UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q | | | | | |
☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31,September 30, 2023 | | | | | |
Or |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 001-5424
DELTA AIR LINES, INC.
(Exact name of registrant as specified in its charter) | | | | | | | | |
Delaware | | 58-0218548 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | |
Post Office Box 20706 | | |
Atlanta, Georgia | | 30320-6001 |
(Address of principal executive offices) | | (Zip Code) |
Registrant's telephone number, including area code: (404) 715-2600
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
Title of each class | | Trading Symbol | | Name of each exchange on which registered |
Common Stock, par value $0.0001 per share | | DAL | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | | | | | | | |
Large accelerated filer | ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ |
Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
Number of shares outstanding by each class of common stock, as of March 31,September 30, 2023:
Common Stock, $0.0001 par value - 642,716,623643,463,433 shares outstanding
This document is also available through our website at http://ir.delta.com/.
Forward Looking Statements
Unless otherwise indicated or the context otherwise requires, the terms "Delta," "we," "us" and "our" refer to Delta Air Lines, Inc. and its subsidiaries.
FORWARD-LOOKING STATEMENTS
Statements in this Form 10-Q (or otherwise made by us or on our behalf) that are not historical facts, including statements about our estimates, expectations, beliefs, intentions, projections, goals, aspirations, commitments or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations. Known material risk factors applicable to Delta are described in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 ("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. | MarchSeptember 2023 Form 10-Q 1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Delta Air Lines, Inc.
Results of Review of Interim Financial Statements
We have reviewed the accompanying consolidated balance sheet of Delta Air Lines, Inc. (the Company) as of March 31,September 30, 2023, the related condensed consolidated statements of operations and comprehensive loss, condensed consolidated statements of cash flows,income and consolidated statements of stockholders' equity for the three-month and nine-month periods ended March 31,September 30, 2023 and 2022, condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2023 and 2022, 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, 2022, the related consolidated statements of operations, comprehensive income/(loss), cash flows, and stockholders' equity for the year then ended, and the related notes (not presented herein); and in our report dated February 10, 2023, 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, 2022, 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 Securities and Exchange Commission ("SEC") and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
| | | | | |
| /s/ Ernst & Young LLP |
Atlanta, Georgia | |
April 13,October 12, 2023 | |
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 2
DELTA AIR LINES, INC.
Consolidated Balance Sheets
(Unaudited)
| (in millions, except share data) | (in millions, except share data) | March 31, 2023 | | December 31, 2022 | (in millions, except share data) | September 30, 2023 | | December 31, 2022 |
ASSETS | ASSETS | ASSETS |
Current Assets: | Current Assets: | | Current Assets: | |
Cash and cash equivalents | Cash and cash equivalents | $ | 3,215 | | | $ | 3,266 | | Cash and cash equivalents | $ | 2,835 | | | $ | 3,266 | |
Short-term investments | Short-term investments | 3,396 | | | 3,268 | | Short-term investments | 2,170 | | | 3,268 | |
Accounts receivable, net of allowance for uncollectible accounts of $24 and $23 | 3,224 | | | 3,176 | | |
Fuel, expendable parts and supplies inventories, net of allowance for obsolescence of $134 and $136 | 1,379 | | | 1,424 | | |
Accounts receivable, net of allowance for uncollectible accounts of $17 and $23 | | Accounts receivable, net of allowance for uncollectible accounts of $17 and $23 | 3,214 | | | 3,176 | |
Fuel, expendable parts and supplies inventories, net of allowance for obsolescence of $128 and $136 | | Fuel, expendable parts and supplies inventories, net of allowance for obsolescence of $128 and $136 | 1,507 | | | 1,424 | |
Prepaid expenses and other | Prepaid expenses and other | 2,187 | | | 1,877 | | Prepaid expenses and other | 2,529 | | | 1,877 | |
Total current assets | Total current assets | 13,401 | | | 13,011 | | Total current assets | 12,255 | | | 13,011 | |
| Noncurrent Assets: | Noncurrent Assets: | | Noncurrent Assets: | |
Property and equipment, net of accumulated depreciation and amortization of $20,881 and $20,370 | 33,249 | | | 33,109 | | |
Property and equipment, net of accumulated depreciation and amortization of $21,235 and $20,370 | | Property and equipment, net of accumulated depreciation and amortization of $21,235 and $20,370 | 34,593 | | | 33,109 | |
Operating lease right-of-use assets | Operating lease right-of-use assets | 7,067 | | | 7,036 | | Operating lease right-of-use assets | 6,962 | | | 7,036 | |
Goodwill | Goodwill | 9,753 | | | 9,753 | | Goodwill | 9,753 | | | 9,753 | |
Identifiable intangibles, net of accumulated amortization of $904 and $902 | 5,990 | | | 5,992 | | |
Identifiable intangibles, net of accumulated amortization of $909 and $902 | | Identifiable intangibles, net of accumulated amortization of $909 and $902 | 5,985 | | | 5,992 | |
Equity investments | Equity investments | 2,249 | | | 2,128 | | Equity investments | 2,291 | | | 2,128 | |
Deferred income taxes, net | 432 | | | 325 | | |
| Other noncurrent assets | Other noncurrent assets | 993 | | | 934 | | Other noncurrent assets | 1,408 | | | 1,259 | |
Total noncurrent assets | Total noncurrent assets | 59,733 | | | 59,277 | | Total noncurrent assets | 60,992 | | | 59,277 | |
Total assets | Total assets | $ | 73,134 | | | $ | 72,288 | | Total assets | $ | 73,247 | | | $ | 72,288 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | LIABILITIES AND STOCKHOLDERS' EQUITY | LIABILITIES AND STOCKHOLDERS' EQUITY |
Current Liabilities: | Current Liabilities: | | Current Liabilities: | |
Current maturities of debt and finance leases | Current maturities of debt and finance leases | $ | 2,136 | | | $ | 2,359 | | Current maturities of debt and finance leases | $ | 1,981 | | | $ | 2,359 | |
Current maturities of operating leases | Current maturities of operating leases | 724 | | | 714 | | Current maturities of operating leases | 728 | | | 714 | |
Air traffic liability | Air traffic liability | 11,187 | | | 8,160 | | Air traffic liability | 8,738 | | | 8,160 | |
Accounts payable | Accounts payable | 4,754 | | | 5,106 | | Accounts payable | 5,320 | | | 5,106 | |
Accrued salaries and related benefits | Accrued salaries and related benefits | 2,828 | | | 3,288 | | Accrued salaries and related benefits | 4,003 | | | 3,288 | |
Loyalty program deferred revenue | Loyalty program deferred revenue | 3,685 | | | 3,434 | | Loyalty program deferred revenue | 3,917 | | | 3,434 | |
Fuel card obligation | Fuel card obligation | 1,100 | | | 1,100 | | Fuel card obligation | 1,100 | | | 1,100 | |
Other accrued liabilities | Other accrued liabilities | 2,003 | | | 1,779 | | Other accrued liabilities | 1,769 | | | 1,779 | |
Total current liabilities | Total current liabilities | 28,417 | | | 25,940 | | Total current liabilities | 27,556 | | | 25,940 | |
| Noncurrent Liabilities: | Noncurrent Liabilities: | | Noncurrent Liabilities: | |
Debt and finance leases | Debt and finance leases | 19,823 | | | 20,671 | | Debt and finance leases | 17,532 | | | 20,671 | |
| Pension, postretirement and related benefits | Pension, postretirement and related benefits | 3,730 | | | 3,707 | | Pension, postretirement and related benefits | 3,618 | | | 3,707 | |
Loyalty program deferred revenue | Loyalty program deferred revenue | 4,413 | | | 4,448 | | Loyalty program deferred revenue | 4,456 | | | 4,448 | |
Noncurrent operating leases | Noncurrent operating leases | 6,877 | | | 6,866 | | Noncurrent operating leases | 6,558 | | | 6,866 | |
Other noncurrent liabilities | Other noncurrent liabilities | 3,614 | | | 4,074 | | Other noncurrent liabilities | 4,301 | | | 4,074 | |
Total noncurrent liabilities | Total noncurrent liabilities | 38,457 | | | 39,766 | | Total noncurrent liabilities | 36,465 | | | 39,766 | |
| Commitments and Contingencies | Commitments and Contingencies | | Commitments and Contingencies | |
| Stockholders' Equity: | Stockholders' Equity: | | Stockholders' Equity: | |
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 653,855,351 and 651,800,786 shares issued | — | | | — | | |
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 654,674,447 and 651,800,786 shares issued | | Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 654,674,447 and 651,800,786 shares issued | — | | | — | |
Additional paid-in capital | Additional paid-in capital | 11,544 | | | 11,526 | | Additional paid-in capital | 11,613 | | | 11,526 | |
Retained earnings | Retained earnings | 807 | | | 1,170 | | Retained earnings | 3,613 | | | 1,170 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (5,754) | | | (5,801) | | Accumulated other comprehensive loss | (5,660) | | | (5,801) | |
Treasury stock, at cost, 11,138,728 and 10,535,033 shares | (337) | | | (313) | | |
Treasury stock, at cost, 11,211,014 and 10,535,033 shares | | Treasury stock, at cost, 11,211,014 and 10,535,033 shares | (340) | | | (313) | |
Total stockholders' equity | Total stockholders' equity | 6,260 | | | 6,582 | | Total stockholders' equity | 9,226 | | | 6,582 | |
Total liabilities and stockholders' equity | Total liabilities and stockholders' equity | $ | 73,134 | | | $ | 72,288 | | Total liabilities and stockholders' equity | $ | 73,247 | | | $ | 72,288 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. | The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. | The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. |
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 3
DELTA AIR LINES, INC.
Condensed Consolidated Statements of Operations and Comprehensive LossIncome
(Unaudited) | | | Three Months Ended March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions, except per share data) | (in millions, except per share data) | 2023 | | 2022 | | (in millions, except per share data) | 2023 | | 2022 | | 2023 | | 2022 |
Operating Revenue: | Operating Revenue: | | | Operating Revenue: | | | |
Passenger | Passenger | $ | 10,411 | | | $ | 6,907 | | | Passenger | $ | 13,119 | | | $ | 11,464 | | | $ | 36,735 | | | $ | 29,329 | |
Cargo | Cargo | 209 | | | 289 | | | Cargo | 154 | | | 240 | | | 535 | | | 801 | |
Other | Other | 2,139 | | | 2,152 | | | Other | 2,215 | | | 2,271 | | | 6,555 | | | 7,017 | |
Total operating revenue | Total operating revenue | 12,759 | | | 9,348 | | | Total operating revenue | 15,488 | | | 13,975 | | | 43,825 | | | 37,147 | |
| Operating Expense: | Operating Expense: | | | Operating Expense: | |
Salaries and related costs | Salaries and related costs | 3,386 | | | 2,826 | | | Salaries and related costs | 3,760 | | | 3,050 | | | 10,838 | | | 8,832 | |
Aircraft fuel and related taxes | Aircraft fuel and related taxes | 2,676 | | | 2,092 | | | Aircraft fuel and related taxes | 2,936 | | | 3,318 | | | 8,128 | | | 8,633 | |
Ancillary businesses and refinery | Ancillary businesses and refinery | 1,125 | | | 1,382 | | | Ancillary businesses and refinery | 1,128 | | | 1,349 | | | 3,427 | | | 4,449 | |
Contracted services | Contracted services | 1,010 | | | 753 | | | Contracted services | 1,004 | | | 881 | | | 3,009 | | | 2,425 | |
Pilot agreement and related expenses | 864 | | | — | | | |
Landing fees and other rents | | Landing fees and other rents | 679 | | | 562 | | | 1,880 | | | 1,611 | |
Aircraft maintenance materials and outside repairs | Aircraft maintenance materials and outside repairs | 585 | | | 465 | | | Aircraft maintenance materials and outside repairs | 661 | | | 487 | | | 1,860 | | | 1,474 | |
Landing fees and other rents | 584 | | | 504 | | | |
Passenger commissions and other selling expenses | | Passenger commissions and other selling expenses | 618 | | | 546 | | | 1,770 | | | 1,385 | |
Depreciation and amortization | Depreciation and amortization | 564 | | | 506 | | | Depreciation and amortization | 594 | | | 538 | | | 1,731 | | | 1,554 | |
Regional carrier expense | Regional carrier expense | 559 | | | 491 | | | Regional carrier expense | 546 | | | 528 | | | 1,664 | | | 1,547 | |
Passenger commissions and other selling expenses | 500 | | | 312 | | | |
Passenger service | Passenger service | 416 | | | 275 | | | Passenger service | 449 | | | 406 | | | 1,307 | | | 1,050 | |
Profit sharing | | Profit sharing | 417 | | | 237 | | | 1,084 | | | 291 | |
Pilot agreement and related expenses | | Pilot agreement and related expenses | — | | | — | | | 864 | | | — | |
Aircraft rent | Aircraft rent | 132 | | | 122 | | | Aircraft rent | 131 | | | 131 | | | 395 | | | 380 | |
Profit sharing | 72 | | | — | | | |
| Other | Other | 563 | | | 403 | | | Other | 581 | | | 486 | | | 1,669 | | | 1,325 | |
Total operating expense | Total operating expense | 13,036 | | | 10,131 | | | Total operating expense | 13,504 | | | 12,519 | | | 39,626 | | | 34,956 | |
| Operating Loss | (277) | | | (783) | | | |
Operating Income | | Operating Income | 1,984 | | | 1,456 | | | 4,199 | | | 2,191 | |
| Non-Operating Expense: | Non-Operating Expense: | | | Non-Operating Expense: | |
Interest expense, net | Interest expense, net | (227) | | | (274) | | | Interest expense, net | (196) | | | (248) | | | (627) | | | (791) | |
| Gain/(loss) on investments, net | Gain/(loss) on investments, net | 122 | | | (147) | | | Gain/(loss) on investments, net | (206) | | | (245) | | | 45 | | | (613) | |
Loss on extinguishment of debt | Loss on extinguishment of debt | (22) | | | (25) | | | Loss on extinguishment of debt | (13) | | | (34) | | | (63) | | | (100) | |
Pension and related (expense)/benefit | Pension and related (expense)/benefit | (61) | | | 73 | | | Pension and related (expense)/benefit | (61) | | | 73 | | | (183) | | | 218 | |
Miscellaneous, net | Miscellaneous, net | (41) | | | (44) | | | Miscellaneous, net | 13 | | | (40) | | | (38) | | | (111) | |
Total non-operating expense, net | Total non-operating expense, net | (229) | | | (417) | | | Total non-operating expense, net | (463) | | | (494) | | | (866) | | | (1,397) | |
| Loss Before Income Taxes | (506) | | | (1,200) | | | |
Income Before Income Taxes | | Income Before Income Taxes | 1,521 | | | 962 | | | 3,333 | | | 794 | |
| Income Tax Benefit | 143 | | | 260 | | | |
Income Tax Provision | | Income Tax Provision | (413) | | | (267) | | | (761) | | | (305) | |
| Net Loss | $ | (363) | | | $ | (940) | | | |
Net Income | | Net Income | $ | 1,108 | | | $ | 695 | | | $ | 2,572 | | | $ | 489 | |
| Basic Loss Per Share | $ | (0.57) | | | $ | (1.48) | | | |
Diluted Loss Per Share | $ | (0.57) | | | $ | (1.48) | | | |
Basic Earnings Per Share | | Basic Earnings Per Share | $ | 1.73 | | | $ | 1.09 | | | $ | 4.03 | | | $ | 0.77 | |
Diluted Earnings Per Share | | Diluted Earnings Per Share | $ | 1.72 | | | $ | 1.08 | | | $ | 4.00 | | | $ | 0.76 | |
| | Comprehensive Loss | $ | (316) | | | $ | (881) | | | |
Comprehensive Income | | Comprehensive Income | $ | 1,157 | | | $ | 757 | | | $ | 2,713 | | | $ | 673 | |
| The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. | The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. | The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. |
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 4
DELTA AIR LINES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | Three Months Ended March 31, | | Nine Months Ended September 30, |
(in millions) | (in millions) | 2023 | | 2022 | (in millions) | 2023 | | 2022 |
Net Cash Provided by Operating Activities | Net Cash Provided by Operating Activities | $ | 2,235 | | | $ | 1,771 | | Net Cash Provided by Operating Activities | $ | 5,919 | | | $ | 5,175 | |
| Cash Flows from Investing Activities: | Cash Flows from Investing Activities: | | Cash Flows from Investing Activities: | |
Property and equipment additions: | Property and equipment additions: | | Property and equipment additions: | |
Flight equipment, including advance payments | Flight equipment, including advance payments | (630) | | | (1,276) | | Flight equipment, including advance payments | (2,560) | | | (2,852) | |
Ground property and equipment, including technology | Ground property and equipment, including technology | (370) | | | (490) | | Ground property and equipment, including technology | (1,161) | | | (1,314) | |
| Purchase of short-term investments | Purchase of short-term investments | (999) | | | (226) | | Purchase of short-term investments | (2,312) | | | (575) | |
Redemption of short-term investments | Redemption of short-term investments | 897 | | | 1,346 | | Redemption of short-term investments | 3,488 | | | 2,584 | |
Purchase of equity investments | — | | | (100) | | |
Acquisition of strategic investments | | Acquisition of strategic investments | (152) | | | (153) | |
| Other, net | Other, net | 2 | | | (3) | | Other, net | 84 | | | 121 | |
Net cash used in investing activities | Net cash used in investing activities | (1,100) | | | (749) | | Net cash used in investing activities | (2,613) | | | (2,189) | |
| Cash Flows from Financing Activities: | Cash Flows from Financing Activities: | | Cash Flows from Financing Activities: | |
| Payments on debt and finance lease obligations | Payments on debt and finance lease obligations | (1,166) | | | (1,443) | | Payments on debt and finance lease obligations | (3,710) | | | (4,190) | |
| Cash dividends | | Cash dividends | (64) | | | — | |
| Other, net | Other, net | (13) | | | (13) | | Other, net | (36) | | | (40) | |
Net cash used in financing activities | Net cash used in financing activities | (1,179) | | | (1,456) | | Net cash used in financing activities | (3,810) | | | (4,230) | |
| Net Decrease in Cash, Cash Equivalents and Restricted Cash Equivalents | Net Decrease in Cash, Cash Equivalents and Restricted Cash Equivalents | (44) | | | (434) | | Net Decrease in Cash, Cash Equivalents and Restricted Cash Equivalents | (504) | | | (1,244) | |
Cash, cash equivalents and restricted cash equivalents at beginning of period | Cash, cash equivalents and restricted cash equivalents at beginning of period | 3,473 | | | 8,569 | | Cash, cash equivalents and restricted cash equivalents at beginning of period | 3,473 | | | 8,569 | |
Cash, cash equivalents and restricted cash equivalents at end of period | Cash, cash equivalents and restricted cash equivalents at end of period | $ | 3,429 | | | $ | 8,135 | | Cash, cash equivalents and restricted cash equivalents at end of period | $ | 2,969 | | | $ | 7,325 | |
| Non-Cash Transactions: | Non-Cash Transactions: | | Non-Cash Transactions: | |
Right-of-use assets acquired under operating leases | | Right-of-use assets acquired under operating leases | $ | 443 | | | $ | 372 | |
Flight and ground equipment acquired under finance leases | Flight and ground equipment acquired under finance leases | $ | 25 | | | $ | 33 | | Flight and ground equipment acquired under finance leases | 37 | | | 84 | |
Right-of-use assets acquired under operating leases | 208 | | | 359 | | |
Operating leases converted to finance leases | Operating leases converted to finance leases | 30 | | | 9 | | Operating leases converted to finance leases | 53 | | | 279 | |
Equity investments and other financings | Equity investments and other financings | — | | | 330 | | Equity investments and other financings | — | | | 330 | |
| The following table provides a reconciliation of cash, cash equivalents and restricted cash equivalents reported within the Consolidated Balance Sheets to the total of the same such amounts shown above: | | | March 31, | | September 30, |
(in millions) | (in millions) | 2023 | | 2022 | (in millions) | 2023 | | 2022 |
Current assets: | Current assets: | | Current assets: | |
Cash and cash equivalents | Cash and cash equivalents | $ | 3,215 | | | $ | 7,705 | | Cash and cash equivalents | $ | 2,835 | | | $ | 7,023 | |
Restricted cash included in prepaid expenses and other | Restricted cash included in prepaid expenses and other | 160 | | | 170 | | Restricted cash included in prepaid expenses and other | 134 | | | 149 | |
Noncurrent assets: | Noncurrent assets: | | Noncurrent assets: | |
Restricted cash included in other noncurrent assets | Restricted cash included in other noncurrent assets | 54 | | | 260 | | Restricted cash included in other noncurrent assets | — | | | 153 | |
Total cash, cash equivalents and restricted cash equivalents | Total cash, cash equivalents and restricted cash equivalents | $ | 3,429 | | | $ | 8,135 | | Total cash, cash equivalents and restricted cash equivalents | $ | 2,969 | | | $ | 7,325 | |
| The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. | The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. | The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. |
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 5
DELTA AIR LINES, INC.
