# Delta Air Lines, Inc.: Form 10-Q for the period ended Mar 31, 2022

- Company: [Delta Air Lines, Inc.](/companies/dal.md) (CIK 27904)
- Form: 10-Q
- Filed: 2022-04-13
- Accepted by EDGAR: Apr 13, 2022, 16:38 ET
- Period: 2022-03-31
- Accession: 0000027904-22-000006
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/27904/000002790422000006/dal-20220331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/27904/000002790422000006/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-01-01 to 2022-03-31 | $9.35bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | −$783.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | −$260.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | −$940.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-01-01 to 2022-03-31 | −$1.48 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-01-01 to 2022-03-31 | −$1.48 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-01-01 to 2022-03-31 | 637,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | $1.77bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-01-01 to 2022-03-31 | $1.77bn | us-gaap:PaymentsToAcquireProductiveAssets |
| Cash and equivalents | at 2022-03-31 | $7.71bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-03-31 | $15.72bn | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $73.75bn | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $24.06bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2022-03-31 | $22.94bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-03-31 | $831.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-03-31 | $2.99bn | us-gaap:StockholdersEquity |
| Shares outstanding | at 2022-03-31 | 641,076,463 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 17,849 characters.

*Environmental Sustainability.* During 2022, we are continuing to develop our climate transition plan and to have our medium- and long-term climate goals, including our goal of achieving net zero greenhouse gas emissions no later than 2050, validated by the Science Based Targets initiative, as described in our 2021 Form 10-K. We expect our path toward achievement of these goals to depend heavily on increased use of sustainable aviation fuel ("SAF") which is not presently available at scale or at prices competitive to jet fuel, and improved fuel efficiency from fleet renewal and operational initiatives. In the three months ended March 31, 2022, we also incurred $47 million of expense related to carbon offset credits, which relates to a portion of our airline segment's 2021 carbon emissions.

Delta Air Lines, Inc. March 2022 Form 10-Q 20

### Results of Operations - Three Months Ended March 31, 2022 and 2021

### Operating Revenue

| (in millions)(1) | Three Months Ended March 31, 2022 |  | 2021 |  | Increase (Decrease) |  | % Increase (Decrease) |
| --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Ticket - Main cabin | $3,448 |  | $1,353 |  | $2,095 |  | 155% |
| Ticket - Premium products | 2,538 |  | 924 |  | 1,614 |  | 175% |
| Loyalty travel awards | 543 |  | 241 |  | 302 |  | 125% |
| Travel-related services | 378 |  | 230 |  | 148 |  | 64% |
| Total passenger revenue | $6,907 |  | $2,748 |  | $4,159 |  | 151% |
| Cargo | 289 |  | 215 |  | 74 |  | 34% |
| Other | 2,152 |  | 1,187 |  | 965 |  | 81% |
| Total operating revenue | $9,348 |  | $4,150 |  | $5,198 |  | 125% |
| TRASM (cents) | 18.04 | ¢ | 10.34 | ¢ | 7.70 | ¢ | 74% |
| Third-party refinery sales | (2.29) |  | (1.35) |  | (0.94) |  | 70% |
| TRASM, adjusted(2) | 15.75 | ¢ | 9.00 | ¢ | 6.75 | ¢ | 75% |

(1) Total amounts in the table above may not calculate exactly due to rounding.

(2) TRASM, adjusted is a non-GAAP financial measure. For additional information on adjustments to TRASM, see "Supplemental Information" below.

#### Operating Revenue

Compared to the March 2021 quarter, our operating revenue increased $5.2 billion, or 125%, due to the continued recovery in demand from the COVID-19 pandemic and higher refinery third party sales. The increase in operating revenue, on a 29% increase in capacity, resulted in a 74% increase in total revenue per available seat mile ("TRASM") and a 75% increase in TRASM, adjusted compared to the March 2021 quarter. The growth in passenger revenue was due to increased demand in both main cabin and premiums products, with premium products experiencing a quicker recovery than main cabin.

See "Refinery Segment" below for additional details on the refinery's operations, including third party refinery sales recorded in other revenue.

We have historically generated cargo revenues in domestic and international markets through the use of cargo space on regularly scheduled passenger aircraft. In 2020 and 2021, following the onset of the COVID-19 pandemic, reduced industry cargo capacity drove a significant increase in our cargo yield, and we also generated cargo revenue through the operation of cargo-only charter flights (i.e., using aircraft in our fleet not being utilized for passenger travel to fly cargo internationally). The higher cargo yield trend has continued into the March 2022 quarter driving the increase in revenue compared to the March 2021 quarter. We expect capacity constraints and elevated market yields to continue through 2022 while the industry rebuilds international networks to pre-pandemic levels.

