Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 994K
2: EX-10.1 Material Contract HTML 28K
3: EX-10.2 Material Contract HTML 26K
4: EX-15 Letter re: Unaudited Interim Financial Info HTML 18K
5: EX-31.1 Certification -- §302 - SOA'02 HTML 22K
6: EX-31.2 Certification -- §302 - SOA'02 HTML 22K
7: EX-32 Certification -- §906 - SOA'02 HTML 20K
14: R1 Cover HTML 70K
15: R2 Consolidated Balance Sheets (Unaudited) HTML 165K
16: R3 Consolidated Balance Sheets (Unaudited) HTML 40K
(Parenthetical)
17: R4 Condensed Consolidated Statements of Operations HTML 121K
and Comprehensive Income/(Loss) (Unaudited)
18: R5 Condensed Consolidated Statements of Cash Flows HTML 88K
(Unaudited)
19: R6 Consolidated Statements of Stockholders' Equity HTML 90K
(Unaudited)
20: R7 Consolidated Statements of Stockholders' Equity HTML 20K
(Unaudited) (Parenthetical)
21: R8 Summary of Significant Accounting Policies HTML 25K
22: R9 Revenue Recognition HTML 93K
23: R10 Fair Value Measurements HTML 45K
24: R11 Investments HTML 47K
25: R12 Debt HTML 94K
26: R13 Employee Benefit Plans HTML 59K
27: R14 Commitments and Contingencies HTML 41K
28: R15 Accumulated Other Comprehensive Loss HTML 39K
29: R16 Segments HTML 104K
30: R17 Earnings/(Loss) Per Share HTML 39K
31: R18 Summary of Significant Accounting Policies HTML 25K
(Policies)
32: R19 Revenue Recognition (Tables) HTML 89K
33: R20 Fair Value Measurements (Tables) HTML 40K
34: R21 Investments (Tables) HTML 63K
35: R22 Debt (Tables) HTML 83K
36: R23 Employee Benefit Plans (Tables) HTML 55K
37: R24 Commitments and Contingencies (Tables) HTML 32K
38: R25 Accumulated Other Comprehensive Loss (Tables) HTML 39K
39: R26 Segments (Tables) HTML 99K
40: R27 Earnings/(Loss) Per Share (Tables) HTML 37K
41: R28 Summary of Significant Accounting Policies HTML 24K
(Details)
42: R29 Revenue Recognition - Passenger Revenue (Details) HTML 33K
43: R30 Revenue Recognition - Narrative (Details) HTML 24K
44: R31 Revenue Recognition - Other Revenue (Details) HTML 36K
45: R32 Revenue Recognition - Loyalty Program Liability HTML 28K
(Details)
46: R33 Revenue Recognition - Revenue by Geographic Region HTML 40K
(Details)
47: R34 Fair Value Measurements - Measured at Fair Value HTML 39K
on a Recurring Basis (Details)
48: R35 Fair Value Measurements - Narrative (Details) HTML 24K
49: R36 Investments - Narrative (Details) HTML 45K
50: R37 Investments - Equity Investments Ownership HTML 44K
Interest and Carrying Value (Details)
51: R38 Debt - Summary of Debt (Details) HTML 99K
52: R39 Debt - Payroll Support Program Activity (Details) HTML 58K
53: R40 Debt - Narrative (Details) HTML 140K
54: R41 Debt - Fair Value of Debt (Details) HTML 21K
55: R42 Employee Benefit Plans - Components of Net HTML 50K
Periodic (Benefit) Cost (Details)
56: R43 Employee Benefit Plans - Narrative (Details) HTML 23K
57: R44 Commitments and Contingencies - Narrative HTML 49K
(Details)
58: R45 Commitments and Contingencies - Aircraft HTML 34K
Commitments by Year (Details)
59: R46 Commitments and Contingencies - Aircraft HTML 37K
Commitments by Fleet Type (Details) (Details)
60: R47 Accumulated Other Comprehensive Loss (Details) HTML 51K
61: R48 Segments - Narrative (Details) HTML 27K
62: R49 Segments - Segment Reporting (Details) HTML 77K
63: R50 Earnings/(Loss) Per Share (Details) HTML 53K
65: XML IDEA XML File -- Filing Summary XML 112K
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(Exact name of registrant as specified in its charter)
iDelaware
i58-0218548
(State
or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
iPost Office Box 20706
iAtlanta,
iGeorgia
i30320-6001
(Address of principal executive offices)
(Zip
Code)
Registrant's telephone number, including area code: (i404) i715-2600
Securities registered pursuant to Section 12(b) of the Act:
Title
of each class
Trading Symbol
Name of each exchange on which registered
iCommon Stock, par value $0.0001 per share
iDAL
iNew
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.
iYes☑ 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).
iYes☑ 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.
iLarge
accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
i☐
Emerging growth company
i☐
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 i☐ No
☑
Number of shares outstanding by each class of common stock, as of September 30, 2021:
Common Stock, $0.0001 par value - i640,013,818 shares outstanding
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 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 September 30, 2021, the related condensed consolidated statements of operations and comprehensive income/(loss) and consolidated statements of stockholders' equity for the three-month and nine-month periods ended 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.