Consolidated Statements of Stockholders' Equity
(Unaudited)
| | | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | | | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | |
(in millions, except per share data) | (in millions, except per share data) | Shares | Amount | Shares | Amount | Total | (in millions, except per share data) | Shares | Amount | Shares | Amount | Total |
Balance at December 31, 2022 | Balance at December 31, 2022 | 652 | | $ | — | | $ | 11,526 | | $ | 1,170 | | $ | (5,801) | | 11 | | $ | (313) | | $ | 6,582 | | Balance at December 31, 2022 | 652 | | $ | — | | $ | 11,526 | | $ | 1,170 | | $ | (5,801) | | 11 | | $ | (313) | | $ | 6,582 | |
Net loss | Net loss | — | | — | | — | | (363) | | — | | — | | — | | (363) | | Net loss | — | | — | | — | | (363) | | — | | — | | — | | (363) | |
| Other comprehensive income | Other comprehensive income | — | | — | | — | | — | | 47 | | — | | — | | 47 | | Other comprehensive income | — | | — | | — | | — | | 47 | | — | | — | | 47 | |
Common stock issued for employee equity awards(1) | Common stock issued for employee equity awards(1) | 2 | | — | | 18 | | — | | — | | — | | (24) | | (6) | | Common stock issued for employee equity awards(1) | 2 | | — | | 18 | | — | | — | | — | | (24) | | (6) | |
| Balance at March 31, 2023 | Balance at March 31, 2023 | 654 | | $ | — | | $ | 11,544 | | $ | 807 | | $ | (5,754) | | 11 | | $ | (337) | | $ | 6,260 | | Balance at March 31, 2023 | 654 | | $ | — | | $ | 11,544 | | $ | 807 | | $ | (5,754) | | 11 | | $ | (337) | | $ | 6,260 | |
Net income | | Net income | — | | — | | — | | 1,827 | | — | | — | | — | | 1,827 | |
Dividends declared ($0.10 per share) | | Dividends declared ($0.10 per share) | — | | — | | — | | (65) | | — | | — | | — | | (65) | |
Other comprehensive income | | Other comprehensive income | — | | — | | — | | — | | 45 | | — | | — | | 45 | |
Common stock issued for employee equity awards(1) | | Common stock issued for employee equity awards(1) | 1 | | — | | 34 | | — | | — | | — | | (1) | | 33 | |
| Balance at June 30, 2023 | | Balance at June 30, 2023 | 655 | | $ | — | | $ | 11,578 | | $ | 2,569 | | $ | (5,709) | | 11 | | $ | (338) | | $ | 8,100 | |
Net income | | Net income | — | | — | | — | | 1,108 | | — | | — | | — | | 1,108 | |
Dividends declared ($0.10 per share) | | Dividends declared ($0.10 per share) | — | | — | | — | | (64) | | — | | — | | — | | (64) | |
Other comprehensive income | | Other comprehensive income | — | | — | | — | | — | | 49 | | — | | — | | 49 | |
Common stock issued for employee equity awards(1) | | Common stock issued for employee equity awards(1) | — | | — | | 35 | | — | | — | | — | | (2) | | 33 | |
| Balance at September 30, 2023 | | Balance at September 30, 2023 | 655 | | $ | — | | $ | 11,613 | | $ | 3,613 | | $ | (5,660) | | 11 | | $ | (340) | | $ | 9,226 | |
(1)Treasury shares were withheld for payment of taxes, at a weighted average price per share of $39.73, $36.76 and $45.34 in the March 2023 quarter.quarter, June 2023 quarter and September 2023 quarter, respectively.
| | | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Treasury Stock | | | Common Stock | Additional Paid-In Capital | Retained Earnings/(Accumulated Deficit) | Accumulated Other Comprehensive Loss | Treasury Stock | |
(in millions, except per share data) | (in millions, except per share data) | Shares | Amount | Shares | Amount | Total | (in millions, except per share data) | Shares | Amount | Shares | Amount | Total |
Balance at December 31, 2021 | Balance at December 31, 2021 | 650 | | $ | — | | $ | 11,447 | | $ | (148) | | $ | (7,130) | | 10 | | $ | (282) | | $ | 3,887 | | Balance at December 31, 2021 | 650 | | $ | — | | $ | 11,447 | | $ | (148) | | $ | (7,130) | | 10 | | $ | (282) | | $ | 3,887 | |
Net loss | Net loss | — | | — | | — | | (940) | | — | | — | | — | | (940) | | Net loss | — | | — | | — | | (940) | | — | | — | | — | | (940) | |
| Other comprehensive income | Other comprehensive income | — | | — | | — | | — | | 59 | | — | | — | | 59 | | Other comprehensive income | — | | — | | — | | — | | 59 | | — | | — | | 59 | |
Common stock issued for employee equity awards(1) | Common stock issued for employee equity awards(1) | 2 | | — | | 15 | | — | | — | | 1 | | (30) | | (15) | | Common stock issued for employee equity awards(1) | 2 | | — | | 15 | | — | | — | | 1 | | (30) | | (15) | |
| Balance at March 31, 2022 | Balance at March 31, 2022 | 652 | | $ | — | | $ | 11,462 | | $ | (1,088) | | $ | (7,071) | | 11 | | $ | (312) | | $ | 2,991 | | Balance at March 31, 2022 | 652 | | $ | — | | $ | 11,462 | | $ | (1,088) | | $ | (7,071) | | 11 | | $ | (312) | | $ | 2,991 | |
Net income | | Net income | — | | — | | — | | 735 | | — | | — | | — | | 735 | |
| Other comprehensive income | | Other comprehensive income | — | | — | | — | | — | | 63 | | — | | — | | 63 | |
Common stock issued for employee equity awards(1) | | Common stock issued for employee equity awards(1) | — | | — | | 23 | | — | | — | | — | | (1) | | 22 | |
| Balance at June 30, 2022 | | Balance at June 30, 2022 | 652 | | $ | — | | $ | 11,485 | | $ | (353) | | $ | (7,008) | | 11 | | $ | (313) | | $ | 3,811 | |
Net income | | Net income | — | | — | | — | | 695 | | — | | — | | — | | 695 | |
| Other comprehensive income | | Other comprehensive income | — | | — | | — | | — | | 62 | | — | | — | | 62 | |
Common stock issued for employee equity awards(1) | | Common stock issued for employee equity awards(1) | — | | — | | 22 | | — | | — | | — | | — | | 22 | |
| Balance at September 30, 2022 | | Balance at September 30, 2022 | 652 | | $ | — | | $ | 11,507 | | $ | 342 | | $ | (6,946) | | 11 | | $ | (313) | | $ | 4,590 | |
(1)Treasury shares were withheld for payment of taxes, at a weighted average price per share of $41.00, $38.11 and $30.66 in the March 2022 quarter.quarter, June 2022 quarter and September 2022 quarter, respectively.
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 6
Notes to the Condensed Consolidated Financial Statements
DELTA AIR LINES, INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Delta Air Lines, Inc. and our consolidated subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by GAAP for complete financial statements. As a result, this Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying Notes in our Form 10-K for the year ended December 31, 2022.
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 seasonal variations in the demand for air travel, the volatility of aircraft fuel prices and other factors, operating results for the three and nine months ended March 31,September 30, 2023 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.
NOTE 2. REVENUE RECOGNITION
Passenger Revenue
| | | | Three Months Ended March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
(in millions) | (in millions) | 2023 | 2022 | | (in millions) | 2023 | 2022 | | 2023 | 2022 | |
Ticket | Ticket | $ | 9,239 | | $ | 5,986 | | | Ticket | $ | 11,733 | | $ | 10,247 | | | $ | 32,801 | | $ | 26,005 | | |
Loyalty travel awards | Loyalty travel awards | 743 | | 543 | | | Loyalty travel awards | 902 | | 786 | | | 2,547 | | 2,073 | | |
Travel-related services | Travel-related services | 429 | | 378 | | | Travel-related services | 484 | | 431 | | | 1,387 | | 1,251 | | |
Total passenger revenue | $ | 10,411 | | $ | 6,907 | | | |
Passenger revenue | | Passenger revenue | $ | 13,119 | | $ | 11,464 | | | $ | 36,735 | | $ | 29,329 | | |
Ticket
We recognized approximately $3.9$6.7 billion and $2.2$3.9 billion in passenger revenue during the threenine months ended March 31,September 30, 2023 and 2022, respectively, that had been recorded in our air traffic liability balance at the beginning of those periods.
As of March 31,September 30, 2023, all of our air traffic liability was recorded as a current liability. As of December 31, 2022, our air traffic liability was $8.3 billion, of which $100 million was included in other noncurrent liabilities on our Consolidated Balance Sheet ("balance sheet").
Loyalty Travel Awards
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. Loyalty travel awards revenue is related to the redemption of miles for air travel. Customers can also earn miles through participating companies, such as credit card companies, hotels, car rental agencies and ridesharing companies, who purchase miles from us. Our most significant contract to sell miles relates to our co-brand credit card relationship with American Express. During the threenine months ended March 31,September 30, 2023 and 2022, total cash sales from marketing agreements related to our loyalty program were $1.7$5.2 billion and $1.2$4.1 billion, respectively, which are allocated to travel and other performance obligations.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 7
Notes to the Condensed 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. The timing of mile redemptions can vary widely; however, the majority of miles have historically been redeemed within two years of being earned.
The table below presents the activity of the current and noncurrent loyalty program deferred revenue and includes miles earned through travel and miles sold to participating companies, which are primarily through marketing agreements.
| Loyalty program activity | Loyalty program activity | Loyalty program activity |
(in millions) | (in millions) | | 2023 | 2022 | (in millions) | | 2023 | 2022 |
Balance at January 1 | Balance at January 1 | | $ | 7,882 | | $ | 7,559 | | Balance at January 1 | | $ | 7,882 | | $ | 7,559 | |
Miles earned | Miles earned | | 999 | | 658 | | Miles earned | | 3,164 | | 2,496 | |
Miles redeemed for air travel | Miles redeemed for air travel | | (743) | | (543) | | Miles redeemed for air travel | | (2,547) | | (2,073) | |
Miles redeemed for non-air travel and other | Miles redeemed for non-air travel and other | | (40) | | (30) | | Miles redeemed for non-air travel and other | | (126) | | (122) | |
Balance at March 31 | | $ | 8,098 | | $ | 7,644 | | |
Balance at September 30 | | Balance at September 30 | | $ | 8,373 | | $ | 7,860 | |
Travel-Related Services
Travel-related services are primarily composed of services performed in conjunction with a passenger’s flight and include baggage fees, administrative fees, and on-board sales and administrative fees.sales.
Other Revenue | | | | Three Months Ended March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
(in millions) | (in millions) | 2023 | 2022 | | (in millions) | 2023 | 2022 | | 2023 | 2022 | |
Refinery | Refinery | $ | 916 | | $ | 1,187 | | | Refinery | $ | 935 | | $ | 1,134 | | | $ | 2,817 | | $ | 3,835 | | |
Loyalty program | Loyalty program | 726 | | 571 | | | Loyalty program | 791 | | 655 | | | 2,291 | | 1,877 | | |
Ancillary businesses | Ancillary businesses | 231 | | 209 | | | Ancillary businesses | 212 | | 249 | | | 657 | | 665 | | |
Miscellaneous | Miscellaneous | 266 | | 185 | | | Miscellaneous | 277 | | 233 | | | 790 | | 640 | | |
Total other revenue | $ | 2,139 | | $ | 2,152 | | | |
Other revenue | | Other revenue | $ | 2,215 | | $ | 2,271 | | | $ | 6,555 | | $ | 7,017 | | |
Refinery. This represents refinery sales to third parties. See Note 9, "Segments," for more information on revenue recognition within our refinery segment.
Loyalty Program. Loyalty program revenue relates to brand usage by third parties and other performance obligations embedded in miles sold, including redemption of miles for non-air travel and other awards. These revenues are mainly derived from the total cash sales from marketing agreements, discussed above.
Ancillary Businesses. Ancillary businesses revenue represents revenues from aircraft maintenance services we provide to third parties and our vacation wholesale operations.
