis by year end
Recognized as the No. 1 corporate blood drive sponsor with the American Red Cross for the fourth consecutive year
Named for the fourth year in a row to the Civic 50, an initiative of Points of Light, which recognizes the 50 most community-minded companies in the nation

 

Customer Experience and Loyalty

Ran an industry-leading operation, ranking No. 1 among our competitive peer set on all key operating metrics, including completion factor and on time performance for the month of June and year to date
Achieved an all-time record for new SkyMiles member enrollments in the month of June, outpacing the prior record set in July of 2019. New co-brand credit card acquisitions improved more than 75 percent sequentially and were nearly 90 percent recovered to June quarter 2019 levels

 

 

 

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Reintroduced onboard food and beverage service, with L.A. chefs Jon Shook and Vinny Dotolo headlining the return of fresh meals to Delta’s premium domestic cabins
Announced the reopening of Delta’s full network of Sky Club lounges in July and the phased return of signature hot food options at lounges
Launched the newest Delta Sky Club in Fort Lauderdale and opened a Pop-Up Delta Sky Club in Anchorage to support Delta’s increased service to the market
Continued to accelerate expansion and improvements at key hubs, including LAX and LGA, where new headhouses are expected to open in early 2022
Launched first Viasat-equipped A321 into service, delivering high-speed and streaming-quality connectivity – the first of more than 300 aircraft planned for installation in 2021
Announced new routes in response to increasing travel demand, including:
Nonstop Dubrovnik service from New York-JFK, a market previously unserved by Delta
Nonstop Seoul service from Portland
Nonstop Athens service from Atlanta
Nonstop Reykjavik service from Boston
Announced Delta FlyReady, a digital health solution built to assist with international entry requirements

 

Environmental, Social and Governance

Realized 7.1 percent improvement in fuel efficiency during the June quarter 2021 versus June quarter 2019
Continued to accelerate fleet renewal efforts, which drives improved fuel efficiency, with yesterday’s announcement of the addition of 29 737-900ERs and seven A350s along with the exercise of 25 A321neo options announced in April 2021
Continued collaboration with a growing list of travel management companies and corporate partners to purchase sustainable aviation fuel which is a critically important lever in Delta’s Flight to Net Zero
Published Delta’s inaugural ESG Report in May, which expands on the Corporate Responsibility Reports issued in the past, informed by the reporting standards of the Sustainability Accounting Standards Board and framework established by the Task Force on Climate-Related Financial Disclosures
Committed to reporting Delta's progress on the goal of annual airline carbon-neutrality while planning to closely evaluate the Science-Based Targets Initiative framework for aviation
Leveraged partnerships to help drive equity and accountability with the expansion of a partnership with Operation Hope to support its One Million Black Business and Entrepreneur Initiative and internal financial wellness/literacy programs 
Accepted Atlanta city lead role in the OneTen coalition’s overall efforts to recruit, hire, train and advance 1 million Black Americans over the next 10 years into sustaining jobs with opportunities for advancement
Launched enhanced Inclusion Training experience with nearly 51,000 employees who have completed at least one of four DEI training classes

 

Payroll Support Program / Government Grant Accounting

 

In the June quarter 2021, the remaining $1.1 billion of PSP2 and $356 million of PSP3 was recognized as a contra-expense, which is reflected as “government grant recognition” on the Consolidated Statements of Operations. The remaining funds under PSP3 are expected to be recognized in the second half of 2021.

 

 

 

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June Quarter Results

 

June quarter results have been adjusted primarily for the government grant recognition, unrealized gains on investments, and third-party refinery sales as described in the reconciliations in Note B.

 

 GAAP$ Change% Change
($ in millions except per share and unit costs)2Q212Q19
Pre-tax income776  1,907  (1,131) (59)%
Net income652  1,443  (791) (55)%
Diluted earnings per share1.02  2.21  (1.19) (54)%
Operating revenue7,126  12,536  (5,410) (43)%
Total revenue per available seat mile (TRASM) (cents)14.68  17.47  (2.79) (16)%
Operating cash flow1,866  3,268  (1,402) (43)%
Operating expense6,310  10,408  (4,098) (39)%
Total debt and finance lease obligations29,051  9,990  19,061  NM
Cost per available seat mile (CASM) (cents)13.00  14.51  (1.51) (10)%
Fuel expense1,487  2,291  (804) (35)%
Average fuel price per gallon2.16  2.08  0.08  %

 