#### Passenger Revenue by Geographic Region

*(in millions)*

|  | Three Months Ended March 31, 2022 | Increase (Decrease) vs. Three Months Ended March 31, 2021 Passenger Revenue | RPMs (Traffic) | ASMs (Capacity) | Passenger Mile Yield | PRASM | Load Factor |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | --- |
| Domestic | $5,563 | 144% | 105% | 29% | 19% | 90% | 29 | pts |
| Atlantic | 539 | 281% | 320% | 108% | (9)% | 83% | 33 | pts |
| Latin America | 680 | 158% | 93% | (1)% | 33% | 160% | 38 | pts |
| Pacific | 125 | 100% | 106% | 3% | (3)% | 95% | 17 | pts |
| Total | $6,907 | 151% | 116% | 29% | 17% | 95% | 30 | pts |

#### Domestic

Domestic passenger unit revenue ("PRASM") increased in the March 2022 quarter compared to the March 2021 quarter as a result of the higher levels of capacity and demand during the March 2022 quarter due to the ongoing recovery in the period.

Delta Air Lines, Inc. March 2022 Form 10-Q 21

The March 2022 quarter domestic consumer revenue was above March 2021 quarter levels. After starting with somewhat muted demand recovery due to rising COVID-19 cases attributable to variants of the virus, revenue recovery accelerated during the quarter as consumers continued to show increased confidence in travel.

We also remain optimistic about the ultimate recovery of business travel, which is comprised of both corporate managed travel and small- and medium-sized businesses, and expect the recovery of both of these components to continue to increase throughout 2022. Business travel demand in the March 2022 quarter was the highest since the onset of the COVID-19 pandemic.

#### International

International passenger revenue for the March 2022 quarter increased compared to the March 2021 quarter as travel to certain destinations has resumed or increased. While some countries have removed or eased travel restrictions, many countries still maintain international testing requirements and travel restrictions, which have restrained demand in the short-term.

In November 2021, travel restrictions for fully vaccinated foreign visitors to the United States were lifted. This action made travel to the U.S. by many foreign nationals possible for the first time in 18 months. Despite this policy change, we expect the lower international revenue environment to continue through at least the second quarter of 2022, with the recovery of international revenue continuing to trail domestic revenue. We will continue to be nimble in the restoration of our international network based on changes in government restrictions and consumer demand.

The Atlantic region continues to improve, despite the conflict in Ukraine, as western European countries remove or ease travel restrictions. In February 2022, we suspended our codeshare services operated in conjunction with Russian national airline, Aeroflot, which is not expected to have a material impact on our Atlantic region revenues as Russia and Ukraine represent less than one percent of our Atlantic region traffic.

The Latin America region has shown the most recovery of the international regions, with continued demand improvement for leisure destinations in the Caribbean, Mexico and Central America. We expect this trend to continue throughout 2022 with the recovery in Latin America leading the Atlantic and Pacific regions.

The Pacific region continues to be the most impacted by the restrictions described above. Travel in the Pacific region remains largely limited to essential travel, and we expect only small demand improvements until government restrictions ease, such as South Korea's recent announcement that vaccinated travelers would be able to enter the country without quarantine beginning on April 1, 2022.

#### Ticket Validity Flexibility

In order to provide our customers more flexibility and time to plan or rebook their travel, in January 2022, we announced that all existing travel credit holders will have until December 31, 2023 to rebook their ticket for travel throughout 2024. Additionally, all Delta customers with upcoming 2022 travel or who purchase a ticket in 2022 will also have the flexibility to rebook their ticket through December 31, 2023, and travel throughout 2024.

We estimate the value of ticket breakage and recognize the related revenue at the scheduled flight date. Our ticket breakage estimates are primarily based on historical experience, ticket contract terms and customers’ travel behavior. Given the impact of the COVID-19 pandemic on customer behavior and changes made in ticket validity terms, as well as the elimination of change fees for most tickets, our estimates of revenue that will be recognized from the air traffic liability for unused tickets may vary in future periods.