Miscellaneous. Miscellaneous is primarily composed of revenues related to Delta Sky Club lounge access, including access provided to certain American Express cardholders, and codeshare agreements.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 8
Notes to the Condensed Consolidated Financial Statements
Revenue by Geographic Region
Operating revenue for the airline segment is recognized in a specific geographic region based on the origin, flight path and destination of each flight segment. A significant portion of the refinery segment's revenues typically consists of fuel sales to support the airline, which is eliminated in the Condensed Consolidated Financial Statements. The remaining operating revenue for the refinery segment is included in the domestic region. Our passenger and operating revenue by geographic region is summarized in the following tables:
| Passenger revenue by geographic region | Passenger revenue by geographic region | Passenger revenue by geographic region |
| | Passenger Revenue | | | Passenger Revenue | |
| | Three Months Ended March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
(in millions) | (in millions) | 2023 | 2022 | | (in millions) | 2023 | 2022 | | 2023 | 2022 | |
Domestic | Domestic | $ | 7,594 | | $ | 5,563 | | | Domestic | $ | 8,662 | | $ | 8,154 | | | $ | 25,200 | | $ | 22,035 | | |
Atlantic | Atlantic | 1,244 | | 539 | | | Atlantic | 3,110 | | 2,313 | | | 7,157 | | 4,553 | | |
Latin America | Latin America | 1,132 | | 680 | | | Latin America | 788 | | 659 | | | 2,846 | | 2,084 | | |
Pacific | Pacific | 441 | | 125 | | | Pacific | 559 | | 338 | | | 1,532 | | 657 | | |
Total | Total | $ | 10,411 | | $ | 6,907 | | | Total | $ | 13,119 | | $ | 11,464 | | | $ | 36,735 | | $ | 29,329 | | |
| Operating revenue by geographic region | Operating revenue by geographic region | Operating revenue by geographic region |
| | Operating Revenue | | | Operating Revenue | |
| | Three Months Ended March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
(in millions) | (in millions) | 2023 | 2022 | | (in millions) | 2023 | 2022 | | 2023 | 2022 | |
Domestic | Domestic | $ | 9,396 | | $ | 7,549 | | | Domestic | $ | 10,461 | | $ | 10,118 | | | $ | 30,607 | | $ | 28,322 | | |
Atlantic | Atlantic | 1,548 | | 776 | | | Atlantic | 3,497 | | 2,705 | | | 8,223 | | 5,538 | | |
Latin America | Latin America | 1,280 | | 811 | | | Latin America | 891 | | 752 | | | 3,208 | | 2,417 | | |
Pacific | Pacific | 535 | | 212 | | | Pacific | 639 | | 400 | | | 1,787 | | 870 | | |
Total | Total | $ | 12,759 | | $ | 9,348 | | | Total | $ | 15,488 | | $ | 13,975 | | | $ | 43,825 | | $ | 37,147 | | |
NOTE 3. FAIR VALUE MEASUREMENTS
Assets/(Liabilities) Measured at Fair Value on a Recurring Basis | (in millions) | (in millions) | March 31, 2023 | Level 1 | Level 2 | Level 3 | (in millions) | September 30, 2023 | Level 1 | Level 2 | Level 3 |
Cash equivalents | Cash equivalents | $ | 2,231 | | $ | 2,231 | | $ | — | | $ | — | | Cash equivalents | $ | 1,854 | | $ | 1,854 | | $ | — | | $ | — | |
Restricted cash equivalents | Restricted cash equivalents | 213 | | 213 | | — | | — | | Restricted cash equivalents | 134 | | 134 | | — | | — | |
Short-term investments | Short-term investments | | Short-term investments | |
U.S. Government securities | U.S. Government securities | 1,501 | | 162 | | 1,339 | | — | | U.S. Government securities | 1,162 | | 239 | | 923 | | — | |
Corporate obligations | Corporate obligations | 1,756 | | — | | 1,756 | | — | | Corporate obligations | 857 | | — | | 857 | | — | |
Asset-backed securities | Asset-backed securities | 37 | | — | | 37 | | — | | Asset-backed securities | 86 | | — | | 86 | | — | |
Other fixed income securities | Other fixed income securities | 102 | | — | | 102 | | — | | Other fixed income securities | 65 | | — | | 65 | | — | |
Long-term investments | 1,572 | | 1,424 | | 38 | | 110 | | |
Long-term investments and related | | Long-term investments and related | 1,647 | | 1,342 | | 130 | | 175 | |
Fuel hedge contracts | Fuel hedge contracts | (6) | | — | | (6) | | — | | Fuel hedge contracts | 12 | | — | | 12 | | — | |
|
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 9
Notes to the Condensed Consolidated Financial Statements
| | | | | | | | | | | | | | |
(in millions) | December 31, 2022 | Level 1 | Level 2 | Level 3 |
Cash equivalents | $ | 2,021 | | $ | 2,021 | | $ | — | | $ | — | |
Restricted cash equivalents | 206 | | 206 | | — | | — | |
Short-term investments | | | | |
U.S. Government securities | 1,587 | | 122 | | 1,465 | | — | |
Corporate obligations | 1,614 | | — | | 1,614 | | — | |
Other fixed income securities | 67 | | — | | 67 | | — | |
Long-term investments | 1,450 | | 1,305 | | 38 | | 107 | |
Fuel hedge contracts | (47) | | — | | (47) | | — | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Cash Equivalents and Restricted Cash Equivalents. Cash equivalents generally consist of money market funds. Restricted cash equivalents generally consist of money market funds, time deposits, commercial paper and negotiable certificates of deposit, which primarily relate to certain self-insurance obligations and airport commitments as well as 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.commitments. Restricted cash equivalents are recorded in prepaid expenses and other and other noncurrent assets on our balance sheet. 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. The fair values of our short-term 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 March 31,September 30, 2023, the estimated fair value of our short-term investments was $3.42.2 billion. Of these investments, $3.0$2.1 billion are expected to mature in one year or less, with the remainder maturing inby the secondfirst quarter of 2024.2026. 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.Investments and Related. 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. 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. As of September 30, 2023 our equity investment in Wheels Up Experience Inc. ("Wheels Up") is classified as Level 3 in the fair value hierarchy. In prior periods, this investment was classified as Level 1. We determined the quoted price of its publicly-traded shares does not represent fair value after the closing of Wheels Up's $500 million credit facility on September 20, 2023. In addition to the quoted price, the valuation of our equity investment in Wheels Up considered certain unobservable inputs, including Wheels Up's financial projections, using both market and income approach valuation techniques. 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 the transaction with Wheels Up and our other equity investments.
Fuel Hedge Contracts. Our derivative contracts to hedge the financial risk from changing fuel prices are primarily related to inventory at our wholly-owned subsidiary, Monroe Energy, LLC ("Monroe"). Our fuel hedge portfolio may consist of a combination of options, swaps or futures contracts, most of which have a duration of less than three months. Option and swap contracts are valued under income approaches using option pricing models and discounted cash flow models, respectively, based on data either readily observable in public markets, derived from public markets or provided by counterparties who regularly trade in public markets. Futures contracts and options on futures contracts are traded on a public exchange and valued based on quoted market prices. We recognized gainslosses of $31$140 million and losses of $240$96 million on our fuel hedge contracts in aircraft fuel and related taxes on our Condensed Consolidated Statements of Operations and Comprehensive LossIncome ("income statement") for the three and nine months ended March 31,September 30, 2023, respectively, compared to gains of $139 million and losses of $339 million for the three and nine months ended September 30, 2022, respectively. The gainslosses recognized during the threefirst nine months ended March 31,of 2023 were composed of $41$59 million of mark-to-market gains and $10$155 million of settlementssettlement losses on contracts. TheGains and losses recognized during the March 2022 quarter were composed of $244 million of settlements on settled contracts and $4 million of mark-to-market gains. Expense from the settlement of closed contracts is offset by higherare reflected within Monroe's operating profits at Monroe from higher pricing.results. See Note 9, "Segments," for further information on our Monroe refinery segment.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 10
Notes to the Condensed Consolidated Financial Statements
NOTE 4. INVESTMENTS
We have developed strategic relationships with a number of airlines and airline services companies through joint ventures and other forms of cooperation and support, including equity investments. Our equity investments reinforce our commitment to these relationships and generally enhance our ability to offer input to the investee on strategic issues and direction, in some cases through representation on the board of directors.
Fair Value Investments. 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, foreign currency fluctuations and other valuation techniques for investments in certain companies, particularly those without publicly-traded shares.
Equity Method Investments. We record our share of our equity method investees' financial results in our income statement as described in the table below.
| Equity investments ownership interest and carrying value | Equity investments ownership interest and carrying value | Equity investments ownership interest and carrying value |
| | Accounting Treatment | | Ownership Interest | | Carrying Value | | Accounting Treatment | | Ownership Interest | | Carrying Value |
(in millions) | (in millions) | | | March 31, 2023 | December 31, 2022 | | March 31, 2023 | December 31, 2022 | (in millions) | | | September 30, 2023 | December 31, 2022 | | September 30, 2023 | December 31, 2022 |
Air France-KLM | Air France-KLM | Fair Value | | 3 | % | 3 | % | | $ | 135 | | $ | 97 | | Air France-KLM | Fair Value | | 3 | % | 3 | % | | $ | 92 | | $ | 97 | |
China Eastern | China Eastern | Fair Value | | 2 | % | 2 | % | | 184 | | 189 | | China Eastern | Fair Value | | 2 | % | 2 | % | | 159 | | 189 | |
CLEAR | CLEAR | Fair Value | | 5 | % | 5 | % | | 217 | | 227 | | CLEAR | Fair Value | | 5 | % | 5 | % | | 158 | | 227 | |
Grupo Aeroméxico | Grupo Aeroméxico | Equity Method(1) | | 20 | % | 20 | % | | 410 | | 412 | | Grupo Aeroméxico | Equity Method(1) | | 20 | % | 20 | % | | 459 | | 412 | |
Hanjin KAL | Hanjin KAL | Fair Value(2) | | 15 | % | 15 | % | | 351 | | 296 | | Hanjin KAL | Fair Value(2) | | 15 | % | 15 | % | | 313 | | 296 | |
LATAM | LATAM | Fair Value | | 10 | % | 10 | % | | 455 | | 403 | | LATAM | Fair Value | | 10 | % | 10 | % | | 548 | | 403 | |
Unifi Aviation | Unifi Aviation | Equity Method(3) | | 49 | % | 49 | % | | 164 | | 165 | | Unifi Aviation | Equity Method(3) | | 49 | % | 49 | % | | 174 | | 165 | |
Wheels Up | Wheels Up | Fair Value(4) | | 21 | % | 21 | % | | 33 | | 54 | | Wheels Up | Fair Value(4) | | 39 | % | 21 | % | | 59 | | 54 | |
Other investments | Other investments | Various | | 300 | | 285 | | Other investments | Various | | 329 | | 285 | |
Equity investments | Equity investments | | $ | 2,249 | | $ | 2,128 | | Equity investments | | $ | 2,291 | | $ | 2,128 | |
(1)Results are included in miscellaneous, net in our income statement under non-operating expense.
(2)At March 31,September 30, 2023, we held 14.8% of the outstanding shares (including common and preferred), and 14.9% of the common shares, of Hanjin KAL.
(3)Results are included in contracted services in our income statement as this entity is integral to the operations of our business by providing services at many of our airport locations.
(4)We elected to accountSee below for additional information about our investment under the fair value option.ownership interest and voting rights.
Wheels Up. We, along with Certares Management LLC, Knighthead Capital Management LLC and Cox Enterprises, Inc. announced the closing on September 20, 2023 of an expanded strategic partnership with Wheels Up, which includes an agreement for a $500 million credit facility to Wheels Up. At closing, the credit facility was comprised of a $350 million term loan, of which we contributed $150 million, and a $100 million liquidity facility that we made available to Wheels Up in the event the company's liquidity falls below $100 million. The terms of the credit facility permit one or more new lenders to provide an aggregate incremental $50 million term loan after the closing date. In connection with the closing, the term loan investors received newly issued shares of Wheels Up's common stock representing 80% of Wheels Up's outstanding equity as of the closing of the credit facility on a fully diluted basis. Upon approval by Wheels Up's stockholders of an amendment to its certificate of incorporation, Wheels Up is expected to issue to the lenders additional new shares such that the lenders will own 95% of Wheels Up's outstanding equity as of the closing of the credit facility on a fully diluted basis.
The $150 million cash contribution was reflected as an investing outflow in our Condensed Consolidated Statement of Cash Flows and allocated on a relative fair value basis to a loan receivable within other noncurrent assets and an equity investment on our balance sheet. Combined with our previous ownership stake, this new investment provides us with a 39% equity stake in Wheels Up calculated based on Wheels Up's outstanding equity as of September 20, 2023. Our current percentage ownership does not reflect the anticipated dilutive effect from the additional shares to be issued to the lenders (including potentially to one or more new lenders under the term loan) upon approval by Wheels Up's stockholders and common stock grants expected to be made under Wheels Up's equity compensation plans. Furthermore, Delta's voting rights with respect to its Wheels Up equity stake are capped at 29.9%.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 11
Notes to the Condensed Consolidated Financial Statements
As a result of the transaction, we concluded that Wheels Up is a variable interest entity ("VIE"). A VIE requires consolidation by the entity’s primary beneficiary. We determined that we are not the primary beneficiary after assessing the decision-making process for the significant activities of Wheels Up, concluding that Wheels Up's Board of Directors continues to possess the decision-making authority over the significant activities, and we do not control Wheels Up's Board. Based on this assessment, Wheels Up is not consolidated in our financial statements.
We continue to account for our equity interest under the fair value option, as originally elected as part of our initial acquisition of Wheels Up shares in 2020. We will also account for our loan receivable at fair value, as the fair value option is applied to all of an investor's financial interests in the same entity. None of the $100 million liquidity facility has been drawn as of September 30, 2023.
NOTE 5. DEBT
| Summary of outstanding debt by category | Summary of outstanding debt by category | Summary of outstanding debt by category |
| | Maturity | Interest Rate(s) Per Annum at | March 31, | December 31, | | Maturity | Interest Rate(s) Per Annum at | September 30, | December 31, |
(in millions) | (in millions) | Dates | March 31, 2023 | 2023 | 2022 | (in millions) | Dates | September 30, 2023 | 2023 | 2022 |
Unsecured Payroll Support Program Loans | Unsecured Payroll Support Program Loans | 2030 | to | 2031 | 1.00% | $ | 3,496 | | $ | 3,496 | | Unsecured Payroll Support Program Loans | 2030 | to | 2031 | 1.00% | $ | 3,496 | | $ | 3,496 | |
Unsecured notes | Unsecured notes | 2023 | to | 2029 | 2.90% | to | 7.38% | 2,997 | | 2,997 | | Unsecured notes | 2024 | to | 2029 | 2.90% | to | 7.38% | 2,590 | | 2,997 | |
Financing arrangements secured by SkyMiles assets: | Financing arrangements secured by SkyMiles assets: | | Financing arrangements secured by SkyMiles assets: | |
SkyMiles Notes(1) | SkyMiles Notes(1) | 2023 | to | 2028 | 4.50% | and | 4.75% | 5,007 | | 5,144 | | SkyMiles Notes(1) | 2023 | to | 2028 | 4.50% | and | 4.75% | 4,655 | | 5,144 | |
SkyMiles Term Loan(1)(2) | SkyMiles Term Loan(1)(2) | 2023 | to | 2027 | 8.56% | 2,478 | | 2,820 | | SkyMiles Term Loan(1)(2) | 2023 | to | 2027 | 9.08% | 1,882 | | 2,820 | |
NYTDC Special Facilities Revenue Bonds(1) | NYTDC Special Facilities Revenue Bonds(1) | 2024 | to | 2045 | 4.00% | to | 5.00% | 2,778 | | 2,838 | | NYTDC Special Facilities Revenue Bonds(1) | 2024 | to | 2045 | 4.00% | to | 5.00% | 2,778 | | 2,838 | |
Financing arrangements secured by aircraft: | Financing arrangements secured by aircraft: | | | Financing arrangements secured by aircraft: | | |
Certificates(1) | Certificates(1) | 2023 | to | 2028 | 2.00% | to | 8.00% | 1,790 | | 1,802 | | Certificates(1) | 2023 | to | 2028 | 2.00% | to | 8.00% | 1,632 | | 1,802 | |
Notes(1)(2) | Notes(1)(2) | 2023 | to | 2033 | 6.11% | to | 7.22% | 553 | | 813 | | Notes(1)(2) | 2023 | to | 2033 | 6.76% | to | 8.00% | 173 | | 813 | |
Financing arrangements secured by slots, gates and/or routes: | Financing arrangements secured by slots, gates and/or routes: | | Financing arrangements secured by slots, gates and/or routes: | |
2020 Senior Secured Notes | 2020 Senior Secured Notes | 2025 | 7.00% | 1,274 | | 1,542 | | 2020 Senior Secured Notes | 2025 | 7.00% | 838 | | 1,542 | |
2018 Revolving Credit Facility(2) | 2018 Revolving Credit Facility(2) | 2024 | to | 2025 | Undrawn | — | | — | | 2018 Revolving Credit Facility(2) | 2024 | to | 2025 | Undrawn | — | | — | |
Other financings(1)(2) | Other financings(1)(2) | 2023 | to | 2030 | 2.51% | to | 5.00% | 67 | | 67 | | Other financings(1)(2) | 2023 | to | 2030 | 2.51% | to | 5.00% | 67 | | 67 | |
Other revolving credit facilities(2) | Other revolving credit facilities(2) | 2023 | Undrawn | — | | — | | Other revolving credit facilities(2) | 2023 | to | 2024 | Undrawn | — | | — | |
Total secured and unsecured debt | Total secured and unsecured debt | | $ | 20,440 | | $ | 21,519 | | Total secured and unsecured debt | | $ | 18,111 | | $ | 21,519 | |
Unamortized (discount)/premium and debt issue cost, net and other | Unamortized (discount)/premium and debt issue cost, net and other | | (120) | | (138) | | Unamortized (discount)/premium and debt issue cost, net and other | | (83) | | (138) | |
Total debt | Total debt | | $ | 20,320 | | $ | 21,381 | | Total debt | | $ | 18,028 | | $ | 21,381 | |
Less: current maturities | Less: current maturities | | (1,830) | | (2,055) | | Less: current maturities | | (1,681) | | (2,055) | |
Total long-term debt | Total long-term debt | | $ | 18,490 | | $ | 19,326 | | Total long-term debt | | $ | 16,347 | | $ | 19,326 | |
(1)Due in installments during the years shown above.
(2)Certain financings are comprised of variable rate debt. All variable rates are equal to LIBOR (generally subject to a floor), Secured Overnight Financing Rate ("SOFR") (generally subject to a floor) or another index rate, plus a specified margin.
Availability Under Revolving Credit Facilities
As of March 31,September 30, 2023, we had approximately $2.9$2.8 billion undrawn and available under our revolving credit facilities. In addition, we had approximately $400 million outstanding letters of credit as of March 31,September 30, 2023 that did not affect the availability of our revolving credit facilities.
Early Settlement of Outstanding Notes
InDuring the Marchnine months ended September 30, 2023, quarter, we repurchased a principal amount of $468 million$1.4 billion of various secured and unsecured notes and a portion of the SkyMiles Term Loan on the open market and made early principal repayments of $227$585 million on various notes secured by aircraft. These payments resulted in a $22$63 million loss on extinguishment of debt recorded in non-operating expense in our income statement.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 12
Notes to the Condensed Consolidated Financial Statements
Fair Value of Debt
Market risk associated with our fixed- and variable-rate debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates. The fair value of debt shown below is principally based on reported market values, recently completed market transactions and estimates based on interest rates, maturities, credit risk and underlying collateral. Debt is primarily classified as Level 2 within the fair value hierarchy.
| Fair value of outstanding debt | Fair value of outstanding debt | Fair value of outstanding debt |
(in millions) | (in millions) | March 31, 2023 | December 31, 2022 | (in millions) | September 30, 2023 | December 31, 2022 |
Net carrying amount | Net carrying amount | $ | 20,320 | | $ | 21,381 | | Net carrying amount | $ | 18,028 | | $ | 21,381 | |
Fair value | Fair value | $ | 19,900 | | $ | 20,700 | | Fair value | $ | 17,300 | | $ | 20,700 | |
Covenants
Our debt agreements contain various affirmative, negative and financial covenants. We were in compliance with the covenants in our debt agreements at March 31,September 30, 2023.