 Adjusted$ Change% Change
($ in millions except per share and unit costs)2Q212Q19
Pre-tax (loss)/income(881) 1,998  (2,879) NM
Net (loss)/income(678) 1,533  (2,211) NM
(Loss)/diluted earnings per share(1.07) 2.35  (3.42) NM
Operating revenue6,349  12,448  (6,099) (49)%
TRASM, adjusted (cents)13.08  17.35  (4.27) (25)%
Free cash flow, adjusted195  2,175  (1,980) (91)%
Operating expense7,005  10,308  (3,303) (32)%
Adjusted net debt18,282  9,347  8,935  96 %
CASM, adjusted (cents)14.43  14.37  0.07  0.5 %
Consolidated unit cost (CASM-Ex) (cents)11.42  10.47  0.94  %
Fuel expense1,463  2,274  (811) (36)%
Average fuel price per gallon2.12  2.07  0.05  %

 

About Delta Air Lines In a world that thrives on connection, no one better connects the world than Delta Air Lines (NYSE: DAL). Powered by its people around the world, Delta is the U.S. global airline leader in safety, innovation, reliability and customer experience. Delta was named by J.D. Power & Associates as the No. 1 airline in its 2021 North American Satisfaction Study, a recognition of its decade-long airline industry leadership in operational excellence and award-winning customer service.

 

Delta is a values-driven company with a mission of connecting the people and cultures of the globe, striving to foster understanding across a diverse world. Delta is the first airline to commit to becoming carbon neutral on a global basis by focusing on carbon reductions and removals, stakeholder engagement, and coalition building. Delta’s long-term vision is zero-impact aviation: air travel that does not damage the environment directly or indirectly via greenhouse gas emissions, noise, waste generation or other environmental impacts. Its people are committed to these values while leading the way in ensuring safe, reliable and comfortable travel.

 

 

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Forward Looking Statements

Statements made in this press release that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections, goals, aspirations, commitments or strategies for the future, should be considered “forward-looking statements” under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements are not guarantees or promised outcomes and should not be construed as such. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections, goals, aspirations, commitments and strategies reflected in or suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the material adverse effect that the COVID-19 pandemic is having on our business; the impact of incurring significant debt in response to the pandemic; failure to comply with the financial and other covenants in our financing agreements; the possible effects of accidents involving our aircraft; breaches or security lapses in our information technology systems; breaches or lapses in the security of technology systems on which we rely; disruptions in our information technology infrastructure; our dependence on technology in our operations; our commercial relationships with airlines in other parts of the world and the investments we have in certain of those airlines; the effects of a significant disruption in the operations or performance of third parties on which we rely; failure to realize the full value of intangible or long-lived assets; labor issues; the effects of weather, natural disasters and seasonality on our business; the cost of aircraft fuel; the availability of aircraft fuel; failure or inability of insurance to cover a significant liability at Monroe’s Trainer refinery; the impact of environmental regulation on the Trainer refinery, including costs related to renewable fuel standard regulations; our ability to retain senior management, key employees and our culture; significant damage to our reputation and brand, including from exposure to significant adverse publicity; the effects of terrorist attacks or geopolitical conflict; competitive conditions in the airline industry; interruptions or disruptions in service at major airports at which we operate or significant problems associated with types of aircraft or engines we operate; the effects of extensive government regulation on our business; the impact of environmental regulation and climate change risks on our business; and unfavorable economic or political conditions in the markets in which we operate.

 

Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in our Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and our Quarterly Report for the quarterly period ended March 31, 2021. Caution should be taken not to place undue reliance on our forward-looking statements, which represent our views only as of the date of this press release, and which we undertake no obligation to update except to the extent required by law.

 

 

 

 

 

 

 

 

 

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DELTA AIR LINES, INC.

Consolidated Statements of Operations

(Unaudited)

 

 Three Months Ended   Six Months Ended  
 June 30,   June 30,  
(in millions, except per share data)20212019$ Change% Change 20212019$ Change% Change
Operating Revenue:         
Passenger$5,339  $11,368  $(6,029) (53)% $8,087  $20,622  $(12,535) (61)%
Cargo251  186  65  35 % 466  378  88  23 %
Other1,536  982  554  56 % 2,723  2,008  715  36 %
Total operating revenue7,126  12,536  (5,410) (43)% 11,276  23,008  (11,732) (51)%
          