Accounts
receivable, net of an allowance for uncollectible accounts of $i78 and $i89
i2,183
i1,396
Fuel
inventory
i641
i377
Expendable
parts and supplies inventories, net of an allowance for obsolescence of $i174 and $i188
i371
i355
Prepaid
expenses and other
i1,074
i1,180
Total
current assets
i17,471
i17,404
Noncurrent
Assets:
Property and equipment, net of accumulated depreciation and amortization of $i18,693 and $i17,511
i27,816
i26,529
Operating
lease right-of-use assets
i5,827
i5,733
Goodwill
i9,753
i9,753
Identifiable
intangibles, net of accumulated amortization of $i890 and $i883
i6,004
i6,011
Cash
restricted for airport construction
i713
i1,556
Equity
investments
i1,919
i1,665
Deferred
income taxes, net
i1,813
i1,988
Other
noncurrent assets
i1,467
i1,357
Total
noncurrent assets
i55,312
i54,592
Total
assets
$
i72,783
$
i71,996
LIABILITIES
AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of debt and finance leases
$
i2,296
$
i1,732
Current
maturities of operating leases
i636
i678
Air
traffic liability
i6,246
i4,044
Accounts
payable
i4,017
i2,840
Accrued
salaries and related benefits
i2,198
i2,086
Loyalty
program deferred revenue
i2,619
i1,777
Fuel
card obligation
i1,100
i1,100
Other
accrued liabilities
i1,812
i1,670
Total
current liabilities
i20,924
i15,927
Noncurrent
Liabilities:
Debt and finance leases
i25,523
i27,425
Noncurrent
air traffic liability
i130
i500
Pension,
postretirement and related benefits
i8,408
i10,630
Loyalty
program deferred revenue
i4,837
i5,405
Noncurrent
operating leases
i5,742
i5,713
Other
noncurrent liabilities
i4,613
i4,862
Total
noncurrent liabilities
i49,253
i54,535
Commitments
and Contingencies
i
i
Stockholders'
Equity:
Common stock at $ii0.0001/
par value; ii1,500,000,000/ shares authorized,
i649,758,099 and i647,352,203
shares issued
i—
i—
Additional
paid-in capital
i11,428
i11,259
Retained
earnings/(accumulated deficit)
i259
(i428)
Accumulated
other comprehensive loss
(i8,800)
(i9,038)
Treasury
stock, at cost, i9,744,281 and i9,169,683 shares
(i281)
(i259)
Total
stockholders' equity
i2,606
i1,534
Total
liabilities and stockholders' equity
$
i72,783
$
i71,996
The
accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Delta Air Lines, Inc. September 2021 Form 10-Q 3
Financial Statements
DELTA AIR LINES, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss)
(Unaudited)
Three
Months Ended September 30,
Nine Months Ended September 30,
(in millions, except per share data)
2021
2020
2021
2020
Operating Revenue:
Passenger
$
i7,191
$
i1,938
$
i15,278
$
i10,185
Cargo
i262
i142
i728
i403
Other
i1,701
i982
i4,423
i2,534
Total
operating revenue
i9,154
i3,062
i20,429
i13,122
Operating
Expense:
Salaries and related costs
i2,566
i2,012
i7,096
i7,000
Aircraft
fuel and related taxes
i1,552
i486
i4,056
i2,453
Ancillary
businesses and refinery
i1,079
i561
i2,724
i1,181
Contracted
services
i634
i419
i1,723
i1,536
Depreciation
and amortization
i501
i545
i1,494
i1,813
Landing
fees and other rents
i524
i458
i1,477
i1,430
Regional
carrier expense
i453
i290
i1,258
i1,204
Aircraft
maintenance materials and outside repairs
i433
i106
i1,014
i618
Passenger
commissions and other selling expenses
i308
i100
i640
i548
Passenger
service
i226
i92
i520
i456
Aircraft
rent
i105
i99
i313
i295
Restructuring
charges
i33
i5,345
(i3)
i7,798
Government
grant recognition
(i1,822)
(i1,315)
(i4,512)
(i2,595)
Other
i357
i250
i1,006
i996
Total
operating expense
i6,949
i9,448
i18,806
i24,733
Operating
Income/(Loss)
i2,205
(i6,386)
i1,623
(i11,611)
Non-Operating
Expense:
Interest expense, net
(i314)
(i291)
(i1,014)
(i564)
Impairments
and equity method losses
(i49)
(i114)
(i102)
(i2,432)
Gain/(loss)
on investments, net
(i223)
(i95)
i251
(i199)
Loss
on extinguishment of debt
(i183)
i—
(i266)
i—
Miscellaneous,
net
i96
i27
i301
i327
Total
non-operating expense, net
(i673)
(i473)
(i830)
(i2,868)
Income/(Loss)
Before Income Taxes
i1,532
(i6,859)
i793
(i14,479)
Income
Tax (Provision)/Benefit
(i320)
i1,480
(i105)
i2,849
Net
Income/(Loss)
$
i1,212
$
(i5,379)
$
i688
$
(i11,630)
Basic
Earnings/(Loss) Per Share
$
i1.90
$
(i8.47)
$
i1.08
$
(i18.30)
Diluted
Earnings/(Loss) Per Share
$
i1.89
$
(i8.47)
$
i1.07
$
(i18.30)
Cash
Dividends Declared Per Share
$
i—
$
i—
$
i—
$
i0.40
Comprehensive
Income/(Loss)
$
i1,294
$
(i5,381)
$
i926
$
(i11,580)
The
accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Delta Air Lines, Inc. September 2021 Form 10-Q 4
Financial Statements
DELTA AIR LINES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine
Months Ended September 30,
(in millions)
2021
2020
Net Cash Provided by/(Used in) Operating Activities
$
i2,708
$
(i2,507)
Cash
Flows from Investing Activities:
Property and equipment additions:
Flight equipment, including advance payments
(i961)
(i594)
Ground
property and equipment, including technology
(i1,068)
(i757)
Proceeds
from sale-leaseback transactions
i—
i465
Purchase
of short-term investments
(i10,799)
(i8,700)
Redemption
of short-term investments
i12,158
i3,654
Purchase
of equity investments
i—
(i2,099)
Other,
net
i252
(i159)
Net
cash used in investing activities
(i418)
(i8,190)
Cash
Flows from Financing Activities:
Proceeds from short-term obligations
i—
i3,261
Proceeds
from long-term obligations
i1,902
i22,481
Proceeds
from sale-leaseback transactions
i—
i2,306
Payments
on debt and finance lease obligations
(i4,685)
(i2,318)
Repurchase
of common stock
i—
(i344)
Cash
dividends
i—
(i260)
Fuel
card obligation
i—
i364
Other,
net
i98
(i177)
Net
cash (used in)/provided by financing activities
(i2,685)
i25,313
Net
(Decrease)/Increase in Cash, Cash Equivalents and Restricted Cash Equivalents
(i395)
i14,616
Cash,
cash equivalents and restricted cash equivalents at beginning of period
i10,055
i3,730
Cash,
cash equivalents and restricted cash equivalents at end of period
$
i9,660
$
i18,346
Non-Cash
Transactions:
Flight and ground equipment acquired under finance leases
$
i904
$
i347
Right-of-use
assets acquired under operating leases
i536
i1,062
Other
financings
i240
i115
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
$
i8,785
$
i16,477
Restricted
cash included in prepaid expenses and other
i162
i189
Noncurrent
assets:
Cash restricted for airport construction
i713
i1,680
Total
cash, cash equivalents and restricted cash equivalents
$
i9,660
$
i18,346
The
accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
(1)Treasury
shares were withheld for payment of taxes, at a weighted average price per share of $i38.35, $i46.21 and $i43.48
in the March 2021 quarter, June 2021 quarter and September 2021 quarter, respectively.