NOTE 6. EMPLOYEE BENEFIT PLANS
| Employee benefit plans net periodic cost (benefit) | Employee benefit plans net periodic cost (benefit) | Employee benefit plans net periodic cost (benefit) |
| | Pension Benefits | | Other Postretirement and Postemployment Benefits | | Pension Benefits | | Other Postretirement and Postemployment Benefits |
(in millions) | (in millions) | 2023 | 2022 | | 2023 | 2022 | (in millions) | 2023 | 2022 | | 2023 | 2022 |
Three Months Ended March 31, | | |
Three Months Ended September 30, | | Three Months Ended September 30, | |
Service cost | Service cost | $ | — | | $ | — | | | $ | 18 | | $ | 18 | | Service cost | $ | — | | $ | — | | | $ | 18 | | $ | 18 | |
Interest cost | Interest cost | 213 | | 153 | | | 50 | | 32 | | Interest cost | 213 | | 153 | | | 50 | | 32 | |
Expected return on plan assets | Expected return on plan assets | (264) | | (330) | | | — | | (4) | | Expected return on plan assets | (264) | | (330) | | | — | | (4) | |
Amortization of prior service credit | Amortization of prior service credit | — | | — | | | (1) | | (1) | | Amortization of prior service credit | — | | — | | | (1) | | (1) | |
Recognized net actuarial loss | Recognized net actuarial loss | 60 | | 64 | | | 3 | | 13 | | Recognized net actuarial loss | 60 | | 64 | | | 3 | | 13 | |
| | Net periodic cost (benefit) | Net periodic cost (benefit) | $ | 9 | | $ | (113) | | | $ | 70 | | $ | 58 | | Net periodic cost (benefit) | $ | 9 | | $ | (113) | | | $ | 70 | | $ | 58 | |
| Nine Months Ended September 30, | | Nine Months Ended September 30, | |
Service cost | | Service cost | $ | — | | $ | — | | | $ | 54 | | $ | 53 | |
Interest cost | | Interest cost | 638 | | 459 | | | 150 | | 96 | |
Expected return on plan assets | | Expected return on plan assets | (791) | | (990) | | | (1) | | (12) | |
Amortization of prior service credit | | Amortization of prior service credit | — | | — | | | (4) | | (4) | |
Recognized net actuarial loss | | Recognized net actuarial loss | 179 | | 191 | | | 10 | | 41 | |
| Net periodic cost (benefit) | | Net periodic cost (benefit) | $ | 26 | | $ | (340) | | | $ | 209 | | $ | 174 | |
Service cost is recorded in salaries and related costs in our income statement, while all other components are recorded within pension and related (expense)/benefit under non-operating expense.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 13
Notes to the Condensed Consolidated Financial Statements
NOTE 7. COMMITMENTS AND CONTINGENCIES
Aircraft Purchase Commitments
Our future aircraft purchase commitments totaled approximately $18.7$17.8 billion at March 31,September 30, 2023.
| Aircraft purchase commitments(1) | Aircraft purchase commitments(1) | Aircraft purchase commitments(1) |
(in millions) | (in millions) | Total | (in millions) | Total |
Nine months ending December 31, 2023 | $ | 2,360 | | |
Three months ending December 31, 2023 | | Three months ending December 31, 2023 | $ | 920 | |
2024 | 2024 | 4,460 | | 2024 | 3,520 | |
2025 | 2025 | 4,290 | | 2025 | 5,410 | |
2026 | 2026 | 3,830 | | 2026 | 3,850 | |
2027 | 2027 | 2,580 | | 2027 | 2,720 | |
Thereafter | Thereafter | 1,200 | | Thereafter | 1,410 | |
Total | Total | $ | 18,720 | | Total | $ | 17,830 | |
(1)The timing of these commitments is based on our contractual agreements with the aircraft manufacturers and may be subject to change based on modifications to those agreements or changes in delivery schedules.
Our future aircraft purchase commitments included the following aircraft at March 31,September 30, 2023:
| | | | | |
Aircraft purchase commitments by fleet type | |
Aircraft Type | Purchase Commitments |
A220-300 | 5968 | |
A321-200neo | 130113 | |
A330-900neo | 1716 | |
A350-900 | 16 | |
B-737-10 | 100 | |
Total | 322313 | |
Aircraft Orders
During the June 2023 quarter, we agreed to acquire one A330-900 with delivery expected to occur in 2025. We also exercised purchase rights for 12 A220-300 with delivery expected to start in 2027.
Legal Contingencies
We are involved in various legal proceedings related to employment practices, environmental issues, commercial disputes, antitrust and other regulatory 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.
Employees Under Collective Bargaining Agreements
In the March 2023 quarter, Delta pilots ratified a new four-year Pilot Working Agreement effective January 1, 2023. The agreement includes numerous work rule changes and pay rate increases during the four-year term, including an initial pay rate increase of 18%. The agreement also includes a provision for a one-time payment made upon ratification in the March 2023 quarter of $735 million. Additionally, we recorded adjustments to other benefit-related items of approximately $130 million. These items are recorded within pilot agreement and related expenses in our income statement.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 14
Notes to the Condensed Consolidated Financial Statements
NOTE 8. ACCUMULATED OTHER COMPREHENSIVE LOSS
| Components of accumulated other comprehensive loss | Components of accumulated other comprehensive loss | Components of accumulated other comprehensive loss |
(in millions) | (in millions) | Pension and Other Benefit Liabilities | Other | Tax Effect | Total | (in millions) | Pension and Other Benefit Liabilities | Other | Tax Effect | Total |
Balance at January 1, 2023 | Balance at January 1, 2023 | $ | (6,624) | | $ | 41 | | $ | 782 | | $ | (5,801) | | Balance at January 1, 2023 | $ | (6,624) | | $ | 41 | | $ | 782 | | $ | (5,801) | |
| Changes in value | | Changes in value | — | | (1) | | — | | (1) | |
Reclassifications into earnings(1) | Reclassifications into earnings(1) | 62 | | — | | (15) | | 47 | | Reclassifications into earnings(1) | 185 | | — | | (43) | | 142 | |
Balance at March 31, 2023 | $ | (6,562) | | $ | 41 | | $ | 767 | | $ | (5,754) | | |
Balance at September 30, 2023 | | Balance at September 30, 2023 | $ | (6,439) | | $ | 40 | | $ | 739 | | $ | (5,660) | |
| Balance at January 1, 2022 | Balance at January 1, 2022 | $ | (8,355) | | $ | 41 | | $ | 1,184 | | $ | (7,130) | | Balance at January 1, 2022 | $ | (8,355) | | $ | 41 | | $ | 1,184 | | $ | (7,130) | |
| Reclassifications into earnings(1) | Reclassifications into earnings(1) | 77 | | — | | (18) | | 59 | | Reclassifications into earnings(1) | 240 | | — | | (56) | | 184 | |
Balance at March 31, 2022 | $ | (8,278) | | $ | 41 | | $ | 1,166 | | $ | (7,071) | | |
Balance at September 30, 2022 | | Balance at September 30, 2022 | $ | (8,115) | | $ | 41 | | $ | 1,128 | | $ | (6,946) | |
(1)Amounts reclassified from accumulated other comprehensive loss for pension and other benefit liabilities are recorded in pension and related (expense)/benefit in non-operating expense in our income statement.
Delta Air Lines, Inc. | September 2023 Form 10-Q 15
Notes to the Condensed Consolidated Financial Statements
NOTE 9. SEGMENTS
Refinery Operations
Our refinery segment operates for the benefit of the airline segment by providing jet fuel to the airline segment from its own production and from 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 March 31,September 30, 2023 and 2022 was $714$519 million and $809$1.8 billion, respectively, compared to $834 million and $2.6 billion for the three and nine months ended September 30, 2022, respectively.
Delta Air Lines, Inc. | March 2023 Form 10-Q 15
Notes to the Consolidated Financial Statements
Segment Reporting
Segment results are prepared based on our internal accounting methods described below, with reconciliations to consolidated amounts in accordance with GAAP. Our segments are not designed to measure operating income or loss directly related to the products and services included in each segment on a stand-alone basis.
| Financial information by segment | Financial information by segment | Financial information by segment |
(in millions) | (in millions) | Airline | Refinery | | Intersegment Sales/Other | | Consolidated | (in millions) | Airline | Refinery | | Intersegment Sales/Other | | Consolidated |
Three Months Ended March 31, 2023 | | |
Three Months Ended September 30, 2023 | | Three Months Ended September 30, 2023 | |
Operating revenue: | Operating revenue: | $ | 11,843 | | $ | 2,352 | | | $ | 12,759 | | Operating revenue: | $ | 14,553 | | $ | 1,886 | | | $ | 15,488 | |
Sales to airline segment | Sales to airline segment | | $ | (596) | | (1) | | Sales to airline segment | | $ | (385) | | (1) | |
Exchanged products | Exchanged products | | (714) | | (2) | | Exchanged products | | (519) | | (2) | |
Sales of refined products | Sales of refined products | | (126) | | | Sales of refined products | | (47) | | |
Operating (loss)/income | (499) | | 222 | | (3) | — | | | (277) | | |
Depreciation and amortization | | Depreciation and amortization | 594 | | 23 | | | (23) | | (3) | 594 | |
Operating income | | Operating income | 1,865 | | 119 | | (3) | — | | | 1,984 | |
Interest expense, net | Interest expense, net | 227 | | 4 | | | (4) | | | 227 | | Interest expense, net | 196 | | 6 | | | (6) | | | 196 | |
Depreciation and amortization | 564 | | 23 | | | (23) | | (3) | 564 | | |
| Total assets, end of period | Total assets, end of period | 70,183 | | 3,005 | | | (54) | | | 73,134 | | Total assets, end of period | 69,851 | | 3,397 | | | (1) | | | 73,247 | |
Net fair value obligations, end of period | Net fair value obligations, end of period | — | | (38) | | | — | | | (38) | | Net fair value obligations, end of period | — | | (9) | | | — | | | (9) | |
Capital expenditures | Capital expenditures | 971 | | 29 | | | — | | | 1,000 | | Capital expenditures | 1,201 | | 68 | | | — | | | 1,269 | |
| Three Months Ended March 31, 2022 | | |
Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2022 | |
Operating revenue: | Operating revenue: | $ | 8,161 | | $ | 2,313 | | | $ | 9,348 | | Operating revenue: | $ | 12,841 | | $ | 2,599 | | | $ | 13,975 | |
Sales to airline segment | Sales to airline segment | | $ | (291) | | (1) | | Sales to airline segment | | $ | (504) | | (1) | |
Exchanged products | Exchanged products | | (809) | | (2) | | Exchanged products | | (834) | | (2) | |
Sales of refined products | Sales of refined products | | (26) | | | Sales of refined products | | (127) | | |
Operating (loss)/income | (836) | | 53 | | (3) | — | | | (783) | | |
Depreciation and amortization | | Depreciation and amortization | 538 | | 23 | | | (23) | | (3) | 538 | |
Operating income | | Operating income | 1,264 | | 192 | | (3) | — | | | 1,456 | |
Interest expense, net | Interest expense, net | 274 | | 2 | | | (2) | | | 274 | | Interest expense, net | 248 | | 3 | | | (3) | | | 248 | |
Depreciation and amortization | 506 | | 23 | | | (23) | | (3) | 506 | | |
| Total assets, end of period | Total assets, end of period | 71,392 | | 2,382 | | | (26) | | | 73,748 | | Total assets, end of period | 69,680 | | 2,977 | | | (61) | | | 72,596 | |
Net fair value obligations, end of period | Net fair value obligations, end of period | — | | (430) | | | — | | | (430) | | Net fair value obligations, end of period | — | | (291) | | | — | | | (291) | |
Capital expenditures | Capital expenditures | 1,749 | | 17 | | | — | | | 1,766 | | Capital expenditures | 1,393 | | 49 | | | — | | | 1,442 | |
(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 for jet fuel from the refinery by reference to the market index for the primary delivery location, which is New York Harbor.
(2)Represents value of products delivered under our exchange agreements, as discussed above, determined on a market price basis.
(3)Refinery segment operating results, including depreciation and amortization, are included within aircraft fuel and related taxes in our income statement.
Delta Air Lines, Inc. | September 2023 Form 10-Q 16
Notes to the Condensed Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | |
Financial information by segment |
(in millions) | Airline | Refinery | | Intersegment Sales/Other | | Consolidated |
Nine Months Ended September 30, 2023 | | | | | | |
Operating revenue: | $ | 41,008 | | $ | 6,274 | | | | | $ | 43,825 | |
Sales to airline segment | | | | $ | (1,346) | | (1) | |
Exchanged products | | | | (1,848) | | (2) | |
Sales of refined products | | | | (263) | | | |
Depreciation and amortization | 1,731 | | 69 | | | (69) | | (3) | 1,731 | |
Operating income | 3,814 | | 385 | | (3) | — | | | 4,199 | |
Interest expense, net | 627 | | 14 | | | (14) | | | 627 | |
Capital expenditures | 3,594 | | 127 | | | — | | | 3,721 | |
| | | | | | |
Nine Months Ended September 30, 2022 | | | | | | |
Operating revenue: | $ | 33,312 | | $ | 8,265 | | | | | $ | 37,147 | |
Sales to airline segment | | | | $ | (1,557) | | (1) | |
Exchanged products | | | | (2,623) | | (2) | |
Sales of refined products | | | | (250) | | | |
Depreciation and amortization | 1,554 | | 70 | | | (70) | | (3) | 1,554 | |
Operating income | 1,676 | | 515 | | (3) | — | | | 2,191 | |
Interest expense, net | 791 | | 7 | | | (7) | | | 791 | |
Capital expenditures | 4,069 | | 97 | | | — | | | 4,166 | |
(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 for jet fuel from the refinery by reference to the market index for the primary delivery location, which is New York Harbor.
(2)Represents value of products delivered under our exchange agreements, as discussed above, determined on a market price basis.
(3)Refinery segment operating results, including depreciation and amortization, are included within aircraft fuel and related taxes in our income statement.
Fair Value Obligations
The net fair value obligations presented in the table above are related to renewable fuel compliance costs and presented net of any related assets or fixed price purchase agreements. Their value is based on quoted market prices and other observable information and are therefore classified as Level 2 in the fair value hierarchy. Our obligation as of March 31,September 30, 2023 was calculated using the U.S. Environmental Protection Agency's ("EPA") Renewable Fuel Standard ("RFS") volume requirements, which were finalized in 2022 for the 2021 and 2022 obligations, and proposed in 2022 for 2023 obligations. In the March 2023 quarter, we settled a portion of our 2021 RINsRenewable Identification Numbers ("RINs") obligation with the EPA. We expect to settle the remaining 2021 and our entire 2022 RINs obligation by the 2022 compliance deadline whichin the EPA has not yet finalized.December 2023 quarter.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 1617
Notes to the Condensed Consolidated Financial Statements
NOTE 10. LOSSEARNINGS PER SHARE
We calculate basic lossearnings per share and diluted loss per share by dividing net lossincome 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 instruments, including stock options, restricted stock awards and warrants. Antidilutive common stock equivalents excluded from the diluted earnings per share calculation are not material. The following table shows the computation of basic and diluted lossearnings per share:
| Basic and diluted loss per share | |
Basic and diluted earnings per share | | Basic and diluted earnings per share |
| | Three Months Ended March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions, except per share data) | (in millions, except per share data) | 2023 | 2022 | | (in millions, except per share data) | 2023 | 2022 | | 2023 | 2022 |
Net loss | $ | (363) | | $ | (940) | | | |
Net income | | Net income | $ | 1,108 | | $ | 695 | | | $ | 2,572 | | $ | 489 | |
| Basic weighted average shares outstanding | Basic weighted average shares outstanding | 639 | | 637 | | | Basic weighted average shares outstanding | 639 | | 638 | | | 639 | | 638 | |
Dilutive effect of share-based instruments | Dilutive effect of share-based instruments | — | | — | | | Dilutive effect of share-based instruments | 5 | | 3 | | | 4 | | 3 | |
Diluted weighted average shares outstanding | Diluted weighted average shares outstanding | 639 | | 637 | | | Diluted weighted average shares outstanding | 644 | | 641 | | | 643 | | 641 | |
| Basic loss per share | $ | (0.57) | | $ | (1.48) | | | |
Diluted loss per share | $ | (0.57) | | $ | (1.48) | | | |
Basic earnings per share | | Basic earnings per share | $ | 1.73 | | $ | 1.09 | | | $ | 4.03 | | $ | 0.77 | |
Diluted earnings per share | | Diluted earnings per share | $ | 1.72 | | $ | 1.08 | | | $ | 4.00 | | $ | 0.76 | |
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 1718
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited Consolidated Financial Statements and related notes included in our 2022 Form 10-K.