Operating Expense:         
Salaries and related costs2,328  2,847  (519) (18)% 4,530  5,579  (1,049) (19)%
Aircraft fuel and related taxes1,487  2,291  (804) (35)% 2,504  4,269  (1,765) (41)%
Ancillary businesses and refinery939  316  623  NM 1,645  667  978  NM
Contracted services570  731  (161) (22)% 1,089  1,440  (351) (24)%
Depreciation and amortization501  713  (212) (30)% 993  1,328  (335) (25)%
Landing fees and other rents460  548  (88) (16)% 953  1,072  (119) (11)%
Regional carrier expense403  542  (139) (26)% 804  1,079  (275) (25)%
Aircraft maintenance materials and outside repairs287  434  (147) (34)% 581  910  (329) (36)%
Passenger commissions and other selling expenses222  597  (375) (63)% 332  1,071  (739) (69)%
Passenger service175  340  (165) (49)% 294  628  (334) (53)%
Aircraft rent104  107  (3) (3)% 208  209  (1) — %
Restructuring charges —   NM (36) —  (36) NM
Government grant recognition(1,504) —  (1,504) NM (2,689) —  (2,689) NM
Profit sharing—  518  (518) (100)% —  739  (739) (100)%
Other330  424  (94) (22)% 650  869  (219) (25)%
Total operating expense6,310  10,408  (4,098) (39)% 11,858  19,860  (8,002) (40)%
          
Operating Income/(Loss)816  2,128  (1,312) (62)% (582) 3,148  (3,730) NM
          
Non-Operating Expense:         
Interest expense, net(338) (75) (263) NM (700) (158) (542) NM
Impairments and equity method losses—  (17) 17  (100)% (54) (71) 17  (24)%
Gain/(Loss) on investments, net211  (82) 293  NM 473  18  455  NM
Miscellaneous, net87  (47) 134  NM 124  (84) 208  NM
Total non-operating expense, net(40) (221) 181  (82)% (157) (295) 138  (47)%
          
Income/(Loss) Before Income Taxes776  1,907  (1,131) (59)% (739) 2,853  (3,592) NM
          
Income Tax (Provision)/Benefit(124) (464) 340  (73)% 214  (680) 894  NM
          
Net Income/(Loss)652  1,443  (791) (55)% $(525) $2,173  $(2,698) NM
          
Basic Earnings/(Loss) Per Share$1.02  $2.22     $(0.82) $3.30    
Diluted Earnings/(Loss) Per Share$1.02  $2.21     $(0.82) $3.29    
          
Basic Weighted Average Shares Outstanding637  650     636  658    
Diluted Weighted Average Shares Outstanding642  652     636  660    

 

 

 

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DELTA AIR LINES, INC.

Passenger Revenue

(Unaudited)

 

 Three Months Ended   Six Months Ended  
 June 30,   June 30,  
(in millions)20212019$ Change% Change 20212019$ Change% Change
Ticket - Main cabin$2,797  $5,938  $(3,141) (53)% $4,197  $10,659  $(6,462) (61)%
Ticket - Business cabin and premium products1,756  4,031  (2,275) (56)% 2,633  7,298  (4,665) (64)%
Loyalty travel awards428  751  (323) (43)% 669  1,442  (773) (54)%
Travel-related services358  648  (290) (45)% 588  1,223  (635) (52)%
Total passenger revenue$5,339  $11,368  $(6,029) (53)% $8,087  $20,622  $(12,535) (61)%

 

 

DELTA AIR LINES, INC.

Other Revenue

(Unaudited)

 

          
 Three Months Ended   Six Months Ended  
 June 30,   June 30,  
(in millions)20212019$ Change% Change 20212019$ Change% Change
Ancillary businesses and refinery$962  $330  $632  NM $1,688  $699  $989  NM
Loyalty program439  484  (45) (9)% 807  958  (151) (16)%
Miscellaneous135  168  (33) (20)% 228  351  (123) (35)%
Total other revenue$1,536  $982  $554  56 % $2,723  $2,008  $715  36 %
          

 

DELTA AIR LINES, INC.

Total Revenue

(Unaudited)

 

        
    Increase (Decrease)
    2Q21 versus 2Q19
Revenue 2Q21 ($M) ChangeUnit RevenueYieldCapacity
Domestic$4,478   (45)%(32)%(19)%(19)%
Atlantic 288   (85)%(52)%(4)%(68)%
Latin America 485   (36)%(31)%(12)%(6)%
Pacific 88   (87)%(59)%90%(67)%
Total Passenger$5,339   (53)%(31)%(11)%(32)%
Cargo Revenue 251   35%   
Other Revenue 1,536   56%   
Total Revenue$7,126   (43)%(16)%  
       Third Party Refinery Sales (777)      
Total Revenue, adjusted$6,349   (49)%(25)%  
        

 

 

 

 

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DELTA AIR LINES, INC.