(1)Treasury
shares were withheld for payment of taxes, at a weighted average price per share of $i56.48, $i25.56 and $i28.29
in the March 2020 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 Form 10-Q 6
Notes to the Consolidated Financial Statements
DELTA AIR LINES, INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE
1. iSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
i
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 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.
i
Regional
Carrier Expense
We previously allocated certain costs (such as landing fees and other rents, salaries and related costs and contracted services) to regional carrier expense in our Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss) ("income statement") based on relevant statistics (such as passenger counts). Beginning in the March 2021 quarter we ceased performing this allocation and have reclassified the costs presented in prior periods to align with this presentation. This reclassification better reflects the nature of, and how management views, these regional carrier related expenses. This allocation was approximately $i900 million
in 2020, including approximately $i200 million in the September 2020 quarter, and $i1.4 billion
in 2019, including approximately $i360 million in the September 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 Form 10-Q 7
Notes to the Consolidated Financial Statements
NOTE 2. iREVENUE RECOGNITION
iPassenger
Revenue
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2021
2020
2021
2020
Ticket
$
i6,237
$
i1,634
$
i13,067
$
i8,712
Loyalty
travel awards
i544
i143
i1,213
i731
Travel-related
services
i410
i161
i998
i742
Total
passenger revenue
$
i7,191
$
i1,938
$
i15,278
$
i10,185
/
We
recognized approximately $i1.8 billionand $i3.0 billion
in passenger revenue during the nine months ended 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 purchased or expiring in 2021 to December 31, 2022. Additionally, with the exception of Basic Economy 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
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.
Other Revenue
Three
Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2021
2020
2021
2020
Refinery
$
i872
$
i417
$
i2,189
$
i709
Loyalty
program
i453
i343
i1,260
i1,086
Ancillary
businesses
i215
i155
i586
i476
Miscellaneous
i161
i67
i388
i263
Total
other revenue
$
i1,701
$
i982
$
i4,423
$
i2,534
Refinery.
This represents refinery sales to third parties, 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 nine months ended September 30, 2021 and 2020,
total cash sales from marketing agreements related to our loyalty program were $i2.9 billion and $i2.2 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, 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.
i
The
table below presents the activity of the current and noncurrent loyalty program deferred revenue and includes miles earned through travel and miles sold to participating companies, which are primarily through marketing agreements.
Loyalty program activity
(in millions)
2021
2020
Balance
at January 1
$
i7,182
$
i6,728
Miles
earned
i1,541
i1,132
Miles
redeemed for air travel
(i1,213)
(i731)
Miles
redeemed for non-air travel and other
(i54)
(i40)
Balance
at September 30
$
i7,456
$
i7,089
/
The
timing of mile redemptions can vary widely; however, the majority of miles have historically been redeemed within itwo years of being earned.
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. iOur passenger and operating revenue by geographic region is summarized in the following tables:
Passenger
revenue by geographic region
Passenger Revenue
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2021
2020
2021
2020
Domestic
$
i5,759
$
i1,647
$
i12,517
$
i7,812
Atlantic
i730
i132
i1,160
i1,014
Latin
America
i564
i97
i1,313
i879
Pacific
i138
i62
i288
i480
Total
$
i7,191
$
i1,938
$
i15,278
$
i10,185
Operating
revenue by geographic region
Operating Revenue
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2021
2020
2021
2020
Domestic
$
i7,311
$
i2,585
$
i16,572
$
i10,116
Atlantic
i954
i240
i1,688
i1,353
Latin
America
i653
i126
i1,620
i1,015
Pacific
i236
i111
i549
i638
Total
$
i9,154
$
i3,062
$
i20,429
$
i13,122
Delta
Air Lines, Inc. September 2021 Form 10-Q 9
Notes to the Consolidated Financial Statements
NOTE 3. iFAIR VALUE MEASUREMENTS
i
Assets
Measured at Fair Value on a Recurring Basis
Cash
Equivalents and Restricted Cash Equivalents. Cash equivalents generally consist of money market funds. Restricted cash equivalents are recorded in prepaid expenses and other and cash restricted for airport construction on our Consolidated Balance Sheet ("balance sheet"). Restricted cash equivalents generally consist of money market funds, time deposits, commercial paper and negotiable certificates of deposit, which primarily relate to proceeds from debt issued to finance, among other things, a portion of the construction costs for our new terminal facilities at New York's LaGuardia Airport. The fair value of these cash equivalents is based on a market approach using prices generated by market transactions involving identical or comparable assets.
Short-Term Investments. Short-term investments consist of U.S. government and agency securities.
The fair values of these investments are based on a market approach using industry standard valuation techniques that incorporate observable inputs such as quoted market prices, interest rates, benchmark curves, credit ratings of the security and other observable information.
As of September 30, 2021, the estimated fair value of our short-term investments was $i4.4 billion. Of these investments, $i3.7 billion
are expected to mature in one year or less, with the remainder maturing 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 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 September 2021 quarter, Wheels Up Experience Inc. ("Wheels Up") became publicly traded and, as of September 30, 2021, our investment in Wheels Up is classified as Level 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.
NOTE 4. iINVESTMENTS
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.
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.
ii
Equity
investments ownership interest and carrying value
Wheels
Up. In July 2021, Wheels Up became a publicly-traded company through a merger with Aspirational Consumer Lifestyle Corp ("Aspirational"). Aspirational subsequently changed its name to Wheels Up Experience Inc. and its common stock trades on the New York Stock Exchange under the symbol UP. We account for our investment under the fair value option and are using the stock 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 Class 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 i6%
ownership interest is determined on a fully exchanged and converted basis. We account for our investment under the fair value method and are using the stock price 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 therein are our investments in Grupo Aeroméxico, LATAM Airlines Group S.A. ("LATAM") and Virgin Atlantic, all of which are undergoing in-court or out-of-court restructurings, and the carrying values of these investments have been reduced to and remain iiizero//
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. As of September 30, 2021, we had notes payable of approximately $ii525/ million,
which were recorded in current maturities of debt and finance leases, and receivables from those carriers recorded within other noncurrent assets, including $ii185/ 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), $i250 million to be used exclusively to repay the term loan we had previously guaranteed. In the June 2021 quarter, GOL repaid the outstanding balance of this loan
in full.
Financing
arrangements secured by SkyMiles assets:
SkyMiles Notes(1)
2023
to
2028
i4.50%
and
i4.75%
i6,000
i6,000
SkyMiles
Term Loan(1)(2)
2023
to
2027
i4.75%
i2,865
i3,000
Financing
arrangements secured by slots, gates and/or routes:
2020 Senior Secured Notes
2025
i7.00%
i2,823
i3,500
2020
Term Loan
n/a
n/a
i—
i1,493
2018
Revolving Credit Facility(2)
2022
to
2023
Undrawn
i—
i—
Financing
arrangements secured by aircraft:
Certificates(1)
2021
to
2028
i2.00%
to
i8.00%
i1,990
i2,633
Notes(1)(2)
2021
to
2033
i0.70%
to
i5.75%
i1,208
i1,284
NYTDC
Special Facilities Revenue Bonds, Series 2020(1)
2026
to
2045
i4.00%
to
i5.00%
i1,511
i1,511
NYTDC
Special Facilities Revenue Bonds, Series 2018(1)
2022
to
2036
i4.00%
to
i5.00%
i1,383
i1,383
Other
financings(1)(2)
2021
to
2030
i2.25%
to
i8.00%
i592
i412
Other
revolving credit facilities(2)
2022
Undrawn
i—
i—
Total
secured and unsecured debt
i26,328
i28,214
Unamortized
(discount)/premium and debt issue cost, net and other
(i227)
(i240)
Total
debt
i26,101
i27,974
Less:
current maturities
(i2,024)
(i1,443)
Total
long-term debt
$
i24,077
$
i26,531
(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 plus a specified margin.