MarchSeptember 2023 Quarter Financial Overview
Given the impact of the COVID-19 pandemic during the March 2022 quarter, comparisons discussed below are not indicative of expected full year-over-year results. Compared to the March 2019 quarter, total revenue increased $2.3 billion, or 22%, and total operating expense increased $3.6 billion, or 38%, with 2% lower capacity. We are planning for our full year 2023 system capacity to be close to 2019 capacity levels.Highlights
Our operating lossincome for the MarchSeptember 2023 quarter was $277improved $528 million representing a $506 million improvement compared to the MarchSeptember 2022 quarter primarily resulting from increased revenue from continued improvement in demand and higher capacity. Operating expenses also increased primarily due to $2.0 billion for the pilot agreement and related expenses, higher fuel expense and higher salaries and related costs. Operating income, adjusted (a non-GAAP financial measure) was $546 million, an increase of $1.3 billion compared to the corresponding prior year quarter. Adjustments are primarily related to the pilot agreement and related expenses and unrealized gains and losses on our equity investments.reasons discussed below.
Revenue. Compared to the MarchSeptember 2022 quarter, our operatingtotal revenue increased $3.4$1.5 billion, or 36%11%, due primarily to a 16%increase in capacity driven by strength in the demand for premium products and international travel. Total revenue, adjusted (a non-GAAP financial measure) increased travel demand and higher yield, as well as a capacity increase of 18%.in the September 2023 quarter by $1.7 billion, or 13%, compared to the September 2022 quarter. Adjustments were primarily to exclude revenue related to refinery sales to third parties.
Operating Expense. Total operating expense in the MarchSeptember 2023 quarter increased $2.9$1.0 billion, or 29%8%, compared to the MarchSeptember 2022 quarter, primarily resulting from the pilot agreement and related expenses, higher fuel costs, due to both an increase in fuel pricehigher employee costs from increased wages and profit sharing, higher maintenance costs and increased costs associated with higher capacity, partially offset by lower fuel expense and higher salarieslower expenses related to refinery sales to third parties, reflected in ancillary businesses and related costs from pay rate increases and increased headcount.refinery expense. Total operating expense, adjusted (a non-GAAP financial measure) in the MarchSeptember 2023 quarter increased $2.3$1.2 billion, or 26%11%, compared to the MarchSeptember 2022 quarter. Adjustments were primarily to exclude expenses related to refinery sales to third parties and the pilot agreement and related expenses.parties.
Our total operating cost per available seat mile ("CASM") increased 9%decreased 7% compared to the MarchSeptember 2022 quarter, primarily due to the higher costs discussed above, partially offset by an 18%a 16% increase in capacity.capacity, as well as lower fuel expense and lower expenses related to refinery sales to third parties. Non-fuel unit costs ("CASM-Ex", a non-GAAP financial measure) increased 4.7%1.3%.
Cash Flow. Our cash, cash equivalents, short-term investments and aggregate undrawn principal amount committed and available to be drawn under our revolving credit facilities ("liquidity") as of March 31,September 30, 2023 was $9.5$7.8 billion. During the MarchSeptember 2023 quarter, operating activities generated $2.2$1.1 billion.
Additionally, total cash sales to American Express were $1.7 billion in the March 2023 quarter, an increase of approximately 38% compared to the March 2022 quarter.
During Also, during the quarter, cash flows used in investing activities were a net of $1.1 billion, primarily fortotaled $131 million as capital expenditures and net purchasesour investment in Wheels Up were partially offset by redemptions of short-term investments. These operating and investing activities generated $1.9 billionofnegative free cash flow (aof $250 million(a non-GAAP financial measure) in the MarchSeptember 2023 quarter. Also, during the March 2023 quarterAdditionally, we had cash outflows of approximately $1.2 billion$724 million related to repayments of our debt and finance leases.
Total cash sales to American Express were $1.7 billion in the September 2023 quarter, an increase of approximately 20% compared to the September 2022 quarter.
The non-GAAP financial measuremeasures referenced above for operating income,total revenue, adjusted, operating expense, adjusted, CASM-Ex and free cash flow are defined and reconciled in "Supplemental Information" below.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 1819
Item 2. MD&A - Results of Operations
Results of Operations - Three Months Ended March 31,September 30, 2023 and 2022
Total Operating Revenue | | | Three Months Ended March 31, | Increase (Decrease) | % Increase (Decrease) | | | Three Months Ended September 30, | Increase (Decrease) | % Increase (Decrease) | |
(in millions)(1) | (in millions)(1) | 2023 | 2022 | | (in millions)(1) | 2023 | 2022 | |
Ticket - Main cabin | Ticket - Main cabin | $ | 5,223 | | $ | 3,448 | | | $ | 1,775 | | 51 | % | | Ticket - Main cabin | $ | 6,620 | | $ | 5,893 | | | $ | 727 | | 12 | % | |
Ticket - Premium products | Ticket - Premium products | 4,016 | | 2,538 | | | 1,478 | | 58 | % | | Ticket - Premium products | 5,113 | | 4,354 | | | 759 | | 17 | % | |
Loyalty travel awards | Loyalty travel awards | 743 | | 543 | | | 200 | | 37 | % | | Loyalty travel awards | 902 | | 786 | | | 116 | | 15 | % | |
Travel-related services | Travel-related services | 429 | | 378 | | | 51 | | 13 | % | | Travel-related services | 484 | | 431 | | | 53 | | 12 | % | |
Total passenger revenue | $ | 10,411 | | $ | 6,907 | | | $ | 3,504 | | 51 | % | | |
Passenger revenue | | Passenger revenue | $ | 13,119 | | $ | 11,464 | | | $ | 1,655 | | 14 | % | |
Cargo | Cargo | 209 | | 289 | | | (80) | | (28) | % | | Cargo | 154 | | 240 | | | (86) | | (36) | % | |
Other | Other | 2,139 | | 2,152 | | | (13) | | (1) | % | | Other | 2,215 | | 2,271 | | | (56) | | (2) | % | |
Total operating revenue | Total operating revenue | $ | 12,759 | | $ | 9,348 | | | $ | 3,411 | | 36 | % | | Total operating revenue | $ | 15,488 | | $ | 13,975 | | | $ | 1,513 | | 11 | % | |
| TRASM (cents) | TRASM (cents) | 20.80 | ¢ | 18.04 | ¢ | | 2.76 | ¢ | 15 | % | | TRASM (cents) | 21.15 | ¢ | 22.18 | ¢ | | (1.03) | ¢ | (5) | % | |
Third-party refinery sales | Third-party refinery sales | (1.49) | | (2.29) | | | 0.80 | | (35) | % | | Third-party refinery sales | (1.28) | | (1.80) | | | 0.52 | | (29) | % | |
| TRASM, adjusted(2) | TRASM, adjusted(2) | 19.30 | ¢ | 15.75 | ¢ | | 3.55 | ¢ | 23 | % | | TRASM, adjusted(2) | 19.87 | ¢ | 20.38 | ¢ | | (0.51) | ¢ | (2.5) | % | |
(1)Total amounts in the table above may not calculate exactly due to rounding.
(2)TRASM, adjusted is a non-GAAP financial measure. For additional information on adjustments to TRASM, see "Supplemental Information" below.
Compared to the MarchSeptember 2022 quarter, our operatingtotal revenue increased $3.4$1.5 billion, or 36%11%, due primarily to the continued recovery in demand from the COVID-19 pandemic. The increase in operating revenue, on an 18% a 16%increase in capacity resulteddriven by strength in a 15% increase in total revenue per available seat mile ("TRASM") and a 23% increase in TRASM, adjusted compared to the March 2022 quarter. Thetravel demand, with growth in passenger revenue was due to increased demand, with yield growth infrom premium products outpacing main cabin,cabin. This increase was partially offset by a decline in addition to the increased capacity.
third-party refinery sales recorded in other revenue. See "Refinery Segment" below for additional details on the refinery's operations, including third party refinery sales recorded sales. Total revenue per available seat mile ("TRASM") decreased 5%in other revenue.large part as a result of the decline in third-party refinery sales.
Passenger Revenue by Geographic Region
| | | Increase (Decrease) vs. Three Months Ended March 31, 2022 | | Increase (Decrease) vs. Three Months Ended September 30, 2022 |
(in millions) | (in millions) | Three Months Ended March 31, 2023 | Passenger Revenue | RPMs (Traffic) | ASMs (Capacity) | Passenger Mile Yield | PRASM | Load Factor | (in millions) | Three Months Ended September 30, 2023 | Passenger Revenue | RPMs (Traffic) | ASMs (Capacity) | Passenger Mile Yield | PRASM | Load Factor |
Domestic | Domestic | $ | 7,594 | | 37 | % | 13 | % | 7 | % | 21 | % | 27 | % | 4 | | pts | Domestic | $ | 8,662 | | 6 | % | 12 | % | 11 | % | (5) | % | (4) | % | 1 | | pt |
Atlantic | Atlantic | 1,244 | | 131 | % | 93 | % | 67 | % | 20 | % | 38 | % | 10 | | pts | Atlantic | 3,110 | | 34 | % | 23 | % | 22 | % | 9 | % | 10 | % | 1 | | pt |
Latin America | Latin America | 1,132 | | 66 | % | 26 | % | 11 | % | 33 | % | 50 | % | 10 | | pts | Latin America | 788 | | 20 | % | 23 | % | 19 | % | (3) | % | — | % | 3 | | pts |
Pacific | Pacific | 441 | | 253 | % | 335 | % | 97 | % | (19) | % | 79 | % | 41 | | pts | Pacific | 559 | | 65 | % | 62 | % | 70 | % | 2 | % | (3) | % | (4) | | pts |
Total | Total | $ | 10,411 | | 51 | % | 28 | % | 18 | % | 17 | % | 27 | % | 6 | | pts | Total | $ | 13,119 | | 14 | % | 17 | % | 16 | % | (2) | % | (1) | % | 1 | | pt |
Domestic
Domestic passenger unit revenue ("PRASM") increased6% in the MarchSeptember 2023 quarter compared to the MarchSeptember 2022 quarter on an 11%increase in capacity and a slight increase in load factor. We experienced strong revenue results across the domestic network, with coastal hub markets such as a result of higher demand, as well as increased yield, during the March 2023 quarter. Domestic capacity increased seven percentNew York and Boston improving significantly compared to the Marchprior period, and domestic business travel revenue improving compared to the September 2022 quarter and was fully recovered to pre-pandemic levels.quarter.
International
International passenger revenue for the MarchSeptember 2023 quarter increased compared to the MarchSeptember 2022 quarter in each geographic region. Overall, international demand remained strong leading to an increase in passenger unit revenue of 7% on a 26% increase in capacity compared to the September 2022 quarter.
In JuneConsumers continue to show a strong desire for transatlantic travel, driving higher revenue and passenger unit revenue during the September 2023 quarter on 22% capacity growth compared to the September 2022 the United States lifted its testing requirement for international travel, which has had a positive impact on international demand. In addition, other countries in our network have removed or eased travel restrictions, resultingquarter. The increase in revenue improvement across all international regions.was led by higher demand for travel to leisure destinations in southern Europe and premium products.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 1920
Item 2. MD&A - Results of Operations
In the Atlantic region, revenue and capacity surpassed pre-pandemic levels in the March 2023 quarter as consumers continue to show increased desire for trans-Atlantic travel. This has been led by demand for leisure destinations and improving business demand.
Latin America region revenue exceeded pre-pandemic levelsincreased during the MarchSeptember 2023 quarter, with capacity near pre-pandemic levels, due to continued strong demand for leisure destinations in Mexico,South America and the Caribbean and Central America. We expect this trend to continueCaribbean. In addition, during the June 2023 quarter as demand for leisure destinations remains strong. We have also continued to implementfirst year of our joint venture agreement with LATAM announcing additional new routeswe have streamlined travel between North and South America during the March 2023 quarter.while expanding connections in each of our key hub airports.
In the Pacific region revenue benefited from improved demand for travel to the region, particularly to Japan, on increased capacity and revenue in countries such as South Korea and Australia were fully recovered to pre-pandemic levels infollowing the March 2023 quarter aslifting of travel restrictions were just beginning to ease inand the March 2022 quarter. Additionally, China ended mostperformance of its pandemic-related travel restrictions in January 2023 and we expect to increase capacity to China based on demand during 2023.our joint venture with Korean Air.
Other Revenue | | | Three Months Ended March 31, | Increase (Decrease) | % Increase (Decrease) | | | Three Months Ended September 30, | Increase (Decrease) | % Increase (Decrease) | |
(in millions) | (in millions) | 2023 | 2022 | | (in millions) | 2023 | 2022 | |
Refinery | Refinery | $ | 916 | | $ | 1,187 | | | $ | (271) | | (23) | % | | Refinery | $ | 935 | | $ | 1,134 | | | $ | (199) | | (18) | % | |
Loyalty program | Loyalty program | 726 | | 571 | | | 155 | | 27 | % | | Loyalty program | 791 | | 655 | | | 136 | | 21 | % | |
Ancillary businesses | Ancillary businesses | 231 | | 209 | | | 22 | | 11 | % | | Ancillary businesses | 212 | | 249 | | | (37) | | (15) | % | |
Miscellaneous | Miscellaneous | 266 | | 185 | | | 81 | | 44 | % | | Miscellaneous | 277 | | 233 | | | 44 | | 19 | % | |
Total other revenue | $ | 2,139 | | $ | 2,152 | | | $ | (13) | | (1) | % | | |
Other revenue | | Other revenue | $ | 2,215 | | $ | 2,271 | | | $ | (56) | | (2) | % | |
|
Refinery. Refinery sales to third parties decreased $271$199 million compared to the MarchSeptember 2022 quarter due to lower ratespricing and volume.a planned maintenance event ("turnaround") which began in September 2023. See "Refinery Segment" below for additional details on the refinery's operations, including third party refinery sales recorded in other revenue.sales.
Loyalty Program. Loyalty program revenue relates to brand usage by third parties and other performance obligations embedded in miles sold, including redemption of miles for non-air travel and other 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 March 2023 quarter compared to the MarchSeptember 2022 quarter, due to continued strength inincreased co-brand card spend and card acquisitions.spend.
Miscellaneous. Miscellaneous is primarily composed of revenues related to Delta Sky Club lounge access, including access provided to certain American Express cardholders, and codeshare agreements. The volume of these transactions has increased compared to the MarchSeptember 2022 quarter due toin line with the ongoing recovery of our business.increased capacity.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 2021
Item 2. MD&A - Results of Operations
Operating Expense | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | Increase (Decrease) | % Increase (Decrease)(1) | |
(in millions) | 2023 | 2022 | |
Salaries and related costs | $ | 3,386 | | $ | 2,826 | | | $ | 560 | | 20 | % | |
Aircraft fuel and related taxes | 2,676 | | 2,092 | | | 584 | | 28 | % | |
Ancillary businesses and refinery | 1,125 | | 1,382 | | | (257) | | (19) | % | |
Contracted services | 1,010 | | 753 | | | 257 | | 34 | % | |
Pilot agreement and related expenses | 864 | | — | | | 864 | | NM | |
Aircraft maintenance materials and outside repairs | 585 | | 465 | | | 120 | | 26 | % | |
Landing fees and other rents | 584 | | 504 | | | 80 | | 16 | % | |
Depreciation and amortization | 564 | | 506 | | | 58 | | 11 | % | |
Regional carrier expense | 559 | | 491 | | | 68 | | 14 | % | |
Passenger commissions and other selling expenses | 500 | | 312 | | | 188 | | 60 | % | |
Passenger service | 416 | | 275 | | | 141 | | 51 | % | |
Aircraft rent | 132 | | 122 | | | 10 | | 8 | % | |
Profit sharing | 72 | | — | | | 72 | | NM | |
| | | | | | |
| | | | | | |
Other | 563 | | 403 | | | 160 | | 40 | % | |
Total operating expense | $ | 13,036 | | $ | 10,131 | | | $ | 2,905 | | 29 | % | |
(1)Certain variances are labeled as not meaningful ("NM") throughout management's discussion and analysis. | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | Increase (Decrease) | % Increase (Decrease) | |
(in millions) | 2023 | 2022 | |
Salaries and related costs | $ | 3,760 | | $ | 3,050 | | | $ | 710 | | 23 | % | |
Aircraft fuel and related taxes | 2,936 | | 3,318 | | | (382) | | (12) | % | |
Ancillary businesses and refinery | 1,128 | | 1,349 | | | (221) | | (16) | % | |
Contracted services | 1,004 | | 881 | | | 123 | | 14 | % | |
| | | | | | |
Landing fees and other rents | 679 | | 562 | | | 117 | | 21 | % | |
Aircraft maintenance materials and outside repairs | 661 | | 487 | | | 174 | | 36 | % | |
Passenger commissions and other selling expenses | 618 | | 546 | | | 72 | | 13 | % | |
Depreciation and amortization | 594 | | 538 | | | 56 | | 10 | % | |
Regional carrier expense | 546 | | 528 | | | 18 | | 3 | % | |
Passenger service | 449 | | 406 | | | 43 | | 11 | % | |
Profit sharing | 417 | | 237 | | | 180 | | 76 | % | |
Aircraft rent | 131 | | 131 | | | — | | — | % | |
| | | | | | |
| | | | | | |
| | | | | | |
Other | 581 | | 486 | | | 95 | | 20 | % | |
Total operating expense | $ | 13,504 | | $ | 12,519 | | | $ | 985 | | 8 | % | |
Salaries and Related Costs. In the March 2023 quarter, Delta pilots ratified a new four-year Pilot Working Agreement effective January 1, 2023. The agreement includes numerous work rule changes and pay rate increases during the four-year term, including an initial pay rate increase of 18%. See the discussion below under pilot agreement and related expenses for additional information about the one-time impacts from this agreement.
Effective May 1, 2022,Over the past year, we implemented a 4% base pay increaseincreases for eligible employees.non-pilot employees of 5% effective April 1, 2023. Additionally, we have approximately 13,0008,000 more employees as of March 31,September 30, 2023 than at March 31,September 30, 2022, principally in in-flight service, flight operations in-flight service, reservations and customer care, TechOps and airport customer service,aircraft maintenance, in order to support the growth in our operations as demand and capacity return.operations. Each of these items contributed to the increase in salaries and related costs during the MarchSeptember 2023 quarter compared to the MarchSeptember 2022 quarter.