Statistical Summary

(Unaudited)

 

 Three Months Ended   Six Months Ended  
 June 30,   June 30,  
 20212019Change 20212019Change
Revenue passenger miles (millions)33,285  63,173  (47) % 51,233  114,790  (55) %
Available seat miles (millions)48,529  71,754  (32) % 88,647  134,169  (34) %
Passenger mile yield (cents)16.04  18.00  (11) % 15.79  17.96  (12) %
Passenger revenue per available seat mile (cents)11.00  15.84  (31) % 9.12  15.37  (41) %
Total revenue per available seat mile (cents)14.68  17.47  (16) % 12.72  17.15  (26) %
TRASM, adjusted - see Note B (cents)13.08  17.35  (25) % 11.23  17.01  (34) %
Cost per available seat mile (cents)13.00  14.51  (10) % 13.38  14.80  (10) %
CASM-Ex  - see Note B (cents)11.42  10.47   % 12.14  10.95  11  %
CASM, adjusted - see Note B (cents)14.43  14.37  0.5  % 14.96  14.65   %
Passenger load factor69 %88 %(19) pts 58 %86 %(28) pts
Fuel gallons consumed (millions)690  1,099  (37) % 1,235  2,061  (40) %
Average price per fuel gallon$2.16  $2.08   % $2.03  $2.07  (2) %
Average price per fuel gallon, adjusted - see Note B$2.12  $2.07   % $2.03  $2.06  (1) %

 

 

 

 

 10 

 

 

DELTA AIR LINES, INC.

Consolidated Statements of Cash Flows

(Unaudited)

 

 Three Months Ended 
 June 30, 
(in millions) 2021  2019 
Cash Flows From Operating Activities:        
Net income $652  $1,443 
Depreciation and amortization  501   713 
Pension, postretirement and postemployment payments (greater)/less than expense  (1,651)  (481)
Changes in air traffic liability  1,545   17 
Changes in profit sharing     518 
Deferred government grant recognition  975    
Changes in balance sheet and other, net  (156)  1,058 
Net cash provided by operating activities  1,866   3,268 
         
Cash Flows From Investing Activities:        
Property and equipment additions:        
Flight equipment, including advance refunds/(payments)  (395)  (1,166)
Ground property and equipment, including technology  (366)  (393)
Purchase of short-term investments  (2,427)   
Redemption of short-term investments  3,123    
Other, net  91   (3)
Net cash provided by/(used in) investing activities  26   (1,562)
         
Cash Flows From Financing Activities:        
Proceeds from long-term obligations  977    
Payments on debt and finance lease obligations  (1,358)  (1,165)
Repurchase of common stock     (268)
Cash dividends     (229)
Other, net  51    
Net cash used in financing activities  (330)  (1,662)
         
Net Increase in Cash, Cash Equivalents and Restricted Cash Equivalents  1,562   44 
Cash, cash equivalents and restricted cash equivalents at beginning of period  9,896   2,985 
Cash, cash equivalents and restricted cash equivalents at end of period $11,458  $3,029 

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the total of the same such amounts shown above:

 

Current assets:        
Cash and cash equivalents $10,357  $2,009 
Restricted cash included in prepaid expenses and other  172   127 
Other assets:        
Cash restricted for airport construction  929   893 
Total cash, cash equivalents and restricted cash equivalents $11,458  $3,029 

 

 


 11 

 

 

DELTA AIR LINES, INC.

Consolidated Balance Sheets

(Unaudited)

 

 June 30,  December 31, 
(in millions) 2021  2020 
ASSETS      
Current Assets:        
Cash and cash equivalents $10,357  $8,307 
Short-term investments  4,873   5,789 
Accounts receivable, net  2,258   1,396 
Fuel inventory  641   377 
Expendable parts and supplies inventories, net  364   355 
Prepaid expenses and other  1,173   1,180 
Total current assets  19,666   17,404 
         
Property and Equipment, Net:        
Property and equipment, net  27,508   26,529 
         