/
Unsecured Payroll Support Program Extension Loans
i
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:
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 CARES Act providing an additional
$15 billion in grants and loans to the airline industry. In January 2021, we entered into a payroll support program extension agreement with the U.S. Department of the Treasury. During the six months ended June 30, 2021, we received a total of $i3.3 billion in payroll support payments under this extension agreement, which we were required to use exclusively for the payment of employee wages, salaries and benefits and were conditioned on our agreement to refrain from conducting involuntary
employee layoffs or furloughs from the date of the extension agreement through March 2021. Other conditions include prohibitions on share repurchases and dividends through March 2022 and certain limitations on executive compensation until October 2022. The Department of Transportation also has the authority until March 1, 2022 to require airlines that received payroll support program funds to maintain scheduled air service deemed necessary to any point served by the airline before March 1, 2020.
These support payments consisted of $i2.3 billion
in a grant and $i957 million in an unsecured i10-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 i2.4 million
shares of Delta common stock. The loan bears interest at an annual rate of i1.00% for the first five years and the applicable Secured Overnight Financing Rate ("SOFR") plus i2.00%
in the final five years. The warrants have an initial exercise price of $i39.73 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 $i905 million
of noncurrent debt, net of discount, and $i52 million in additional paid in capital, respectively.
Payroll Support Program 3 (PSP3). The American Rescue Plan Act of 2021 was enacted on March 11, 2021, and included a further extension of the payroll support program providing an additional $14 billion in grants and loans to the airline industry. In April 2021,
we entered into a Payroll Support Program 3 Agreement with the U.S. Department of the Treasury. During the June 2021 quarter, we received a total of $i3.1 billion in payroll support payments under this agreement, which we were required to use exclusively for the payment of employee wages, salaries and benefits and was conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs from the date of the agreement through September 30, 2021 or the date on which
we have expended all of the payroll support, whichever is later. Other conditions include prohibitions on share repurchases and dividends through September 30, 2022 and certain limitations on executive compensation until April 1, 2023.
These support payments consisted of $i2.2 billion in a grant and $i891 million
in an unsecured i10-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 i1.9 million
shares of Delta common stock. The loan bears interest at an annual rate of i1.00% for the first five years and the applicable SOFR plus i2.00% in the final five years.
The warrants have an initial exercise price of $i47.80 per share, subject to adjustment in certain cases, and a five-year term. We have recorded the value of the promissory note and warrants on a relative fair value basis as $i857 million
of noncurrent debt, net of discount, and $i34 million in additional paid in capital, respectively.
2020 Term Loan
In 2020 we entered into a $i1.5 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 $i56 million loss on extinguishment of debt, which is recorded in loss on extinguishment of debt in non-operating expense in our income statement.
In the June
2021 quarter, we repaid in full approximately $i450 million of various EETCs which were scheduled to mature between 2022 and 2023, and incurred a $i26 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 $i1.0 billion,
excluding accrued and unpaid interest, of our outstanding i7.0% Senior Secured Notes due 2025 (the "2025 Notes"), i7.375% Notes due 2026 (the "2026 Notes") and i4.5%
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 $i677 million for approximately $i800 million
and 2026 Notes, included in Unsecured Notes in the table above, with principal amount of $i169 million for approximately $i200 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 $i166 million on extinguishment of debt in non-operating expense in our income statement.
Throughout the September 2021 quarter we also repurchased $i262 million
of various secured certificates, unsecured notes and a portion of the SkyMiles Term Loan on the open market. These payments resulted in a $i17 million loss on extinguishment of debt.
Availability Under Revolving Facilities
As of September 30, 2021, we had approximately $i2.6
billion undrawn and available under our revolving credit facilities. In addition, we had outstanding letters of credit as of September 30, 2021, including approximately $i300 million that reduced the availability under our revolving credit facilities and approximately $i300 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. iThe 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.
Our
debt agreements contain various affirmative, negative and financial covenants. We were in compliance with the covenants in our debt agreements at September 30, 2021.
Delta Air Lines, Inc. September 2021 Form 10-Q 14
Notes to the Consolidated Financial Statements
NOTE 6. iEMPLOYEE
BENEFIT PLANS
i
Employee benefit plans net periodic (benefit) cost
Pension
Benefits
Other Postretirement and Postemployment Benefits
(in millions)
2021
2020
2021
2020
Three Months Ended September 30,
Service cost
$
i—
$
i—
$
i21
$
i24
Interest
cost
i146
i175
i29
i30
Expected
return on plan assets
(i381)
(i343)
(i9)
(i11)
Amortization
of prior service credit
i—
i—
(i2)
(i2)
Recognized
net actuarial loss
i88
i74
i15
i10
Special
termination benefits
i—
i—
i—
i1,260
Settlements
i1
i30
i—
i—
Net
periodic (benefit) cost
$
(i146)
$
(i64)
$
i54
$
i1,311
Nine
Months Ended September 30,
Service cost
$
i—
$
i—
$
i64
$
i72
Interest
cost
i437
i526
i88
i86
Expected
return on plan assets
(i1,142)
(i1,030)
(i26)
(i33)
Amortization
of prior service credit
i—
i—
(i5)
(i7)
Recognized
net actuarial loss
i266
i223
i42
i32
Special
termination benefits
i—
i—
i—
i1,260
Settlements
i1
i33
i—
i—
Net
periodic (benefit) cost
$
(i438)
$
(i248)
$
i163
$
i1,410
/
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 $i1.5 billion to these plans in the June 2021 quarter.
Delta
Air Lines, Inc. September 2021 Form 10-Q 15
Notes to the Consolidated Financial Statements
NOTE 7. iCOMMITMENTS AND CONTINGENCIES
Aircraft Purchase Commitments
i
Our
future aircraft purchase commitments totaled approximately $i16.9 billion at September 30, 2021. Also, as of September 30, 2021, we had commitments under leases that had not yet commenced of $i795 million.
These leases will commence between 2021 and 2024 with lease terms ranging from i7 to i12 years.
Our
future aircraft purchase commitments included the following aircraft at September 30, 2021:
Aircraft purchase commitments by fleet type
Aircraft Type
Purchase Commitments
A220-100
i4
A220-300
i41
A321-200
i4
A321-200neo
i155
A330-900neo
i26
A350-900(1)
i26
B-737-900ER
i27
Total
i283
/
(1)Includes
isix 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 i55
A321neo aircraft into firm orders and replenishing i25 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 itwo
A350-900 deliveries and ione A330-900neo delivery to occur in the second half of 2022.