In the March 2023 quarter, we announced a 5% base pay increase for eligible employees effective April 1, 2023.
Aircraft Fuel and Related Taxes. Fuel expense increased $584Aircraft fuel and related taxes decreased $382 million compared to the MarchSeptember 2022 quarter primarily due to a 15% increase23% decrease in the market price of jet fuel andpartially offset by a 18%14% increase in consumption.consumption on a 16% increase in capacity. The refinery also provided a benefit of 11 cents per gallon compared to a benefit of 21 cents per gallon in the September 2022 quarter. We expect jet fuel prices to remain volatile throughout 2023.the remainder of 2023 and into 2024.
See "Refinery Segment" below for additional details on the refinery's operations.
| Fuel expense and average price per gallon | Fuel expense and average price per gallon | Fuel expense and average price per gallon |
| | | | Average Price Per Gallon | | | | Average Price Per Gallon |
| | Three Months Ended March 31, | Increase (Decrease) | Three Months Ended March 31, | Increase (Decrease) | | Three Months Ended September 30, | Increase (Decrease) | Three Months Ended September 30, | Increase (Decrease) |
(in millions, except per gallon data) | (in millions, except per gallon data) | 2023 | 2022 | | 2023 | 2022 | | (in millions, except per gallon data) | 2022 | Increase (Decrease) | 2023 | Increase (Decrease) | 2022 | |
Fuel purchase cost(1) | Fuel purchase cost(1) | $ | 2,939 | | $ | 2,149 | | | $ | 790 | | $ | 3.31 | | $ | 2.87 | | | $ | 0.44 | | Fuel purchase cost(1) | $ | 3,076 | | $ | 3,474 | | $ | (398) | | $ | 2.89 | | | $ | (0.85) | |
| Fuel hedge impact | Fuel hedge impact | (41) | | (4) | | | (37) | | (0.05) | | (0.01) | | | (0.04) | | Fuel hedge impact | (21) | | 36 | | | (57) | | (0.02) | | 0.04 | | | (0.06) | |
Refinery segment impact | Refinery segment impact | (222) | | (53) | | | (169) | | (0.25) | | (0.07) | | | (0.18) | | Refinery segment impact | (119) | | (192) | | | 73 | | (0.11) | | (0.21) | | | 0.10 | |
Total fuel expense | Total fuel expense | $ | 2,676 | | $ | 2,092 | | | $ | 584 | | $ | 3.01 | | $ | 2.79 | | | $ | 0.22 | | Total fuel expense | $ | 2,936 | | $ | 3,318 | | | $ | (382) | | $ | 2.76 | | $ | 3.57 | | | $ | (0.81) | |
(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. Refinery sales to third parties decreased $271$199 million compared to the MarchSeptember 2022 quarter due to lower ratespricing and volume.the turnaround which began in September 2023. See "Refinery Segment" below for additional details on the refinery's operations, including third party refinery sales.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 2122
Item 2. MD&A - Results of Operations
Contracted Services. During the MarchSeptember 2023 quarter, demand and capacity increased 16% compared to the MarchSeptember 2022 quarter due to the ongoing recovery of our operations. The continued restoration of our operations and associatedresulting in higher volume-related contracted services expenses, andin addition to inflationary pressures were the primary drivers for the increase in contracted services.pressures.
Pilot agreementLanding Fees and related expenses.Other Rents. In additionThe increase in landing fees and other rents resulted from higher rates charged by airports following extensive redevelopment projects at numerous facilities and more flights compared to the items in salaries and related costs above, the recently ratified pilot agreement also includes a provision for a one-time payment upon ratification in the March 2023September 2022 quarter of $735 million. Additionally, we recorded adjustmentsthat contributed to other benefit-related items of approximately $130 million.our increased capacity.
Aircraft Maintenance Materials and Outside Repairs. MaintenanceAircraft maintenance materials and outside repairs expense increased compared to the MarchSeptember 2022 quarter as we continued to restoreinvest in the operational reliability of our operations andfleet, in particular related to supportengine overhauls on our operational reliability.B-757 aircraft, in addition to higher material costs.
Passenger Commissions and Other Selling Expenses. Compared to the MarchSeptember 2022 quarter, passenger revenue increased in the MarchSeptember 2023 quarter which was the primary reason for the increase in passenger commissions and other selling expenses.
Passenger Service.Profit Sharing. Passenger service expensesProfit sharing increased $180 million compared to the MarchSeptember 2022 quarter due to higher volume-related expenses associated with increased demand.
Profit Sharing. projected profitability in 2023. Our profit sharing program pays 10% to all eligible employees for the first $2.5 billion of annual pre-tax profit and 20% of annual pre-tax profit above $2.5 billion, as defined by the terms of the program. In determining the amount of profit sharing, the program defines profit as pre-tax profit adjusted for profit sharing and certain other items.
Other. The increase in other is primarily due to higher volume-related expenses associated with increased capacity, such as flight crew and other employee travel and incidental costs, associated with increased demand.and inflationary pressures.
Delta Air Lines, Inc. | September 2023 Form 10-Q 23
Item 2. MD&A - Results of Operations
Results of Operations - Nine Months Ended September 30, 2023 and 2022
Total Operating Revenue | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | Increase (Decrease) | % Increase (Decrease) | |
(in millions)(1) | 2023 | 2022 | |
Ticket - Main cabin | $ | 18,538 | | $ | 15,000 | | | $ | 3,538 | | 24 | % | |
Ticket - Premium products | 14,263 | | 11,005 | | | 3,258 | | 30 | % | |
Loyalty travel awards | 2,547 | | 2,073 | | | 474 | | 23 | % | |
Travel-related services | 1,387 | | 1,251 | | | 136 | | 11 | % | |
Passenger revenue | $ | 36,735 | | $ | 29,329 | | | $ | 7,406 | | 25 | % | |
Cargo | 535 | | 801 | | | (266) | | (33) | % | |
Other | 6,555 | | 7,017 | | | (462) | | (7) | % | |
Total operating revenue | $ | 43,825 | | $ | 37,147 | | | $ | 6,678 | | 18 | % | |
| | | | | | |
TRASM (cents) | 21.53 | ¢ | 21.38 | ¢ | | 0.15 | ¢ | 1 | % | |
Third-party refinery sales(2) | (1.38) | | (2.20) | | | 0.82 | | (37) | % | |
| | | | | | |
TRASM, adjusted | 20.14 | ¢ | 19.18 | ¢ | | 0.96 | ¢ | 5 | % | |
(1)Total amounts in the table above may not calculate exactly due to rounding.
(2)TRASM, adjusted is a non-GAAP financial measure. For additional information on adjustments to TRASM, see "Supplemental Information" below.
Unless otherwise discussed below, the changes in total revenue line items, as well as the underlying reasons for these changes, compared to the nine months ended September 30, 2022 are consistent with the discussion above under Results of Operations - Three Months Ended September 30, 2023 and 2022.
Compared to the nine months ended September 30, 2022, total revenue increased $6.7 billion, or 18%, due primarily to strength in travel demand on higher capacity and higher yield.
Passenger Revenue by Geographic Region | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Increase (Decrease) vs. Nine Months Ended September 30, 2022 |
(in millions) | Nine Months Ended September 30, 2023 | Passenger Revenue | RPMs (Traffic) | ASMs (Capacity) | Passenger Mile Yield | PRASM | Load Factor |
Domestic | $ | 25,200 | | 14 | % | 11 | % | 9 | % | 3 | % | 5 | % | 1 | | pt |
Atlantic | 7,157 | | 57 | % | 40 | % | 36 | % | 12 | % | 16 | % | 3 | | pts |
Latin America | 2,846 | | 37 | % | 20 | % | 12 | % | 14 | % | 22 | % | 6 | | pts |
Pacific | 1,532 | | 133 | % | 144 | % | 92 | % | (5) | % | 22 | % | 17 | | pts |
Total | $ | 36,735 | | 25 | % | 20 | % | 17 | % | 4 | % | 7 | % | 3 | | pts |
Domestic passenger unit revenue for the nine months ended September 30, 2023 increased compared to the nine months ended September 30, 2022 as a result of the higher levels of capacity and yield during the nine months ended September 30, 2023 due to strong demand in the period. International passenger revenue for the nine months ended September 30, 2023 increased 58% on 35% higher capacity compared to the nine months ended September 30, 2022 due to U.S. consumer demand for international travel and the removal of travel restrictions.
Other Revenue | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | Increase (Decrease) | % Increase (Decrease) | |
(in millions) | 2023 | 2022 | |
Refinery | $ | 2,817 | | $ | 3,835 | | | $ | (1,018) | | (27) | % | |
Loyalty program | 2,291 | | 1,877 | | | 414 | | 22 | % | |
Ancillary businesses | 657 | | 665 | | | (8) | | (1) | % | |
Miscellaneous | 790 | | 640 | | | 150 | | 23 | % | |
Other revenue | $ | 6,555 | | $ | 7,017 | | | $ | (462) | | (7) | % | |
Delta Air Lines, Inc. | September 2023 Form 10-Q 24
Item 2. MD&A - Results of Operations
Operating Expense | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | Increase (Decrease) | % Increase (Decrease)(1) | |
(in millions) | 2023 | 2022 | |
Salaries and related costs | $ | 10,838 | | $ | 8,832 | | | $ | 2,006 | | 23 | % | |
Aircraft fuel and related taxes | 8,128 | | 8,633 | | | (505) | | (6) | % | |
Ancillary businesses and refinery | 3,427 | | 4,449 | | | (1,022) | | (23) | % | |
Contracted services | 3,009 | | 2,425 | | | 584 | | 24 | % | |
Landing fees and other rents | 1,880 | | 1,611 | | | 269 | | 17 | % | |
Aircraft maintenance materials and outside repairs | 1,860 | | 1,474 | | | 386 | | 26 | % | |
Passenger commissions and other selling expenses | 1,770 | | 1,385 | | | 385 | | 28 | % | |
Depreciation and amortization | 1,731 | | 1,554 | | | 177 | | 11 | % | |
Regional carrier expense | 1,664 | | 1,547 | | | 117 | | 8 | % | |
Passenger service | 1,307 | | 1,050 | | | 257 | | 24 | % | |
Profit sharing | 1,084 | | 291 | | | 793 | | NM | |
Pilot agreement and related expenses | 864 | | — | | | 864 | | NM | |
Aircraft rent | 395 | | 380 | | | 15 | | 4 | % | |
| | | | | | |
| | | | | | |
Other | 1,669 | | 1,325 | | | 344 | | 26 | % | |
Total operating expense | $ | 39,626 | | $ | 34,956 | | | $ | 4,670 | | 13 | % | |
(1)Certain variances are labeled as not meaningful ("NM") throughout management's discussion and analysis.
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, 2022 are consistent with the discussion above under Results of Operations - Three Months Ended September 30, 2023 and 2022.
Aircraft Fuel and Related Taxes. Aircraft fuel and related taxesdecreased$505 million compared to the nine months ended September 30, 2022 due to a 19% decrease in the market price per gallon of jet fuel partially offset by a 16% increase in consumption on a 17% increase in capacity. The refinery also provided a benefit of 13 cents per gallon compared to a benefit of 20 cents per gallon in the nine months ended September 30, 2022.
See "Refinery Segment" below for additional details on the refinery's operations.
| | | | | | | | | | | | | | | | | | | | | | |
Fuel expense and average price per gallon |
| | | | | Average Price Per Gallon |
| Nine Months Ended September 30, | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) |
(in millions, except per gallon data) | 2023 | 2022 | | 2023 | 2022 | |
Fuel purchase cost(1) | $ | 8,572 | | $ | 9,189 | | | $ | (617) | | $ | 2.91 | | $ | 3.61 | | | $ | (0.70) | |
| | | | | | | | |
Fuel hedge impact | (59) | | (41) | | | (18) | | (0.02) | | (0.02) | | | — | |
Refinery segment impact | (385) | | (515) | | | 130 | | (0.13) | | (0.20) | | | 0.07 | |
Total fuel expense | $ | 8,128 | | $ | 8,633 | | | $ | (505) | | $ | 2.76 | | $ | 3.39 | | | $ | (0.63) | |
(1)Market price for jet fuel at airport locations, including related taxes and transportation costs.
Passenger Service. Passenger service expenses increased compared to the prior period due to higher volume-related expenses associated with increased demand and expanded onboard service offerings.
Pilot agreement and related expenses. In addition to the items in salaries and related costs above under Results of Operations - Three Months Ended September 30, 2023 and 2022, the recently ratified pilot agreement also includes a provision for a one-time payment made upon ratification in the March 2023 quarter of $735 million. Additionally, we recorded adjustments to other benefit-related items of approximately $130 million.
Delta Air Lines, Inc. | September 2023 Form 10-Q 25
Item 2. MD&A - Non-Operating Results
Non-Operating Results
| | | Three Months Ended March 31, | | Favorable (Unfavorable) | | | Three Months Ended September 30, | | Favorable (Unfavorable) | | Nine Months Ended September 30, | Favorable (Unfavorable) |
(in millions) | (in millions) | 2023 | 2022 | | (in millions) | 2023 | 2022 | | 2023 | 2022 |
Interest expense, net | Interest expense, net | $ | (227) | | $ | (274) | | | $ | 47 | | | Interest expense, net | $ | (196) | | $ | (248) | | | $ | 52 | | | $ | (627) | | $ | (791) | | $ | 164 | |
| Gain/(loss) on investments, net | Gain/(loss) on investments, net | 122 | | (147) | | | 269 | | | Gain/(loss) on investments, net | (206) | | (245) | | | 39 | | | 45 | | (613) | | 658 | |
Loss on extinguishment of debt | Loss on extinguishment of debt | (22) | | (25) | | | 3 | | | Loss on extinguishment of debt | (13) | | (34) | | | 21 | | | (63) | | (100) | | 37 | |
Pension and related (expense)/benefit | Pension and related (expense)/benefit | (61) | | 73 | | | (134) | | | Pension and related (expense)/benefit | (61) | | 73 | | | (134) | | | (183) | | 218 | | (401) | |
Miscellaneous, net | Miscellaneous, net | (41) | | (44) | | | 3 | | | Miscellaneous, net | 13 | | (40) | | | 53 | | | (38) | | (111) | | 73 | |
Total non-operating expense, net | Total non-operating expense, net | $ | (229) | | $ | (417) | | | $ | 188 | | | Total non-operating expense, net | $ | (463) | | $ | (494) | | | $ | 31 | | | $ | (866) | | $ | (1,397) | | $ | 531 | |
Interest expense, net. Interest expense, net includes interest expense and interest income. This decreased compared to the prior year periodperiods as a result of increased interest income and reduced interest expense resulting from our debt reduction initiatives. Interest income increased as a result of higher interest rates and higher short-term investment balances throughout 2023. During 2022, we made payments of approximately $4.5 billion related to our debt and finance lease obligations which included approximately $2.3 billion of early repayment activity. Weand we have continued to pay down our debt during the threenine months ended March 31,September 30, 2023 with $1.2$3.7 billion of payments on debt and finance lease obligations, including $468 millionof principal amounts for the early repurchase of various secured notes and a portion of the SkyMiles Term Loan on the open market and made early principal repayments of $227 million on various notes secured by aircraft.obligations. We continue to seek opportunities to pre-pay our debt, in addition to periodic amortization and scheduled maturities.
Gain/(loss) on investments, net. Changes in the valuation of investments accounted for at fair value are recorded in gain/(loss) on investments, net and are driven by changes in stock prices, foreign currency fluctuations and other valuation techniques for investments in certain companies, particularly those without publicly-traded shares. 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.
Loss on extinguishment of debt. Loss on extinguishment of debt reflects the losses incurred in the early repayment of the notes mentioned above.certain loans and notes.
Pension and related (expense)/benefit. Pension and related (expense)/benefit reflects the net periodic (cost)/benefit of our pension and other postretirement and postemployment benefit plans. The unfavorable movementyear-over-year change in pension and related (expense)/benefit results from lower expected return on plan assets during 2023. This is due to lower plan assetsasset balances as of December 31, 2022, compared to December 31, 2021, primarily as a result of broad marketresulting from investment value declines in 2022.2022 consistent with the broader financial markets.
Delta Air Lines, Inc. | March 2023 Form 10-Q 22
Item 2. MD&A - Income Taxes
Miscellaneous, net. Miscellaneous, net primarily includes foreign exchange gains/(losses), charitable contributions and our share of our equity method investments net results.
Income Taxes
We project our annual effective tax rate for 2023 will be between 23%22% and 26%24%. Our effective tax rate in 2023 may be impacted by mark-to-market adjustments on our equity investments which are considered capital assets for tax purposes.investments. In certain interim periods, we may have adjustments to our net deferred tax assets as a result of changes in prior year estimates, changes in our mark-to-market equity investments and tax laws enacted during the period, which will impact the effective tax rate for that interim period.