Other Assets:        
Operating lease right-of-use assets  5,653   5,733 
Goodwill  9,753   9,753 
Identifiable intangibles, net  6,006   6,011 
Cash restricted for airport construction  929   1,556 
Equity investments  2,143   1,665 
Deferred income taxes, net  2,158   1,988 
Other noncurrent assets  1,493   1,357 
Total other assets  28,135   28,063 
Total assets $75,309  $71,996 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current Liabilities:        
Current maturities of debt and finance leases $2,372  $1,732 
Current maturities of operating leases  638   678 
Air traffic liability  6,798   4,044 
Accounts payable  3,930   2,840 
Accrued salaries and related benefits  2,215   2,086 
Loyalty program deferred revenue  2,757   1,777 
Fuel card obligation  1,100   1,100 
Other accrued liabilities  3,763   1,670 
Total current liabilities  23,573   15,927 
         
Noncurrent Liabilities:        
Debt and finance leases  26,679   27,425 
Noncurrent air traffic liability  140   500 
Pension, postretirement and related benefits  8,644   10,630 
Loyalty program deferred revenue  4,644   5,405 
Noncurrent operating leases  5,633   5,713 
Other noncurrent liabilities  4,715   4,862 
Total noncurrent liabilities  50,455   54,535 
         
Commitments and Contingencies        
         
Stockholders' Equity:  1,281   1,534 
Total liabilities and stockholders' equity $75,309  $71,996 

 

 

 

 12 

 

 

Note A: Scheduled capacity, also referred to as available seat miles or ASMs and which we have historically presented as a capacity measure, equals the total number of seats available for transporting passengers during a reporting period multiplied by the total number of miles flown during that period. Sellable capacity refers to available seat miles after giving effect to blocked seats through April 30, 2021. Cost and revenue unit metrics in this release, including all measures presented in the statistical summary and in Note B, are calculated on the basis of scheduled capacity. Fuel efficiency refers to the percentage change in fuel consumption rate period over period, which rate is calculated as fuel gallons consumed divided by ASMs.

 

Note B: The following tables show reconciliations of non-GAAP financial measures. The reasons Delta uses these measures are described below. Reconciliations may not calculate due to rounding.

 

Delta sometimes uses information ("non-GAAP financial measures") that is derived from the Consolidated Financial Statements, but that is not presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”). Under the Securities and Exchange Commission rules, non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. The tables below show reconciliations of non-GAAP financial measures used in this release to the most directly comparable GAAP financial measures.

 

Forward Looking Projections. Delta is not able to reconcile forward looking non-GAAP financial measures because the adjusting items such as those used in the reconciliations below will not be known until the end of the period and could be significant.

 

 

 

 13 

 

 

Pre-Tax (Loss)/Income, Net (Loss)/Income, and (Loss)/Diluted Earnings per Share, adjusted. In the current period, pre-tax (loss)/income, net (loss)/income, and (loss)/diluted earnings per share, adjusted exclude the following items directly related to the impact of COVID-19 and our response for comparability with the prior period:

 

Restructuring charges. During 2020, we recorded restructuring charges, including certain accruals, following strategic business decisions in response to the COVID-19 pandemic. In the June quarter 2021, we recognized $8 million of adjustments to certain of those restructuring charges, representing changes in our estimates.

 

Government grant recognition. We recognized $1.5 billion of the grant proceeds from the payroll support program extensions as contra-expense during the June quarter 2021. We are recognizing the grant proceeds as contra-expense based on the periods that the funds are intended to compensate and expect to use all proceeds from the payroll support program extensions in the second half of 2021.

 

Loss on extinguishment of debt. This adjustment relates to early termination of a portion of our debt.

 

We also regularly adjust pre-tax income/(loss), net income/(loss), and diluted earnings per share for the following items to determine pre-tax (loss)/income, net (loss)/income, and (loss)/diluted earnings per share, adjusted for the reasons described below. We include the income tax effect of adjustments when presenting net (loss)/income, adjusted. j

 

MTM adjustments and settlements on hedges. Mark-to-market ("MTM") adjustments are defined as fair value changes recorded in periods other than the settlement period. Such fair value changes are not necessarily indicative of the actual settlement value of the underlying hedge in the contract settlement period. Settlements represent cash received or paid on hedge contracts settled during the applicable period.

 

Equity investment MTM adjustments. We adjust for our proportionate share of our equity method investee, Virgin Atlantic’s, hedge portfolio MTM adjustments (recorded in non-operating expense) to allow investors to understand and analyze our core operational performance in the periods shown.

 

MTM adjustments on investments. Unrealized gains/losses result from our equity investments that are accounted for at fair value in non-operating expense. These gains/losses are driven by changes in stock prices, other valuation techniques for investments in companies without publicly-traded shares and foreign currency fluctuations. Adjusting for these gains/losses allows investors to better understand and analyze our core operational performance in the periods shown.