During the June 2021 quarter, we agreed to acquire i29
B-737-900 aircraft and enter into leases for iseven A350-900 aircraft. Additionally, during the September 2021 quarter, we agreed to enter into leases for itwo
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 Form 10-Q 16
Notes to the Consolidated Financial Statements
Other Contingencies
General Indemnifications
We are the lessee under many commercial real estate leases. It is common in these transactions for us, as the lessee, to agree to indemnify the lessor and the lessor's related parties for tort, environmental and other liabilities that arise out of or relate to our use or occupancy of the leased premises. This type of indemnity would typically make us responsible to indemnified parties for liabilities arising
out of the conduct of, among others, contractors, licensees and invitees at, or in connection with, the use or occupancy of the leased premises. This indemnity often extends to related liabilities arising from the negligence of the indemnified parties but usually excludes any liabilities caused by either their sole or gross negligence or their willful misconduct.
Our aircraft and other equipment lease and financing agreements typically contain provisions requiring us, as the lessee or obligor, to indemnify the other parties to those agreements, including certain of those parties' related persons, against virtually any liabilities that might arise from the use or operation of the aircraft or other equipment.
We believe that our insurance would cover most of our exposure to liabilities and related indemnities associated
with the commercial real estate leases and aircraft and other equipment lease and financing agreements described above. While our insurance does not typically cover environmental liabilities, we have insurance policies in place as required by applicable environmental laws.
Some of our aircraft and other financing transactions include provisions that require us to make payments to preserve an expected economic return to the lenders if that economic return is diminished due to specified changes in laws or regulations. In some of these financing transactions, we also bear the risk of changes in tax laws that would subject payments to non-U.S. lenders to withholding taxes.
We cannot reasonably estimate our potential future payments under the indemnities and related provisions described above because we cannot
predict (1) when and under what circumstances these provisions may be triggered and (2) the amount that would be payable if the provisions were triggered because the amounts would be based on facts and circumstances existing at such time.
Other
We have certain contracts for goods and services that require us to pay a penalty, acquire inventory specific to us or purchase contract-specific equipment, as defined by each respective contract, if we terminate the contract
without cause prior to its expiration date. Because these obligations are contingent on our termination of the contract without cause prior to its expiration date, no obligation would exist unless such a termination occurs.
NOTE 8. iACCUMULATED OTHER COMPREHENSIVE LOSS
i
Components of accumulated other comprehensive loss
(1)Amounts
reclassified from accumulated 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 $ii750/
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.
Delta Air Lines, Inc. September 2021 Form 10-Q 17
Notes to the Consolidated Financial Statements
NOTE 9. iSEGMENTS
Refinery
Operations
Our refinery segment operates for the benefit of the airline segment by providing jet fuel to the airline segment from its own production and through jet fuel obtained through agreements with third parties. The refinery's production consists of jet fuel, as well as non-jet fuel products. We use several counterparties to exchange the non-jet fuel products produced by the refinery for jet fuel consumed in our airline operations. The gross fair value of the products exchanged under these agreements during the three and nine months ended September 30, 2021 was $i629 million
and $i1.7 billion, respectively, compared to $i249 million
and $i1.1 billion for the three and nine months ended September 30, 2020, respectively.
Segment Reporting
i
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.
(1)Represents transfers, valued on a market price basis, from the refinery to the airline segment for use in airline operations. We determine market price by reference to the market index for the primary delivery location, which is New York Harbor, for jet fuel from the refinery.
(2)Represents value of products delivered under our exchange agreements, as discussed above, determined on a market price basis.
(3)These sales were at or near cost; accordingly, the margin on these sales is de minimis.
(4)Refinery segment operating results, including depreciation and amortization, are included within aircraft fuel and related taxes in our income statement.
(5)The
fair values of these obligations, which are related to renewable fuel compliance costs, are based on quoted market prices and other observable information and are classified as Level 2 in the fair value hierarchy. At September 30, 2021 we had a gross fair value obligation of $i625 million and related assets of $i78
million. At September 30, 2020 we had a gross fair value obligation of $i80 million and related assets of $i12
million. We expect to use the assets in settling a portion of our obligations.
(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. iEARNINGS/(LOSS) PER SHARE
We calculate basic earnings/(loss) per share and diluted (loss) per share by dividing net income/(loss) by the weighted average number of common shares outstanding, excluding restricted shares. We calculate diluted earnings per share by dividing net income by the weighted average number of common shares outstanding plus the dilutive effect of outstanding share-based awards, including stock options, restricted stock awards and
warrants. Antidilutive common stock equivalents excluded from the diluted earnings per share calculation are not material. iThe following table shows the computation of basic and diluted earnings/(loss) per share:
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)
$
i1,212
$
(i5,379)
$
i688
$
(i11,630)
Basic
weighted average shares outstanding
i637
i635
i636
i636
Dilutive
effect of share-based awards
i4
i—
i5
i—
Diluted
weighted average shares outstanding
i641
i635
i641
i636
Basic
earnings/(loss) per share
$
i1.90
$
(i8.47)
$
i1.08
$
(i18.30)
Diluted
earnings/(loss) per share
$
i1.89
$
(i8.47)
$
i1.07
$
(i18.30)
Delta
Air Lines, Inc. September 2021 Form 10-Q 19
Item 2. MD&A
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial
statements and related notes included in our 2020 Form 10-K.
Our business and operating results for 2021 continue to be significantly impacted by the COVID-19 pandemic. However, as described further below, we have seen improvement in our business beginning in March 2021 and progressing through the September 2021 quarter, which we expect to 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 a better understanding of the full impact of the COVID-19 pandemic and the progress of our recovery. Throughout the remainder of this management's discussion and analysis, we present results for the three and 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.
September 2021 Quarter Financial Overview
Our pre-tax income for the September 2021 quarter was $1.5 billion, including the $1.8 billion benefit related to recognition of the remaining PSP3 grant during the quarter. This represents a $415 million decrease in pre-tax income compared to the September 2019 quarter primarily due to a 27% reduction in operating revenue, partially offset by the recognition of the remaining PSP3 grant. Pre-tax income, adjusted (a non-GAAP financial measure) was $216 million, a decrease of $1.8 billion compared to the September 2019 quarter.
Revenue.
Compared to the September 2019 quarter, our operating revenuedecreased $3.4 billion, or 27%, due primarily to reduced demand resulting from the COVID-19 pandemic.
Operating Expense. Total operating expense in the September 2021 quarter decreased $3.5 billion, or 34%, compared to the September 2019 quarter, primarily resulting from recognition of the remaining 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 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 September 2021 quarter decreased $2.6 billion, or 25%, compared to the September 2019 quarter.