Refinery Segment
The refinery operated by 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. The jet fuel produced and procured through exchanging gasoline and diesel fuel produced by the refinery providedprovides approximately 200,000 barrels per day, or approximately 75% of our consumption, for use in our airline operations.
| | | | | | | | | | | | | | | | |
Refinery segment financial information |
| Three Months Ended March 31, | | Increase (Decrease) | | | |
(in millions, except per gallon data) | 2023 | 2022 | | | | |
Exchange products | $ | 714 | | $ | 809 | | | $ | (95) | | | | | |
Sales of refined products | 126 | | 26 | | | 100 | | | | | |
Sales to airline segment | 596 | | 291 | | | 305 | | | | | |
Third party refinery sales | 916 | | 1,187 | | | (271) | | | | | |
Operating revenue | $ | 2,352 | | $ | 2,313 | | | $ | 39 | | | | | |
| | | | | | | | |
Operating income | $ | 222 | | $ | 53 | | | $ | 169 | | | | | |
Refinery segment impact on airline average price per fuel gallon | $ | (0.25) | | $ | (0.07) | | | $ | (0.18) | | | | | |
Delta Air Lines, Inc. | September 2023 Form 10-Q 26
Item 2. MD&A - Refinery Segment
| | | | | | | | | | | | | | | | | | | | | | |
Refinery segment financial information |
| Three Months Ended September 30, | | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) | |
(in millions, except per gallon data) | 2023 | 2022 | | 2023 | 2022 | |
Exchange products | $ | 519 | | $ | 834 | | | $ | (315) | | $ | 1,848 | | $ | 2,623 | | $ | (775) | | |
Sales of refined products | 47 | | 127 | | | (80) | | 263 | | 250 | | 13 | | |
Sales to airline segment | 385 | | 504 | | | (119) | | 1,346 | | 1,557 | | (211) | | |
Third party refinery sales | 935 | | 1,134 | | | (199) | | 2,817 | | 3,835 | | (1,018) | | |
Operating revenue | $ | 1,886 | | $ | 2,599 | | | $ | (713) | | $ | 6,274 | | $ | 8,265 | | $ | (1,991) | | |
| | | | | | | | |
Operating income | $ | 119 | | $ | 192 | | | $ | (73) | | $ | 385 | | $ | 515 | | $ | (130) | | |
Refinery segment impact on airline average price per fuel gallon | $ | (0.11) | | $ | (0.21) | | | $ | 0.10 | | $ | (0.13) | | $ | (0.20) | | $ | 0.07 | | |
The refinery generated higherlower operating income in the three and nine months ended March 31,September 30, 2023 compared to the three and nine months ended March 31,September 30, 2022, driven by increased sales volumesas a result of lower pricing.
Starting in mid-September 2023, the refinery began the turnaround that is performed once every five years in accordance with the long-term maintenance plan of the facility to allow for safe completion of major repairs and higher realized margins on refined product sales.upgrades. The turnaround is expected to conclude in mid-November 2023 and until that time there will be no production at the refinery.
A refinery is subject to annual U.S. Environmental Protection Agency ("EPA") requirements to blend renewable fuels into the gasoline and on-road diesel fuel it produces. Alternatively, a refinery may purchase Renewable Identification Numbers ("RINs")RINs from third parties in the secondary market. The Monroe refinery purchases the majority of its RINs in the secondary market. Observable RINs prices increaseddeclined slightly duringsince the Marchbeginning of 2023 quarterthrough September 30, 2023 and Monroe incurred $103$80 million and $287 million in RINs compliance costs during the three and nine months ended March 31,September 30, 2023, respectively, compared to $85$140 million and $448 million in the three and nine months ended March 31,September 30, 2022.
At March 31,September 30, 2023, we had a net fair value obligation of $38$9 million related to RINs compliance costs. Our obligation as of March 31,September 30, 2023 was calculated using the Renewable Fuel Standard ("RFS") volume requirements, which were finalized in 2022 for the 2021 and 2022 obligations, and proposed in 2022 for 2023 obligations. In the March 2023 quarter, we settled a portion of our 2021 RINs obligation with the EPA. We expect to settle the remaining 2021 and our entire 2022 RINs obligation by the 2022 compliance deadline whichin the EPA has not yet finalized.December 2023 quarter.
For more information regarding the refinery's results, see Note 9 of the Notes to the Condensed Consolidated Financial Statements.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 2327
Item 2. MD&A - Operating Statistics
Operating Statistics
| | | Three Months Ended March 31, | % Increase (Decrease) | | | Three Months Ended September 30, | % Increase (Decrease) | | Nine Months Ended September 30, | % Increase (Decrease) |
Consolidated(1) | Consolidated(1) | 2023 | 2022 | | Consolidated(1) | 2023 | 2022 | | 2023 | 2022 |
Revenue passenger miles (in millions) ("RPM") | Revenue passenger miles (in millions) ("RPM") | 49,687 | | 38,700 | | | 28 | | % | | Revenue passenger miles (in millions) ("RPM") | 64,095 | | 54,786 | | | 17 | | % | | 174,586 | | 145,004 | | 20 | | % |
Available seat miles (in millions) ("ASM") | Available seat miles (in millions) ("ASM") | 61,351 | | 51,810 | | | 18 | | % | | Available seat miles (in millions) ("ASM") | 73,226 | | 63,007 | | | 16 | | % | | 203,571 | | 173,720 | | 17 | | % |
Passenger mile yield | Passenger mile yield | 20.95 | ¢ | 17.85 | ¢ | | 17 | | % | | Passenger mile yield | 20.47 | ¢ | 20.93 | ¢ | | (2) | | % | | 21.04 | ¢ | 20.23 | ¢ | 4 | | % |
Passenger revenue per available seat mile ("PRASM") | Passenger revenue per available seat mile ("PRASM") | 16.97 | ¢ | 13.33 | ¢ | | 27 | | % | | Passenger revenue per available seat mile ("PRASM") | 17.92 | ¢ | 18.19 | ¢ | | (1) | | % | | 18.05 | ¢ | 16.88 | ¢ | 7 | | % |
Total revenue per available seat mile ("TRASM") | Total revenue per available seat mile ("TRASM") | 20.80 | ¢ | 18.04 | ¢ | | 15 | | % | | Total revenue per available seat mile ("TRASM") | 21.15 | ¢ | 22.18 | ¢ | | (5) | | % | | 21.53 | ¢ | 21.38 | ¢ | 1 | | % |
TRASM, adjusted(2) | TRASM, adjusted(2) | 19.30 | ¢ | 15.75 | ¢ | | 23 | | % | | TRASM, adjusted(2) | 19.87 | ¢ | 20.38 | ¢ | | (2.5) | | % | | 20.14 | ¢ | 19.18 | ¢ | 5 | | % |
Cost per available seat mile ("CASM") | Cost per available seat mile ("CASM") | 21.25 | ¢ | 19.56 | ¢ | | 9 | | % | | Cost per available seat mile ("CASM") | 18.44 | ¢ | 19.87 | ¢ | | (7) | | % | | 19.47 | ¢ | 20.12 | ¢ | (3) | | % |
CASM-Ex(2) | CASM-Ex(2) | 13.86 | ¢ | 13.24 | ¢ | | 5 | | % | | CASM-Ex(2) | 12.59 | ¢ | 12.43 | ¢ | | 1.3 | | % | | 13.13 | ¢ | 12.78 | ¢ | 3 | | % |
| Passenger load factor | Passenger load factor | 81 | % | 75 | % | | 6 | | pts | | Passenger load factor | 88 | % | 87 | % | | 1 | | pt | | 86 | % | 83 | % | 3 | | pts |
Fuel gallons consumed (in millions) | Fuel gallons consumed (in millions) | 888 | | 751 | | | 18 | | % | | Fuel gallons consumed (in millions) | 1,062 | | 930 | | | 14 | | % | | 2,947 | | 2,543 | | 16 | | % |
Average price per fuel gallon(3) | Average price per fuel gallon(3) | $ | 3.01 | | $ | 2.79 | | | 8 | | % | | Average price per fuel gallon(3) | $ | 2.76 | | $ | 3.57 | | | (23) | | % | | $ | 2.76 | | $ | 3.39 | | (19) | | % |
Average price per fuel gallon, adjusted(2)(3) | Average price per fuel gallon, adjusted(2)(3) | $ | 3.06 | | $ | 2.79 | | | 10 | | % | | Average price per fuel gallon, adjusted(2)(3) | $ | 2.78 | | $ | 3.53 | | | (21) | | % | | $ | 2.78 | | $ | 3.41 | | (18) | | % |
(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 and refinery segment results.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 2428
Item 2. MD&A - Fleet Information
Fleet Information
Our operating aircraft fleet, purchase commitments and options at March 31,September 30, 2023 are summarized in the following table.
| Mainline aircraft information by fleet type | Mainline aircraft information by fleet type | Mainline aircraft information by fleet type |
| | Current Fleet(1) | | Commitments | | Current Fleet(1) | | Commitments |
Fleet Type | Fleet Type | Owned | Finance Lease | Operating Lease | Total | Average Age (Years) | | Purchase | Options | Fleet Type | Owned | Finance Lease | Operating Lease | Total | Average Age (Years) | | Purchase | Options |
A220-100 | A220-100 | 41 | | 4 | | — | | 45 | | 3.3 | | | A220-100 | 41 | | 4 | | — | | 45 | | 3.8 | | |
A220-300 | A220-300 | 15 | | — | | — | | 15 | | 1.6 | | 59 | | 26 | | A220-300 | 18 | | — | | — | | 18 | | 1.8 | | 68 | | 14 | |
A319-100 | A319-100 | 57 | | — | | — | | 57 | | 21.1 | | A319-100 | 57 | | — | | — | | 57 | | 21.6 | |
A320-200 | A320-200 | 61 | | — | | — | | 61 | | 27.5 | | A320-200 | 60 | | — | | — | | 60 | | 28.0 | |
A321-200 | A321-200 | 63 | | 22 | | 42 | | 127 | | 4.3 | | A321-200 | 63 | | 22 | | 42 | | 127 | | 4.8 | |
A321-200neo | A321-200neo | 25 | | — | | — | | 25 | | 0.4 | | 130 | | 70 | | A321-200neo | 42 | | — | | — | | 42 | | 0.7 | | 113 | | 70 | |
A330-200 | A330-200 | 11 | | — | | — | | 11 | | 18.0 | | A330-200 | 11 | | — | | — | | 11 | | 18.5 | |
A330-300 | A330-300 | 28 | | — | | 3 | | 31 | | 14.2 | | A330-300 | 28 | | — | | 3 | | 31 | | 14.7 | |
A330-900neo | A330-900neo | 13 | | 3 | | 5 | | 21 | | 1.8 | | 17 | | | A330-900neo | 15 | | 3 | | 5 | | 23 | | 2.1 | | 16 | | |
A350-900 | A350-900 | 17 | | — | | 11 | | 28 | | 4.3 | | 16 | | | A350-900 | 17 | | — | | 11 | | 28 | | 4.8 | | 16 | | |
B-717-200 | B-717-200 | 10 | | 53 | | 3 | | 66 | | 21.7 | | B-717-200 | 10 | | 62 | | 2 | | 74 | | 22.0 | |
B-737-800 | B-737-800 | 73 | | 4 | | — | | 77 | | 21.5 | | B-737-800 | 73 | | 4 | | — | | 77 | | 22.0 | |
B-737-900ER | B-737-900ER | 112 | | 2 | | 49 | | 163 | | 7.2 | | B-737-900ER | 114 | | — | | 49 | | 163 | | 7.7 | |
B-737-10 | B-737-10 | — | | — | | — | | — | | — | | 100 | | 30 | | B-737-10 | — | | — | | — | | — | | — | | 100 | | 30 | |
B-757-200 | B-757-200 | 100 | | — | | — | | 100 | | 25.6 | | B-757-200 | 100 | | — | | — | | 100 | | 26.1 | |
B-757-300 | B-757-300 | 16 | | — | | — | | 16 | | 20.1 | | B-757-300 | 16 | | — | | — | | 16 | | 20.6 | |
B-767-300ER | B-767-300ER | 45 | | — | | — | | 45 | | 27.0 | | B-767-300ER | 45 | | — | | — | | 45 | | 27.5 | |
B-767-400ER | B-767-400ER | 21 | | — | | — | | 21 | | 22.2 | | B-767-400ER | 21 | | — | | — | | 21 | | 22.7 | |
Total | Total | 708 | | 88 | | 113 | | 909 | | 14.6 | | 322 | | 126 | | Total | 731 | | 95 | | 112 | | 938 | | 14.7 | | 313 | | 114 | |
(1)Includes both active and temporarily parked aircraft. Excludes certain aircraft we own or lease that are operated by regional carriers on our behalf shown in the table below.
The table below summarizes the aircraft operated by regional carriers on our behalf at March 31,September 30, 2023. In the June 2023 quarter, we retired all remaining CRJ-200 aircraft from service.
| Regional aircraft information by fleet type and carrier | Regional aircraft information by fleet type and carrier | Regional aircraft information by fleet type and carrier |
| | Fleet Type(1) | | | Fleet Type(1) | |
Carrier | Carrier | CRJ-200 | CRJ-700 | CRJ-900 | Embraer 170 | Embraer 175 | Total | Carrier | CRJ-700 | CRJ-900 | Embraer 170 | Embraer 175 | Total |
Endeavor Air, Inc.(2) | Endeavor Air, Inc.(2) | 11 | | 18 | | 123 | | — | | — | | 152 | | Endeavor Air, Inc.(2) | 18 | | 123 | | — | | — | | 141 | |
SkyWest Airlines, Inc. | SkyWest Airlines, Inc. | — | | 6 | | 38 | | — | | 84 | | 128 | | SkyWest Airlines, Inc. | 6 | | 39 | | — | | 83 | | 128 | |
Republic Airways, Inc. | Republic Airways, Inc. | — | | — | | — | | 11 | | 46 | | 57 | | Republic Airways, Inc. | — | | — | | 11 | | 46 | | 57 | |
Total | Total | 11 | | 24 | | 161 | | 11 | | 130 | | 337 | | Total | 24 | | 162 | | 11 | | 129 | | 326 | |
(1)Includes both active and temporarily parked aircraft. We own 216205 and have operating leases for three of these regional aircraft. The remainder are owned or leased by SkyWest Airlines, Inc. or Republic Airways, Inc.
(2)Endeavor Air, Inc. is a wholly owned subsidiary of Delta.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 2529
Item 2. MD&A - Financial Condition and Liquidity
Financial Condition and Liquidity
As of March 31,September 30, 2023, we had $9.5$7.8 billion in cash, cash equivalents, short-term investments and aggregate undrawn principal amount committed and available to be drawn under our revolving credit facilities ("liquidity"). 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.
Undrawn Lines of Credit. As of September 30, 2023, we had approximately $2.8 billion undrawn and available under our revolving credit facilities. In addition, we had approximately $400 million outstanding letters of credit as of September 30, 2023 that did not affect the availability of our revolving credit facilities.
Sources and Uses of Liquidity
Operating Activities
We generated cash flows from operations of $2.2$5.9 billion and $1.8$5.2 billion in the threenine months ended March 31,September 30, 2023 and 2022, respectively. We expect to continue generating positive cash flows from operations during the remainder of 2023.
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 advance ticket sales grow prior to the summer peak travel season and decreases during the summer and fall months.
Air traffic liability increased during the March 2023 quarter, as is typical with our usual seasonal trend. Additionally, we are seeing a shift in We continue to see customers purchasing flights further in advance compared to historical patterns, enhancing the positive cash flow from advance ticket sales.
Fuel. Fuel expense represented approximately 21% and 25% of our total operating expense for the threenine months ended March 31,September 30, 2023 and 2022.2022, respectively. The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations. Although the average fuel price per gallon decreased during the threenine months ended March 31,September 30, 2023, fuel costs remain higherhigh compared to historical levels. We expect jet fuel prices to remain volatile throughout 2023.the remainder of 2023 and into 2024. Fuel consumption was also higher during the threenine months ended March 31,September 30, 2023 compared to the prior year period due to the increase in capacity. We continue to expect that fuel consumption for the full year 2023 will continuebe higher compared to increase throughout 2023,2022, as we plananticipate capacity for ourthe full year system capacity to be close to 2019 capacity levels,higher than 2022, partially offset by increases in the fuel efficiency of our fleet.
Profit Sharing. Our broad-based employee profit sharing program provides that for each year in which we have an annual pre-tax profit, as defined by the terms of the program, we will pay a specified portion of that profit to employees. In determining the amount of profit sharing, the program defines profit as pre-tax profit adjusted for profit sharing and certain other items. During the threenine months ended March 31,September 30, 2023, we accrued $72 million$1.1 billion in profit sharing expense based on the year-to-date performance and current expectations for 2023 profit.
We paid $563 million in profit sharing in February 2023 related to our 2022 pre-tax profit in recognition of our employees' contributions toward achieving the year's financial results.
Pilot Agreement Payment. In the March 2023 quarter, Delta pilots ratified a new four-year Pilot Working Agreement effective January 1, 2023. The agreement includes numerous work rule changes and pay rate increases during the four-year term, including an initial pay rate increase of 18%. The agreement also includes a provision for a one-time payment made upon ratification in the March 2023 quarter of $735 million. Additionally, we recorded adjustments to other benefit-related items of approximately $130 million.
Sale of Miles to Participating Companies. Customers earn miles based on their spending with participating companies such as credit card companies, hotels, car rental agencies and ridesharing companies with which we have marketing agreements to sell miles. Payments are typically due to us monthly based on the volume of miles sold during the period. Our most significant contract to sell miles relates to our co-brand credit card relationship with American Express. Total cash sales to American Express were $1.7$5.1 billion in the Marchnine months ended September 30, 2023, quarter, an increase of approximately 38%26% compared to the March 2022 quarter.prior year period.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 2630
Item 2. MD&A - Financial Condition and Liquidity
Investing Activities
Short-Term Investments. During the threenine months ended March 31,September 30, 2023, we purchasedredeemed a net of $102 million$1.2 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 $1.0$3.7 billion and $1.8$4.2 billion for the threenine months ended March 31,September 30, 2023 and 2022, respectively. Our capital expenditures are primarily related to the purchases of aircraft, airport construction projects, fleet modifications 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 2023 capital spend of approximately $5.5 billion will be primarily for aircraft, including deliveries and advance deposit payments, as well as fleet modifications and technology enhancements and may vary depending on financing decisions.