 

Delta Private Jets adjustment. Because we combined Delta Private Jets with Wheels Up in January 2020, we have excluded the impact of Delta Private Jets from 2019 results for comparability.

 

 Three Months Ended Three Months Ended
 June 30, 2021 June 30, 2021
 Pre-TaxIncomeNet Diluted Earnings/
(in millions, except per share data)Income/(Loss)TaxIncome/(Loss) (Loss) Per Share
GAAP$776  $(124) $652   $1.02  
Adjusted for:     
Restructuring charges (2)    
Government grant recognition(1,504) 350  (1,154)   
Loss on extinguishment of debt26  (6) 20    
MTM adjustments and settlements on hedges24  (6) 18    
MTM adjustments on investments(211) (9) (220)   
Non-GAAP$(881) $203  $(678)  $(1.07) 

 

      
 Three Months Ended Three Months Ended
 June 30, 2019 June 30, 2019
 Pre-TaxIncomeNet Diluted Earnings
(in millions, except per share data)IncomeTaxIncome Per Share
GAAP$1,907  $(464) $1,443   $2.21  
Adjusted for:     
MTM adjustments and settlements on hedges10  (2)    
Equity investment MTM adjustments(2) —  (2)   
MTM adjustments on investments82   83    
Delta Private Jets adjustment —     
Non-GAAP$1,998  $(465) $1,533   $2.35  

 

 

 14 

 

 

Operating Revenue, adjusted and Total Revenue Per Available Seat Mile ("TRASM"), adjusted. We adjust operating revenue and TRASM for third party refinery sales for the reasons described below. We make an adjustment for the impact of Delta Private Jets for the same reason described above under the heading pre-tax (loss)/income, net (loss)/income, and (loss)/diluted earnings per share, adjusted.

 

Third-party refinery sales. We adjust operating revenue and TRASM for refinery sales to third parties to determine operating revenue, adjusted and TRASM, adjusted because this revenue is not related to our airline segment. Operating revenue, adjusted and TRASM, adjusted therefore provides a more meaningful comparison of revenue from our airline operations to the rest of the airline industry.

 

  

Three Months Ended

  2Q21 vs 2Q19 
(in millions) June 30,
2021
  March 31,
2021
  September 30,
2019
  June 30,
2019
  % Change 
Operating revenue $7,126  $4,150  $12,560  $12,536     
Adjusted for:                    
Third-party refinery sales  (777)  (540)  (6)  (40)    
Delta Private Jets adjustment        (47)  (49)    
Operating revenue, adjusted $6,349  $3,610  $12,507  $12,448   (49)%

 

 

 Six Months Ended            
(in millions) June 30, 2021  June 30, 2019          Change 
                  
Operating revenue $11,276  $23,008             
Adjusted for:                    
Third-party refinery sales  (1,317)  (89)            
Delta Private Jets adjustment     (92)            
Operating revenue, adjusted $9,959  $22,828           (56)%

 

 Three Months Ended      2Q21 vs 2Q19 
(in millions) June 30, 2021  March 31, 2021   June 30, 2019      % Change 
                  
TRASM (cents)  14.68   10.34   17.47         
Adjusted for:                    
Third-party refinery sales  (1.60)  (1.35)  (0.06        
Delta Private Jets adjustment        (0.07        
TRASM, adjusted  13.08   9.00   17.35       (25)%

 

 Six Months Ended          Change 
(in millions) June 30, 2021  June 30, 2019            
                  
TRASM (cents)  12.72   17.15             
Adjusted for:                    
Third-party refinery sales  (1.49)  (0.07)            
Delta Private Jets adjustment     (0.07)            
TRASM, adjusted  11.23   17.01           (34)%

 

 

 


 15 

 

 

Free Cash Flow and Free Cash Flow, adjusted. We present free cash flow and free cash flow, adjusted because management believes these metrics are helpful to investors to evaluate the company's ability to generate cash that is available for use for debt service or general corporate initiatives. Free cash flow, adjusted is also used internally as a component of our 2021 incentive compensation program. Free cash flow is defined as net cash from operating activities and net cash from investing activities, adjusted for (i) net redemptions of short-term investments, (ii) strategic investments and related and (iii) net cash flows related to certain airport construction projects and other, while free cash flow, adjusted is further adjusted for (iv) financed aircraft acquisitions, (v) government grant proceeds and (vi) other items that are not representative of our core operations, such as our pension funding. These adjustments are made for the following reasons:

 

Net redemptions of short-term investments. Net redemptions of short-term investments represent the net purchase and sale activity of investments and marketable securities in the period, including gains and losses. We adjust for this activity to provide investors a better understanding of the company's free cash flow generated by our operations.