Delta Air Lines, Inc. March 2022 Form 10-Q 22

### Other Revenue

*(in millions)*

|  | Three Months Ended March 31, 2022 | 2021 | Increase (Decrease) | % Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Refinery | $1,187 | $540 | $647 | 120% |
| Loyalty program | 571 | 368 | 203 | 55% |
| Ancillary businesses | 209 | 186 | 23 | 12% |
| Miscellaneous | 185 | 93 | 92 | 99% |
| Total other revenue | $2,152 | $1,187 | $965 | 81% |

*Refinery.* This represents refinery sales to third parties. These sales, which are at or near cost, increased $647 million compared to the March 2021 quarter. The increase in third-party refinery sales resulted from higher pricing and production during the March 2022 quarter compared to the March 2021 quarter. See "Refinery Segment" below for additional details on the refinery's operations, including third party refinery sales recorded in other revenue.

*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. As co-brand card spend and card acquisitions continue to be strong, revenues from our relationship with American Express increased in the March 2022 quarter compared to 2021.

*Ancillary Businesses.* Ancillary businesses revenue includes aircraft maintenance services we provide to third parties and our vacation wholesale operations.

*Miscellaneous.* Miscellaneous revenue is primarily composed of lounge access, including access provided to certain American Express cardholders, and codeshare revenues. The volume of these transactions has increased compared to the March 2021 quarter due to the ongoing recovery of our business that continued to materialize in the March 2022 quarter. Our network of Delta Sky Club lounges was fully reopened by the end of July 2021 after some lounges temporarily closed at the onset of the pandemic in 2020.

Delta Air Lines, Inc. March 2022 Form 10-Q 23

### Operating Expense

*(in millions)*

|  | Three Months Ended March 31, 2022 | 2021 | Increase (Decrease) | % Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Salaries and related costs | $2,826 | $2,202 | $624 | 28% |
| Aircraft fuel and related taxes | 2,092 | 1,017 | 1,075 | 106% |
| Ancillary businesses and refinery | 1,382 | 706 | 676 | 96% |
| Contracted services | 753 | 519 | 234 | 45% |
| Depreciation and amortization | 506 | 492 | 14 | 3% |
| Landing fees and other rents | 504 | 493 | 11 | 2% |
| Regional carrier expense | 491 | 401 | 90 | 22% |
| Aircraft maintenance materials and outside repairs | 465 | 294 | 171 | 58% |
| Passenger commissions and other selling expenses | 312 | 110 | 202 | 184% |
| Passenger service | 275 | 118 | 157 | 133% |
| Aircraft rent | 122 | 104 | 18 | 17% |
| Restructuring charges | (5) | (44) | 39 | (89)% |
| Government grant recognition | — | (1,186) | 1,186 | (100)% |
| Other | 408 | 322 | 86 | 27% |
| Total operating expense | $10,131 | $5,548 | $4,583 | 83% |

*Salaries and Related Costs.* During 2021, we continued to offer voluntary unpaid leaves of absence in response to the COVID-19 pandemic for periods ranging from 30 days up to 12 months and approximately 13,000 of our employees elected to take a leave of absence during the March 2021 quarter. In the March 2022 quarter we no longer offered these leaves of absence as the program terminated by the end of the September 2021 quarter. Additionally, we hired approximately 15,000 employees since the March 2021 quarter, of which approximately 4,000 were in the March 2022 quarter, in certain areas, including flight operations, reservations and customer care and airport customer service, in order to support our operations as demand and capacity returns. These actions resulted in higher salaries and related costs during the March 2022 quarter compared to the March 2021 quarter.

In March 2022, we announced that eligible employees will receive a 4% base pay increase, effective May 1, 2022.

*Aircraft Fuel and Related Taxes.* Fuel expense increased $1.1 billion compared to the March 2021 quarter primarily due to a 71% increase in the market price of jet fuel and a 38% increase in consumption on a comparable increase in capacity. We expect this elevated jet fuel cost to continue throughout 2022 due to recent market disruptions, further exacerbated by geopolitical events.

Additionally, during the March 2022 quarter, we purchased and retired $47 million of carbon offset credits which relate to a portion of our airline segment's 2021 carbon emissions. In the table below, these costs are shown in the carbon offset costs line item.