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 to replace Terminals C and D with a new state-of-the-art terminal facility. Construction is ongoing and is being phased to limit passenger inconvenience. Due to an acceleration effort that commenced in 2020, completion is expected by 2025.
We currently expect our net project costs to be approximately $4.3 billion and we bear the risks of project construction, including any potential cost over-runs. Using funding primarily provided by existing financing arrangements and other sources of funding, we expect to spend approximately $500 million on this project during 2023, of which $109$354 million was incurred in the threenine months ended March 31,September 30, 2023.
Los Angeles International Airport ("LAX"). We have an ongoing terminal redevelopment project at LAX to modernize, update and provide post-security connection to Terminals 2 and 3. Construction is expected to be completed inby the end of 2023 with a total cost of approximately $2.4 billion. A substantial majority of the project costs are being funded through the Regional Airports Improvement Corporation ("RAIC"), a California public benefit corporation, using a revolving credit facility provided by a group of lenders. We have guaranteed the obligations of the RAIC under the credit facility and the revolving credit facility agreement was most recently amended in Januarythe March 2023 quarter, decreasing the revolver capacity to $700 million. In the June 2023 quarter, the revolving credit facility agreement capacity was reduced to $626 million.
Wheels Up. We, along with Certares Management LLC, Knighthead Capital Management LLC and Cox Enterprises, Inc. announced the closing on September 20, 2023 of an expanded strategic partnership with Wheels Up, which includes an agreement for a $500 million credit facility to Wheels Up. At closing, the credit facility was comprised of a $350 million term loan, of which we contributed $150 million, and a $100 million liquidity facility that we made available to Wheels Up in the event the company's liquidity falls below $100 million. The terms of the credit facility permit one or more new lenders to provide an aggregate incremental $50 million term loan after the closing date. In connection with the closing, the term loan investors received newly issued shares of Wheels Up's common stock representing 80% of Wheels Up's outstanding equity as of the closing of the credit facility on a fully diluted basis. Upon approval by Wheels Up's stockholders of an amendment to its certificate of incorporation, Wheels Up is expected to issue to the lenders additional new shares such that the lenders will own 95% of Wheels Up's outstanding equity as of the closing of the credit facility on a fully diluted basis.
The $150 million cash contribution was reflected as an investing outflow in our Condensed Consolidated Statement of Cash Flows and allocated on a relative fair value basis to a loan receivable within other noncurrent assets and an equity investment on our balance sheet.
Financing Activities
Debt and Finance Leases. In the threenine months ended March 31,September 30, 2023, we had cash outflows of $1.2$3.7 billion related to repayments of our debt and finance lease obligations, including $468 million$1.4 billion of principal amounts for the early repurchase of various secured and unsecured notes and a portion of the SkyMiles Term Loan on the open market and made early principal repayments of $227$585 million on various notes secured by aircraft. Approximately $1.7 billion of the early repurchases and repayments were scheduled to mature after 2023.We continue to seek opportunities to pre-pay our debt, in addition to periodic amortization and scheduled maturities.
In the March 2023 quarter, both Fitch and S&P credit rating agencies upgraded our debt rating outlooks for Delta to stable and positive, respectively. In the September 2023 quarter, S&P upgraded our credit rating to BB+.
The principal amount of our debt and finance leases was $22.1$19.6 billion at MarchSeptember 30, 2023.
Delta Air Lines, Inc. | September 2023 Form 10-Q 31
Item 2. MD&A - Financial Condition and Liquidity
Capital Return to Shareholders. On June 15, 2023, the Board of Directors approved and we paid a quarterly dividend of $0.10 per share on August 7, 2023.
On September 28, 2023, the Board of Directors approved and we will pay a quarterly dividend of $0.10 per share on November 2, 2023 to shareholders of record as of October 12, 2023.
Undrawn Lines of Credit
Covenants.
As of March 31, 2023, we had approximately $2.9 billion undrawn and available under our revolving credit facilities. In addition, we had approximately $400 million outstanding letters of credit as of March 31, 2023 that did not affect the availability of our revolving credit facilities.
Covenants
We were in compliance with the covenants in our debt agreements at March 31,September 30, 2023.
Critical Accounting Estimates
There have been no material changes in our Critical Accounting Estimates from the information provided in 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. | MarchSeptember 2023 Form 10-Q 2732
Item 2. MD&A - Supplemental Information
Supplemental Information
We sometimes use information (non-GAAP financial measures) that is derived from the Condensed Consolidated Financial Statements, but that is not presented in accordance with GAAP. Under the U.S. Securities and Exchange Commission rules, non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results.
Included below are reconciliations of non-GAAP measures used within this Form 10-Q to the most directly comparable GAAP financial measures. Reconciliations below may not calculate exactly due to rounding. These reconciliations include certain adjustments to GAAP measures to provide comparability between the reported periods, if applicable, and for the reasons indicated below:
•Third-party refinery sales. Refinery sales to third parties, and related expenses, are not related to our airline segment. Excluding these sales therefore provides a more meaningful comparison of our airline operations to the rest of the airline industry.
•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, and therefore we remove this impact to allow investors to better understand and analyze our core performance. Settlements represent cash received or paid on hedge contracts settled during the applicable period.
•One-time pilot agreement expenses. In March 2023, Delta pilots ratified a new four-year Pilot Working Agreement effective January 1, 2023. The agreement includes numerous work rule changes and pay rate increases during the four-year term, including an initial pay rate increase of 18%. The agreement also includes a provision for a one-time payment upon ratification in the March 2023 quarter of $735 million. Additionally, we recorded adjustments to other benefit-related items of approximately $130 million. Adjusting for these expenses allows investors to better understand and analyze our core cost performance.
•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. During 2022, we recognized adjustments to certain of those restructuring charges, representing changes in our estimates.
•Third-party refinery sales. Refinery sales to third parties, and related expenses, are not related to our airline segment. Excluding these sales therefore provides a more meaningful comparison of our airline operations to the rest of the airline industry.
•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.
•
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Operating income/(loss), adjusted reconciliation | | | |
| Three Months Ended March 31, |
(in millions) | 2023 | | 2022 |
Operating loss | $ | (277) | | | $ | (783) | |
Adjusted for: | | | |
MTM adjustments and settlements on hedges | (41) | | | (4) | |
One-time pilot agreement expenses | 864 | | | — | |
Restructuring charges | — | | | (5) | |
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Operating income/(loss), adjusted | $ | 546 | | | $ | (793) | |
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One-time pilot agreement expenses. In the March 2023 quarter, Delta pilots ratified a new four-year Pilot Working Agreement effective January 1, 2023. The agreement includes numerous work rule changes and pay rate increases during the four-year term, including an initial pay rate increase of 18%. The agreement also includes a provision for a one-time payment made upon ratification in the March 2023 quarter of $735 million. Additionally, we recorded adjustments to other benefit-related items of approximately $130 million. Adjusting for these expenses allows investors to better understand and analyze our core cost performance.
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Total revenue, adjusted reconciliation |
| | Three Months Ended September 30, |
(in millions) | 2023 | 2022 |
Total revenue | $ | 15,488 | | $ | 13,975 | |
Adjusted for: | | |
Third-party refinery sales | (935) | | (1,134) | |
Total revenue, adjusted | $ | 14,553 | | $ | 12,840 | |
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 2833
Item 2. MD&A - Supplemental Information
| Operating expense, adjusted reconciliation | Operating expense, adjusted reconciliation | Operating expense, adjusted reconciliation |
| | Three Months Ended March 31, | | Three Months Ended September 30, |
(in millions) | (in millions) | 2023 | | 2022 | | (in millions) | 2023 | | 2022 | |
Operating expense | Operating expense | $ | 13,036 | | | $ | 10,131 | | | Operating expense | $ | 13,504 | | | $ | 12,519 | | |
Adjusted for: | Adjusted for: | | | | | Adjusted for: | | | | |
| MTM adjustments and settlements on hedges | MTM adjustments and settlements on hedges | 41 | | | 4 | | | MTM adjustments and settlements on hedges | 21 | | | (36) | | |
Third-party refinery sales | Third-party refinery sales | (916) | | | (1,187) | | | Third-party refinery sales | (935) | | | (1,134) | | |
One-time pilot agreement expenses | (864) | | | — | | | |
| Restructuring charges | Restructuring charges | — | | | 5 | | | Restructuring charges | — | | | (1) | | |
| Operating expense, adjusted | Operating expense, adjusted | $ | 11,296 | | | $ | 8,954 | | | Operating expense, adjusted | $ | 12,590 | | | $ | 11,348 | | |
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| Fuel expense, adjusted reconciliation | Fuel expense, adjusted reconciliation | Fuel expense, adjusted reconciliation |
| | | | Average Price Per Gallon | | | | Average Price Per Gallon |
| | Three Months Ended March 31, | | Three Months Ended March 31, | | Three Months Ended September 30, | | Three Months Ended September 30, |
(in millions, except per gallon data) | (in millions, except per gallon data) | 2023 | 2022 | | | 2023 | 2022 | | (in millions, except per gallon data) | 2023 | 2022 | | | 2023 | 2022 | |
Total fuel expense | Total fuel expense | $ | 2,676 | | $ | 2,092 | | | | $ | 3.01 | | $ | 2.79 | | | Total fuel expense | $ | 2,936 | | $ | 3,318 | | | | $ | 2.76 | | $ | 3.57 | | |
Adjusted for: | Adjusted for: | | | | | Adjusted for: | | | | |
MTM adjustments and settlements on hedges | MTM adjustments and settlements on hedges | 41 | | 4 | | | | 0.05 | | 0.01 | | | MTM adjustments and settlements on hedges | 21 | | (36) | | | | 0.02 | | (0.04) | | |
| Total fuel expense, adjusted | Total fuel expense, adjusted | $ | 2,718 | | $ | 2,097 | | | | $ | 3.06 | | $ | 2.79 | | | Total fuel expense, adjusted | $ | 2,957 | | $ | 3,282 | | | | $ | 2.78 | | $ | 3.53 | | |
| | | | | | Average Price Per Gallon |
| | | Nine Months Ended September 30, | | Nine Months Ended September 30, |
(in millions, except per gallon data) | | (in millions, except per gallon data) | 2023 | 2022 | | | 2023 | 2022 | |
Total fuel expense | | Total fuel expense | $ | 8,128 | | $ | 8,633 | | | | $ | 2.76 | | $ | 3.39 | | |
Adjusted for: | | Adjusted for: | | | | |
MTM adjustments and settlements on hedges | | MTM adjustments and settlements on hedges | 59 | | 41 | | | | 0.02 | | 0.02 | | |
| Total fuel expense, adjusted | | Total fuel expense, adjusted | $ | 8,188 | | $ | 8,674 | | | | $ | 2.78 | | $ | 3.41 | | |
| TRASM, adjusted reconciliation | TRASM, adjusted reconciliation | TRASM, adjusted reconciliation |
| | Three Months Ended March 31, | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | 2022 | | | 2023 | 2022 | | | 2023 | 2022 | |
TRASM (cents) | TRASM (cents) | 20.80 | ¢ | 18.04 | ¢ | | TRASM (cents) | 21.15 | ¢ | 22.18 | ¢ | | | 21.53 | ¢ | 21.38 | ¢ | |
Adjusted for: | Adjusted for: | | | Adjusted for: | | | | |
Third-party refinery sales | Third-party refinery sales | (1.49) | | (2.29) | | | Third-party refinery sales | (1.28) | | (1.80) | | | | (1.38) | | (2.20) | | |
| TRASM, adjusted | TRASM, adjusted | 19.30 | ¢ | 15.75 | ¢ | | TRASM, adjusted | 19.87 | ¢ | 20.38 | ¢ | | | 20.14 | ¢ | 19.18 | ¢ | |
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CASM-Ex reconciliation |
| Three Months Ended March 31, | | |
| 2023 | 2022 | | | | | |
CASM (cents) | 21.25 | ¢ | 19.56 | ¢ | | | | | |
Adjusted for: | | | | | | | |
| | | | | | | |
Aircraft fuel and related taxes | (4.36) | | (4.04) | | | | | | |
Third-party refinery sales | (1.49) | | (2.29) | | | | | | |
Profit sharing | (0.12) | | — | | | | | | |
One-time pilot agreement expenses | (1.41) | | — | | | | | | |
Restructuring charges | — | | 0.01 | | | | | | |
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CASM-Ex | 13.86 | ¢ | 13.24 | ¢ | | | | | |
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CASM-Ex reconciliation |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | 2022 | | | 2023 | 2022 | |
CASM (cents) | 18.44 | ¢ | 19.87 | ¢ | | | 19.47 | ¢ | 20.12 | ¢ | |
Adjusted for: | | | | | | | |
| | | | | | | |
Aircraft fuel and related taxes | (4.01) | | (5.26) | | | | (4.00) | | (4.97) | | |
Third-party refinery sales | (1.28) | | (1.80) | | | | (1.38) | | (2.20) | | |
Profit sharing | (0.57) | | (0.38) | | | | (0.53) | | (0.17) | | |
One-time pilot agreement expenses | — | | — | | | | (0.42) | | — | | |
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CASM-Ex | 12.59 | ¢ | 12.43 | ¢ | | | 13.13 | ¢ | 12.78 | ¢ | |
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Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 2934
Item 2. MD&A - Supplemental Information
Free Cash Flow
The following table shows a reconciliation of net cash provided by operating and investing activities (a GAAP measure)(GAAP measures) 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 purchasesredemptions of short-term investments. Net purchasesredemptions 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. Certain cash flows related to our investments in and related transactions with other airlines and associated companies, including Wheels Up in the September 2023 quarter, 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 because management believes investors should be informed that a portion of these capital expenditures from airport construction projects are either reimbursed by a third party or funded with restricted cash specific to these projects.
•Financed aircraft acquisitions. This adjustment reflects aircraft deliveries that are leased as capital expenditures. The adjustment is based on their original contractual purchase price or an estimate of the aircraft's fair value and provides a more meaningful view of our investing activities.
•Pilot agreement payment. In March 2023, Delta pilots ratified a new four-year Pilot Working Agreement effective January 1, 2023. The agreement includes numerous work rule changes and pay rate increases during the four-year term, including an initial pay rate increase of 18%. The agreement also includes a provision for a one-time payment upon ratification in the March 2023 quarter of $735 million. We adjust for this item to provide investors a better understanding of our recurring free cash flow generated by our operations.
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Free cash flow reconciliation |
| Three Months Ended March 31,September 30, |
(in millions) | 2023 | | |
Net cash provided by operating activities | $ | 2,2351,076 | | | |
Net cash used in investing activities | (1,100)(131) | | | |
Adjusted for: | | | |
Net purchasesredemptions of short-term investments | 102 (1,226) | | | |
Strategic investments and related | 152 | | | |
Net cash flows related to certain airport construction projects and other | 1940 | | | |
Financed aircraft acquisitions | (137)(162) | | | |
Pilot agreement payment | 735 | | | |
Free cash flow | $ | 1,853 (250) | | | |
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Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 3035
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 March 31,September 30, 2023 to ensure that material information was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
During the three months ended March 31,September 30, 2023, 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. ThereExcept as described below, there have been no material changes from the legal proceedings described in our Form 10-K.
Capacity Antitrust Litigation
In July 2015, a number of purported class action antitrust lawsuits were filed alleging that Delta, American, United and Southwest had conspired to restrain capacity. The lawsuits were filed in the wake of media reports that the U.S. Department of Justice had served civil investigative demands upon these carriers seeking documents and information relating to this subject. The lawsuits have been consolidated into a single Multi-District Litigation proceeding in the U.S. District Court for the District of Columbia. In August 2023, the Court denied the defendants’ motions for summary judgment that had been pending for over two years. In September 2023, we moved to certify the decision for an interlocutory appeal or for reconsideration. Briefing related to that motion will run through mid-November 2023, and class certification discovery will commence in the meantime. Delta believes the claims in these cases are without merit and is vigorously defending these lawsuits.
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 2023 Form 10-Q 36
Item 2. Unregistered Sales of Equity Securities
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table presents information with respect to purchases of common stock we made during the MarchSeptember 2023 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.
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Shares purchased / withheld from employee awards during the March 2023 quarter |
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans | Approximate Dollar Value (in millions) of Shares That May Yet be Purchased Under the Plan |
January 2023 | 26,294 | | $ | 38.80 | | 26,294 | | $ | — | |
February 2023 | 575,067 | | $ | 39.78 | | 575,067 | | $ | — | |
March 2023 | 2,334 | | $ | 36.74 | | 2,334 | | $ | — | |
Total | 603,695 | | | 603,695 | | |
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Shares purchased / withheld from employee awards during the September 2023 quarter |
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans | Approximate Dollar Value (in millions) of Shares That May Yet be Purchased Under the Plan |
July 2023 | 24,298 | | $ | 47.38 | | 24,298 | | $ | — | |
August 2023 | 19,338 | | $ | 45.23 | | 19,338 | | $ | — | |
September 2023 | 13,392 | | $ | 41.82 | | 13,392 | | $ | — | |
Total | 57,028 | | | 57,028 | | |
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 3137
ITEM 6. EXHIBITS
(a) Exhibits
101.INS Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 The cover page from this Quarterly Report on Form 10-Q for the quarter ended March 31,September 30, 2023, formatted in Inline XBRL (included in Exhibit 101)
_______________
* Incorporated by reference.
** Portions of this exhibit have been omitted as confidential information.
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 3238
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | |
| Delta Air Lines, Inc. |
| (Registrant) |
| |
| /s/ William C. Carroll |
| William C. Carroll |
| Senior Vice President - Controller |
| (Principal Accounting Officer) |
April 13,October 12, 2023 | |
Delta Air Lines, Inc. | MarchSeptember 2023 Form 10-Q 3339