Non-Operating Results. Total non-operating expense was $673 million in the September 2021 quarter, $549 million higher than the September 2019 quarter, primarily due to higher interest expense as a result of our increased debt due to financing arrangements entered into in 2020, losses on debt extinguishment and mark-to-market losses 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") as of September 30,
2021 was $15.8 billion. During the September 2021 quarter, operating activities generated $151 million. Also during the quarter, investing activities used $384 million, primarily for 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 and technology enhancements. These activities resulted in $463 million of negative free cash flow (a non-GAAP financial measure) in the September 2021 quarter. Also, during the September 2021 quarter we had cash outflows of approximately $1.6 billion related to repayments of our debt and finance leases, including approximately $1.3 billion for early repayments and the remainder from scheduled maturities.
The non-GAAP financial measures referenced above for pre-tax 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
Item 2. MD&A
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 includes the purchase and retirement of carbon offset credits 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 offset credits. This amount consists of $30 million to address 13 million metric tons of carbon emissions generated by our airline segment from March 1 to December 31, 2020 through carbon offset credits, as well as an additional $39 million for the purchase and retirement of carbon offset credits related to a portion of our airline segment's 2021 carbon emissions. In September 2021, we committed to setting net zero 2050 and interim goals through the Science Based Targets initiative ("SBTi") for our airline operations using recently released SBTi criteria and guidance for the aviation sector.
(1)Total 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 September 2019 quarter, our operating revenue decreased $3.4 billion, or 27%, due primarily to reduced demand resulting from the COVID-19 pandemic. The decline in operating revenue, on a 29% decrease in capacity, resulted in a 2% increase in total revenue per available seat mile ("TRASM") and a 7% decrease in TRASM, adjusted compared to the September 2019 quarter.
Our operating revenue increased $6.1 billion compared to the September 2020 quarter due to the continued recovery in demand that began in the September 2020 quarter, following the depth of the COVID-19 pandemic impact in the June 2020 quarter. The increase in
operating revenue, which outpaced the 91% increase in capacity, resulted in a 56% increase in TRASM and a 64% increase in TRASM, adjusted.
See "Refinery Segment" below for additional details on the refinery's operations, including third-party refinery sales recorded in other revenue, during each period.
The length and severity of the reduction in travel demand due to the COVID-19 pandemic remains uncertain; however, with continued distribution of effective vaccines and easing of travel advisories and restrictions, we believe customer confidence will continue to grow, leading to increased demand for the remainder of 2021, 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 return of business travel as many companies are pausing or delaying return to office plans. We continue to expect domestic demand recovery to lead international demand recovery. We believe international demand recovery will continue to be uneven in 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 revenue in
domestic and international markets through the use of cargo space on regularly scheduled passenger aircraft. Reduced industry capacity as a result of the COVID-19 pandemic drove a significant increase in our cargo yield and our cargo revenue in the September 2021 quarter compared to the September 2019 quarter. Compared to the September 2020 quarter, our cargo revenue in the September 2021 quarter increased due to continued higher yields as well as higher volume.
In
the March 2021 quarter, we announced the extension of the validity of all passenger tickets and travel credits purchased or expiring in 2021 to December 31, 2022. Additionally, with the exception of Basic Economy 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 the updated change fee policies to materially affect our revenue in future 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
Domestic
passenger unit revenue ("PRASM") for the September 2021 quarter decreased 15% with capacity down 16% compared to the September 2019 quarter as a result of reduced demand due to the COVID-19 pandemic. The revenue increase in the September 2021 quarter compared to the September 2020 quarter is attributable to the low levels of capacity and demand during the September 2020 quarter due to the COVID-19 pandemic and the ongoing recovery in the September 2021 quarter.
The September 2021 quarter began with domestic leisure demand near September 2019 quarter levels. This strong demand moderated slightly in the second half of the quarter due to a rise in COVID-19 cases attributable to a variant of the virus. However, as cases begin to decline, leisure and business bookings are increasing. We also remain optimistic about the ultimate recovery of business travel; 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 pace of that recovery.
International
International passenger revenue for the September 2021 quarter decreased 58% with capacity down 50% compared to the September 2019 quarter. Compared to the September 2020 quarter passenger revenue has increased as travel to certain destinations has resumed or increased. The decreases in revenue and capacity compared to the September 2019 quarter resulted from continued reduced demand, including as a result of 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 maintained or reinstituted international testing requirements and travel restrictions, which have restrained demand in the short-term but are expected to enable the long-term recovery of international air travel.
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 the significantly lower international demand environment to continue at least into early 2022, with the recovery pace continuing to trail domestic travel. 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. However, in the September 2021 quarter, we have continued our service to certain countries in the Atlantic 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 essential travel, and we expect only small demand improvements until vaccine distribution improves
and government restrictions ease.
The Latin America region has shown the most recovery of the international regions, with continued 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 this trend to continue through the remainder of 2021 with the recovery in the Atlantic and Pacific regions lagging behind Latin America.
Refinery. This represents refinery sales to third parties.
These sales, which are at or near cost, increased $455 million and $866 million compared to the September 2020 and September 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 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 recorded in other revenue, 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 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 September 2019 quarter due to the impact of, and our response to, the COVID-19 pandemic, including reduced capacity. However, compared to the September 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 lounges was reopened by the end of July 2021.
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 remain significantly lower in the September 2021 quarter than in the September 2019 quarter. Operating expense decreased primarily due to recognition of the remaining 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 taken across all aspects of our operation in response to the COVID-19 pandemic. During the September 2021 quarter, as distribution of effective vaccines continued, travel restrictions and advisories eased and customer confidence continued to grow despite the negative impact of a variant of the COVID-19 virus, we saw revenue and capacity return and related operating
expense line 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 September 2020 and September 2019 quarters that were not primarily driven by the change in capacity or revenue. These include many of what are expected to be structural cost reduction measures and programs we implemented in response to the COVID-19 pandemic.
Salaries and Related Costs. Actions taken as a result of decreased demand for air travel due to the COVID-19 pandemic had a significant impact on salaries and related costs, leading to a decrease compared
to the September 2019 quarter. In the second half of 2020, approximately 18,000 employees elected to participate in voluntary separation programs, which initially reduced our workforce by approximately 20%, though some of those positions have subsequently been filled. Since the beginning of 2021, we have hired approximately 8,000 employees 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 have recalled approximately 1,700 pilots
from 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 related costs in the September 2021 quarter compared to the September 2020 quarter.
Delta Air Lines, Inc. September 2021 Form 10-Q 25
Item 2. MD&A - Results of Operations
Aircraft Fuel and Related Taxes. Fuel expense decreased $687 million compared to the September 2019 quarter primarily due to a 32% decrease in consumption, partially offset by a 1% increase 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 $1.1 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 September 2021 quarter, we purchased and retired $29 million of carbon offset credits, which relate to a portion of 2021 carbon emissions generated by our airline segment. In the table below, these costs are shown in environmental sustainability impact.
(1)Market
price for jet fuel at airport locations, including related taxes and transportation costs.