*Fuel expense and average price per gallon*

*(in millions, except per gallon data)*

|  | Three Months Ended March 31, 2022 | 2021 | Increase (Decrease) 2022 | Average Price Per Gallon Three Months Ended March 31, 2021 |  | Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Fuel purchase cost(1) | $2,102 | $895 | $1,207 | $2.81 | $1.64 | $1.17 |
| Carbon offset costs | 47 | 20 | 27 | 0.06 | 0.04 | 0.02 |
| Fuel hedge impact | (4) | (23) | 19 | (0.01) | (0.04) | 0.03 |
| Refinery segment impact | (53) | 125 | (178) | (0.07) | 0.23 | (0.30) |
| Total fuel expense | $2,092 | $1,017 | $1,075 | $2.79 | $1.87 | $0.92 |

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

Delta Air Lines, Inc. March 2022 Form 10-Q 24

*Ancillary Businesses and Refinery.* Ancillary businesses and refinery includes expenses associated with refinery sales to third parties, aircraft maintenance services we provide to third parties and our vacation wholesale operations. Increased expenses were primarily related to refinery sales to third parties, which are at or near cost. The refinery cost of sales increased $647 million compared to the March 2021 quarter. The increase in third-party refinery sales resulted from higher pricing and production during the March 2022 quarter compared to the March 2021 quarter.

*Contracted Services.* During the March 2022 quarter, demand and capacity increased compared to the March 2021 quarter due to the ongoing recovery from the COVID-19 pandemic as discussed above. The continued restoration of our operations was the primary driver for the increase in contracted services.

*Regional Carrier Expense.* Regional carrier expense increased compared to the March 2021 quarter due to an increase in utilization as a result of the increased demand discussed above.

*Aircraft Maintenance Materials and Outside Repairs.* Maintenance expense increased compared to the March 2021 quarter as we returned aircraft to service and to support our operational reliability.

*Passenger commissions and other selling expenses.* Compared to the March 2021 quarter, passenger revenue increased 151% in the March 2022 quarter, which was the primary reason for the increase in passenger commissions and other selling expenses.

*Passenger service.* Passenger service increased compared to the March 2021 quarter due to the increased traffic discussed above.

*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 March 2022 quarter, we recognized $5 million of net adjustments to certain of those restructuring charges, representing changes in our estimates, compared to $44 million of net adjustments in the March 2021 quarter.

*Government Grant Recognition.* During the March 2021 quarter, we recognized $1.2 billion of government PSP grant proceeds as contra-expense that were used exclusively for the payment of employee wages, salaries and benefits.

### Non-Operating Results

*(in millions)*

|  | Three Months Ended March 31, 2022 | 2021 | Favorable (Unfavorable) |
| --- | ---: | ---: | ---: |
| Interest expense, net | $(274) | $(361) | $87 |
| Equity method results | — | (54) | 54 |
| Gain/(loss) on investments, net | (147) | 262 | (409) |
| Loss on extinguishment of debt | (25) | (56) | 31 |
| Pension and related benefit/(expense) | 73 | 107 | (34) |
| Miscellaneous, net | (44) | (15) | (29) |
| Total non-operating expense, net | $(417) | $(117) | $(300) |

*Interest expense, net.* Interest expense, net includes interest expense and interest income. This decreased compared to the March 2021 quarter as a result of our debt reduction initiatives since the December 2020 quarter. During 2021, we made payments of approximately $5.8 billion related to our debt and finance leases, which included approximately $3.8 billion for early repayments. We have continued to pay down our debt in the March 2022 quarter with $1.4 billion of payments on debt and finance lease obligations, including $199 million for the early repurchase of various secured notes and unsecured notes through repurchases on the open market. We continue to seek opportunities to pre-pay our debt, in addition to periodic amortization and scheduled maturities, during the remainder of 2022 and beyond.

*Equity method results.* Equity method results in 2021 reflected our share of Virgin Atlantic's equity method losses. See Note 4 of the Notes to the Condensed Consolidated Financial Statements for additional information on our equity investments.

Delta Air Lines, Inc. March 2022 Form 10-Q 25

## Market risk

As filed, 171 characters.

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.

## Controls and procedures

As filed, 892 characters.

Our management, including our Chief Executive Officer and Chief Financial 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 Chief Financial Officer, concluded that the controls and procedures were effective as of March 31, 2022 to ensure that material information was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

During the three months ended March 31, 2022, 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.

## Risk factors

As filed, 292 characters.

“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. March 2022 Form 10-Q 35

Filed Apr 13, 2022.
Source: SEC EDGAR, the filing index for accession 0000027904-22-000006. Last ingested by Listed: Nov 13, 2026, 00:52 ET. No prices; not investment advice.