 

Strategic investments 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 operations in the periods shown.

 

Financed aircraft acquisitions. This adjusts free cash flow to reflect aircraft deliveries that are leased as capital expenditures. The adjustment is based on their original contractual purchase price or fair value.

 

Government grant proceeds. Cash flows related to the government grant proceeds are reported within operating activities in GAAP results. We adjust free cash flow for this item to better illustrate the cash from our core operations.

 

Pension funding. Cash flows from pension funding are reported within operating activities in GAAP results. We adjust free cash flow for this item to better illustrate the cash from our core operations.

 

  Three Months Ended  Three Months Ended 
(in millions) June 30, 2021  June 30, 2019 
Net cash provided by operating activities $1,866  $3,268 
Net cash provided by/(used in) investing activities  26   (1,562)
Adjustments:        
Net redemptions of short-term investments  (697)   
Strategic investments and related  (74)  89 
Net cash flows related to certain airport construction projects and other  329   54 
Free cash flow $1,450  $1,849 
Financed aircraft acquisitions  (277)  (174)
Government grant proceeds  (2,479)   
Pension funding  1,500   500 
Free cash flow, adjusted $195  $2,175 

 

 

 

 16 

 

 

Operating Expense, adjusted and CASM, adjusted. In the current period, operating expense, adjusted and CASM, adjusted exclude the following items directly related to the impact of COVID-19 and our response: restructuring charges and government grant recognition, as discussed above under the heading pre-tax (loss)/income, net (loss)/income, and (loss)/diluted earnings per share, adjusted. We also adjust operating expense and CASM for MTM adjustments and settlements on hedges, third-party refinery sales and the impact of Delta Private Jets for the same reasons described above under the headings pre-tax (loss)/income, net (loss)/income, and (loss)/diluted earnings per share, adjusted, and operating revenue, adjusted and TRASM, adjusted to determine operating expense, adjusted and CASM, adjusted.

 

 Operating Expense  CASM 
 Three Months Ended  Three Months Ended 
(operating expense in millions, CASM in cents) June 30, 2021  June 30, 2019  June 30, 2021  June 30, 2019 
GAAP $6,310  $10,408   13.00   14.51 
Adjusted for:                
Restructuring charges  (8)     (0.02)   
Government grant recognition  1,504      3.10    
MTM adjustments and settlements on hedges  (24)  (10)  (0.05)  (0.01)
Third-party refinery sales  (777)  (40)  (1.60)  (0.06)
Delta Private Jets adjustment     (50)     (0.07)
Non-GAAP $7,005  $10,308   14.43   14.37 

 

 

 Operating Expense  CASM 
 Six Months Ended  Six Months Ended 
(operating expense in millions, CASM in cents) June 30, 2021  June 30, 2019  June 30, 2021  June 30, 2019 
GAAP $11,858  $19,860   13.38   14.80 
Adjusted for:                
Restructuring charges  36      0.04    
Government grant recognition  2,689      3.03    
MTM adjustments and settlements on hedges  (1)  (17)     (0.01)
Third-party refinery sales  (1,317)  (89)  (1.49)  (0.07)
Delta Private Jets adjustment     (92)     (0.07)
Non-GAAP $13,266  $19,662   14.96   14.65 

 

 

 

 

 17 

 

 

Adjusted Net Debt. Delta uses adjusted total debt, including aircraft rent, in addition to adjusted debt and finance leases, to present estimated financial obligations. Delta reduces adjusted total debt by cash, cash equivalents and short-term investments, and LGA restricted cash, resulting in adjusted net debt, to present the amount of assets needed to satisfy the debt. Management believes this metric is helpful to investors in assessing the company's overall debt profile.