Ancillary Businesses and Refinery. Ancillary businesses and refinery includes expenses associated with refinery sales to third parties, aircraft maintenance services we provide to third parties and our vacation wholesale operations. Increased expenses were primarily related to refinery sales to third parties, which are at or near cost. The refinery cost of sales increased $455 million and $866 million compared to the September 2020 and September 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 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. 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; however, compared to the September 2020 quarter these expenses increased due to higher levels of flying. In addition, $43 million of costs related to services performed by Delta Private Jets in the September 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 September 2019 quarter due to lower utilization of these carriers as a result of the overall reduced 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 ceased performing this allocation and have reclassified the costs presented in prior periods to align with this presentation. This reclassification better reflects the nature
of, and how management views, these regional carrier related expenses. This allocation was approximately $900 million in 2020, including approximately $200 million in the September 2020 quarter, and $1.4 billion in 2019, including approximately $360 million in the September 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 was more muted than our other operating expense line items, when compared to the September 2019 and September 2020 quarters.
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 September 2021 quarter, we recognized $33 million of net adjustments to increase certain of those restructuring charges, representing changes in our estimates.
Government Grant Recognition. During the nine months ended September 30, 2021, we received a total of $6.4 billion under payroll support program extension agreements with the U.S. Department of the Treasury, which we were required to use exclusively for the payment of employee wages, salaries and benefits. The support payments included grants totaling $4.5 billion that were recognized as contra-expense in 2021 over the period that the funds were used. Following the recognition of $2.7 billion during the six months ended June
30, 2021, we fully recognized the remaining $1.8 billion of the PSP3 grant during the three months ended September 30, 2021. The amount recognized in the September 2021 quarter exceeded the amount recognized from PSP1 during the September 2020 quarter due to the increase in eligible salaries and related costs, as discussed above. See Note 5 of the Notes to the Condensed Consolidated Financial Statements for additional information on the payroll support program extensions.
(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.
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.
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.
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.
(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.
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 September 2021 quarter and $1.0 billion in the nine months ended September 30, 2021. We have begun reducing the total amount of interest expense by pre-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, 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 $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 in 2020 reflected our share of LATAM's and Grupo Aeroméxico's equity method results prior to their respective bankruptcy filings, our share of Virgin Atlantic's
equity method 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. See Note 4 of the Notes to the Condensed Consolidated Financial Statements for additional information on our equity 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 nine months ended September 30, 2020 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 are calculating our income tax expense by applying to any pre-tax income/(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 September 30, 2021, our effective tax rate was 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 income/(loss) due to the impact of the COVID-19 pandemic.
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 nine months ended September 30, 2021, the refinery progressively increased operations, ending the period at close to pre-pandemic production levels, which we expect to continue during the December 2021 quarter, subject to market conditions.
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 nine months ended September 30, 2019 due to lower refinery run rates and lower pricing for refined products in the first half of 2021. Operating income was higher in the three months ended September 30, 2021 as compared to prior periods due to increased production and pricing, 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, which was partially offset by cost savings resulting from decreased production 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 in the secondary market. Observable RINs prices increased through the first half of 2021, and declined during the September 2021 quarter. Monroe incurred $44 million and $453 million in RINs compliance costs during the three and nine months ended September 30,
2021 as compared to $25 million and $78 million in the three and nine months ended September 30, 2020, respectively.
For more information regarding the refinery's results, see Note 9 of the Notes to the Condensed Consolidated Financial Statements.
(1)Includes
the operations of our regional carriers under capacity purchase agreements.
(2)Non-GAAP financial measures 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 environmentalsustainability activity.
Delta Air Lines, Inc. September 2021 Form 10-Q 34
Item 2. MD&A - Fleet Information
Fleet Information
Our
operating aircraft fleet, purchase commitments and options at 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 our aircraft. Accordingly, as of September 30, 2021, less than 5% of our mainline and regional aircraft were temporarily parked compared to 30% as of September 30, 2020.
Mainline
aircraft information by fleet type
Current Fleet(1)
Commitments(2)
Fleet Type
Owned
Finance Lease
Operating Lease
Total
Average Age (Years)
Purchase
Options
B-717-200
9
37
8
54
20.3
B-737-800
73
4
—
77
20.1
B-737-900ER
83
—
49
132
5.1
27
B-757-200
99
1
—
100
24.2
B-757-300
16
—
—
16
18.6
B-767-300ER
40
—
—
40
25.1
B-767-400ER
21
—
—
21
20.8
A220-100
37
4
—
41
2.0
4
A220-300
9
—
—
9
0.8
41
50
A319-100
55
2
—
57
19.6
A320-200
52
4
—
56
25.7
A321-200
65
22
36
123
2.9
4
A321-200neo
—
—
—
—
—
155
70
A330-200
11
—
—
11
16.5
A330-300
28
—
3
31
12.7
A330-900neo
3
3
5
11
1.3
26
A350-900
13
—
5
18
3.1
26
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 six A350-900 lease commitments in 2021 incremental to our order book with Airbus.
The table below summarizes the aircraft operated by regional carriers on our behalf at September 30, 2021.
Regional
aircraft information by fleet type and carrier
Fleet Type
Carrier
CRJ-200
CRJ-700
CRJ-900
Embraer 170
Embraer 175
Total
Endeavor Air, Inc.(1)
47
13
113
—
—
173
SkyWest
Airlines, Inc.
—
5
40
—
71
116
Republic Airways, Inc.
—
—
—
8
46
54
Total
47
18
153
8
117
343
(1)Endeavor
Air, Inc. is a wholly owned subsidiary of Delta.
Delta Air Lines, Inc. September 2021 Form 10-Q 35
Item 2. MD&A - Financial Condition and Liquidity
Financial Condition and Liquidity
As of September 30, 2021, we had $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, 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 nine months ended September 30, 2021 provided $2.7 billion compared to using $2.5 billion and providing $7.5 billion in the nine months ended September 30, 2020 and 2019, respectively.
As described above, we are experiencing a domestic demand recovery and expect this to continue through the end of 2021. If the demand environment continues to evolve in this 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 reduction in demand for air travel due to the COVID-19 pandemic resulted in a lower level of advance bookings and the associated cash received than we have historically experienced, which has impacted the typical seasonal trend of air traffic liability since March 2020.
Domestic demand has improved since the latter half of the March 2021 quarter as consumers have regained confidence to travel and increased ticket purchases for travel further in advance. We 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 COVID-19 virus; however, in the month of September 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 September 30, 2021.
Fuel. Fuel expense represented approximately 22% of our total operating expense for the nine months ended 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 continues to increase and capacity returns,
we expect fuel consumption in the December 2021 quarter to increase compared to the December 2020 quarter, although we still expect it to be lower than the 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 $1.5 billion to these plans during the June 2021 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. In the nine months ended September 30, 2021, $435 million of this charge was
disbursed in cash payments to participants in 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 2023 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.