 

(in millions) June 30, 2021 
Debt and finance lease obligations $29,051 
Plus: sale-leaseback financing liabilities  2,259 
Plus: unamortized discount/(premium) and debt issue cost, net and other  257 
Adjusted debt and finance lease obligations $31,567 
Plus: 7x last twelve months' aircraft rent  2,874 
Adjusted total debt $34,441 
Less: cash, cash equivalents and short-term investments  (15,230)
Less: LGA restricted cash  (929)
Adjusted net debt $18,282 

 

(in millions) December 31, 2019 
Debt and finance lease obligations $11,160 
Plus: unamortized discount/(premium) and debt issue cost, net and other  (115)
Adjusted debt and finance lease obligations $11,044 
Plus: 7x last twelve months' aircraft rent  2,963 
Adjusted total debt $14,007 
Less: cash, cash equivalents and short-term investments  (2,882)
Less: LGA restricted cash  (636)
Adjusted net debt $10,489 

 

(in millions) June 30, 2019 
Debt and finance lease obligations $9,990 
Plus: unamortized discount/(premium) and debt issue cost, net and other  (125)
Adjusted debt and finance lease obligations $9,865 
Plus: 7x last twelve months' aircraft rent  2,874 
Adjusted total debt $12,739 
Less: cash, cash equivalents and short-term investments  (2,009)
Less: LGA restricted cash  (1,383)
Adjusted net debt $9,347 

 

 

 

 18 

 

 

Non-Fuel Unit Cost or Cost per Available Seat Mile, ("CASM-Ex"). In the current period, CASM-Ex excludes the following items directly related to the impact of COVID-19 and our response: restructuring charges and government grant recognition, as discussed above under the heading pre-tax (loss)/income, net (loss)/income, and (loss)/diluted earnings per share, adjusted. We adjust for refinery sales to third parties for the same reason described above under the heading operating revenue, adjusted and TRASM, adjusted. We adjust for the impact of Delta Private Jets for the same reason described above under the heading pre-tax (loss)/income, net (loss)/income, and (loss)/diluted earnings per share, adjusted. We also adjust CASM for the following items to determine CASM-Ex for the reasons described below.

 

Aircraft fuel and related taxes. The volatility in fuel prices impacts the comparability of year-over-year financial performance. The adjustment for aircraft fuel and related taxes allows investors to 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.

 

 

 

  Three Months Ended   2Q21vs 2Q19  
  June 30, 2021  March 31, 2021  December 31, 2019  September 30, 2019   June 30, 2019   % change  
CASM (cents)  13.00   13.83   15.34   13.85   14.51    
Adjusted for:                        
Restructuring charges  (0.02)  0.11              
Government grant recognition  3.10   2.96              
Aircraft fuel and related taxes  (3.06)  (2.54)  (3.08)  (2.96)  (3.19)    
Third-party refinery sales  (1.60)  (1.35)     (0.01)  (0.06)    
Profit sharing        (0.59)  (0.68)  (0.72)    
Delta Private Jets adjustment        (0.07)  (0.05)  (0.06)    
CASM-Ex  11.42   13.01   11.59   10.15   10.47   9%

 

 

  Six Months Ended               
  June 30, 2021  June 30, 2019             Change 
CASM (cents)  13.38   14.80                  
Adjusted for:                          
Restructuring charges  0.04                    
Government grant recognition  3.03                    
Aircraft fuel and related taxes  (2.82)  (3.18)                
Third-party refinery sales  (1.49)  (0.07)                
Profit sharing     (0.55                
Delta Private Jets adjustment     (0.06                 
CASM-Ex  12.14   10.95                11%

 

 

 

 

 19 

 

 

Fuel expense, adjusted and Average fuel price per gallon, adjusted. We adjust fuel expense for MTM adjustments and settlements on hedges and the impact of Delta Private Jets for the same reasons described under the heading pre-tax (loss)/income, net (loss)/ income, and (loss)/diluted earnings per share, adjusted.

 

           Average Price Per Gallon 
  Three Months Ended  Three Months Ended 
  June 30,  March 31,  June 30,  June 30,  March 31,  June 30, 
(in millions, except per gallon data) 2021  2021  2019  2021  2021  2019 
Total fuel expense $1,487  $1,017  $2,291  $2.16  $1.87  $2.08 
MTM adjustments and settlements on hedges  (24)  23   (10)  (0.03)  0.04   (0.01)
Delta Private Jets adjustment        (8)        (0.01)
Total fuel expense, adjusted $1,463  $1,040  $2,274  $2.12  $1.91  $2.07 

 

        Average Price Per Gallon 
  Six Months Ended  Six Months Ended 
  June 30,  June 30,  June 30,  June 30, 
(in millions, except per gallon data) 2021  2019  2021  2019 
Total fuel expense $2,504  $4,269  $2.03  $2.07 
MTM adjustments and settlements on hedges  (1)  (17)     (0.01)
Delta Private Jets adjustment     (15)     (0.01)
Total fuel expense, adjusted $2,504  $4,237  $2.03  $2.06 
                 
Percent change 2021 YTD compared to 2019 YTD  (41)%            

 

 

 

 

 

 

 


 20