Investing Activities
Short-Term Investments. During the nine months ended September 30, 2021, we redeemed a net of $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 $2.0 billion and $3.9 billion for the nine months ended September 30, 2021 and 2019, respectively. Our capital expenditures during the nine months ended September 30,
2021 were primarily related to 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 $3.2 billion, which may vary depending on financing decisions, will be primarily for aircraft, including deliveries and advance deposit payments, as well as fleet 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. Due to an acceleration effort that commenced in 2020, completion is now expected by 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 $709 million was incurred in the nine months ended September 30, 2021.
Financing Activities
Debt
and Finance Leases. In the nine months ended September 30, 2021, we had cash outflows of approximately $4.7 billion related to repayments of our debt and finance leases, including approximately $3.3 billion for the early repayment of the term loan secured by certain of our slots, gates and routes, various EETCs, certain notes through a cash tender offer and other various unsecured notes, secured certificates and SkyMiles term loan. 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.
The principal amount of our debt and finance leases was $28.0 billion at September 30, 2021.
Government
Support Programs. In January 2021, we entered into a payroll support program extension agreement with the U.S. Department of the Treasury. During the six months ended June 30, 2021, we received a total of $3.3 billion in payroll support payments under this extension agreement. These support payments consisted of $2.3 billion in a grant and $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.
In April 2021, we entered into a Payroll Support Program 3 Agreement with the U.S. Department of the Treasury. During the June 2021 quarter, we received a total of $3.1 billion in payroll support payments under this agreement. 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 these programs, see Note 5 of the Notes to the Condensed Consolidated Financial Statements.
Delta Air Lines, Inc. September 2021 Form 10-Q 37
Item 2. MD&A - Financial Condition and Liquidity
Undrawn Lines of Credit
As of
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 September 30, 2021, including approximately $300 million that reduced the availability under our revolving credit facilities and approximately $300 million that did not affect the availability of our revolving credit facilities.
Covenants
We were in compliance with the covenants in our debt agreements at 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 Form 10-Q 38
Item 2. MD&A - Supplemental Information
Supplemental Information
We sometimes use information that is derived from
the Condensed Consolidated Financial Statements but that is not presented in accordance with 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), adjusted
The following table shows a reconciliation of pre-tax income/(loss) (a GAAP measure) to pre-tax income/(loss), adjusted (a non-GAAP financial measure). Pre-tax income/(loss), 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 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 September 2021 quarter, we recognized $33 million of adjustments to certain of those restructuring charges, representing changes in our estimates.
•Government grant recognition. We recognized $1.8 billion of the grant proceeds from the payroll support program extensions as contra-expense during the September 2021 quarter. We recognized the grant proceeds as contra-expense based on the periods that the funds were intended to compensate and have fully used all proceeds from the payroll support
program extensions as of the end of the September 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.
We also regularly adjust pre-tax income/(loss)
for the following items to determine pre-tax income/(loss), 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, 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.
Delta Air Lines, Inc. September 2021 Form 10-Q 39
Item 2. MD&A - Supplemental Information
Pre-tax income/(loss), adjusted reconciliation
Three Months Ended September
30,
(in millions)
2021
2020
2019
Pre-tax income/(loss)
$
1,532
$
(6,859)
$
1,947
Adjusted for:
Restructuring charges
33
5,345
—
Government
grant recognition
(1,822)
(1,315)
—
Impairments and equity method losses
49
114
—
Pension settlement charges
—
30
—
Loss on extinguishment
of debt
183
—
—
MTM adjustments and settlements on hedges
19
(3)
(25)
Equity investment MTM adjustments
—
—
10
MTM adjustments on investments
223
99
35
Delta
Private Jets adjustment
—
—
1
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). Operating expense, adjusted excludes restructuring charges and government grant recognition, which, as discussed above under the heading pre-tax income/(loss), 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), adjusted. We also adjust operating expense for the following item for the reason described below:
•Third-party refinery sales. Refinery sales to third
parties, and related expenses, are not related to our airline segment. Operating expense, adjusted therefore provides a more meaningful comparison of operating expenses from our airline operations to the rest of the airline industry.
Operating expense, adjusted reconciliation
Three
Months Ended September 30,
(in millions)
2021
2020
2019
Operating expense
$
6,949
$
9,448
$
10,489
Adjusted
for:
Restructuring charges
(33)
(5,345)
—
Government grant recognition
1,822
1,315
—
MTM
adjustments and settlements on hedges
(19)
3
25
Third-party refinery sales
(872)
(417)
(6)
Delta Private Jets adjustment
—
—
(49)
Operating
expense, adjusted
$
7,846
$
5,004
$
10,460
Delta
Air Lines, Inc. September 2021 Form 10-Q 40
Item 2. MD&A - Supplemental Information
Fuel 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), adjusted.
Fuel
expense, adjusted reconciliation
Average Price Per Gallon
Three Months Ended September 30,
Three Months Ended September 30,
(in millions, except per gallon data)
2021
2020
2019
2021
2020
2019
Total
fuel expense
$
1,552
$
486
$
2,239
$
1.97
$
1.25
$
1.94
Adjusted for:
MTM
adjustments and settlements on hedges
(19)
3
25
(0.02)
0.01
0.02
Delta Private Jets adjustment
—
—
(7)
—
—
(0.01)
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), adjusted.
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). CASM-Ex excludes restructuring charges and government grant recognition, which, as discussed above under the heading pre-tax income/(loss), adjusted, are directly related to the impact of the COVID-19 pandemic and our response. We adjust 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), adjusted. We also adjust CASM for the following items to determine CASM-Ex for the reasons described below:
•Aircraft
fuel and related taxes. The volatility in fuel prices impacts the comparability of year-over-year financial performance. The adjustment for aircraft fuel and related taxes allows investors to better understand and analyze our non-fuel costs and year-over-year financial performance.
•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.
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)/purchases of short-term investments.
Net (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
Three
Months Ended September 30,
(in millions)
2021
2020
2019
Net cash provided by/(used in) operating activities
$
151
$
(2,575)
$
2,245
Net cash used in investing activities
(384)
(1,144)
(1,125)
Adjusted
for:
Net (redemptions)/purchases of short-term investments
(452)
745
—
Strategic investments and related
—
235
81
Net cash flows related to certain airport construction projects and other
222
208
221
Free
cash flow
$
(463)
$
(2,531)
$
1,422
Delta
Air Lines, Inc. September 2021 Form 10-Q 43
Item 3. Market Risk
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk from the information provided in "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in our Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Our
management, including our Chief Executive Officer and Chief 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 September 30, 2021 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 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 Form 10-Q 44
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 September 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 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
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.
104 The cover page from this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL (included in Exhibit 101)
_______________
* Portions of this exhibit have been redacted pursuant to item 601(b)(10)(iv) of Regulation S-K.
Delta Air Lines, Inc. September 2021 Form 10-Q 46
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.