Delta Air Lines, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Delta is a U.S.-based global airline, with airline and refinery operating segments. Results remained materially affected by the COVID-19 recovery.
Financial performance and condition
| Metric | 2021 | Comparison |
|---|---|---|
| Operating revenue | $29.9 billion | Up 75% from 2020; 36% below 2019 |
| Operating income (loss) | $1.9 billion | 2020 loss of $12.5 billion; 2019 income of $6.6 billion |
| Net income (loss) | $280 million | 2020 loss of $12.4 billion; 2019 income of $4.8 billion |
| Pre-tax income (loss) | $398 million | Includes $4.5 billion in 2021 payroll-support grants; adjusted pre-tax loss was $3.4 billion |
| Operating cash flow | $3.3 billion | Included $4.5 billion of payroll-support grants |
| Free cash flow | $1.3 billion | Non-GAAP measure; compared with negative $4.3 billion in 2020 |
| Liquidity | $14.2 billion | Includes cash, short-term investments and available revolving credit |
| Debt and finance leases | $27.1 billion principal | Delta repaid approximately $5.8 billion in 2021 |
Reported operating margin was approximately 6.3% (operating income divided by revenue), supported by government grant recognition. Total operating costs were $28.0 billion; reported CASM was 14.40 cents and non-GAAP CASM-Ex was 12.12 cents. Fuel expense was $5.6 billion, or 20% of operating expense. The refinery segment recorded a $2 million operating loss, compared with $216 million in 2020.
At year-end, cash and cash equivalents were $7.9 billion and short-term investments were $3.4 billion. Delta reported $2.9 billion available under revolving facilities and compliance with debt covenants. Its $25.1 billion of reported debt (net carrying amount) excludes finance leases. The balance sheet showed stockholders’ equity of $3.9 billion.
Material changes versus prior periods
- Revenue grew as travel demand and capacity recovered: capacity increased 45% from 2020. Domestic consumer travel recovered substantially, while international and business travel remained weaker.
- Revenue remained 36% below 2019, and adjusted pre-tax results remained loss-making despite the reported $398 million pre-tax profit. The $4.5 billion of 2021 grant recognition is a major comparability factor.
- Fuel expense rose 77% from 2020, reflecting higher fuel consumption and market prices. Average fuel cost was $2.02 per gallon, versus $1.64 in 2020.
- Delta reduced debt by approximately $12 billion since October 2020 and made $1.5 billion in voluntary pension contributions during 2021. It recorded $319 million of losses on debt extinguishments.
- Unlike 2020, when Delta recorded $8.2 billion of restructuring charges, 2021 included a $19 million net adjustment to prior restructuring estimates and no new fleet impairment charges.
Outlook, commentary and risks
- For 2022, management expected system capacity to be about 15% below 2019 in the March quarter and about 10% below 2019 for the full year. It expected domestic leisure demand to exceed 2019 levels, with business travel recovering gradually and international demand remaining exposed to restrictions and variants.
- Management expected 2022 non-fuel unit costs to be 7%–10% above 2019, citing lower capacity, rebuilding costs, customer-experience investments, inflation and labor cost escalation. It expected positive operating cash flow in 2022.
- Delta expected 2022 capital expenditures of approximately $6.0 billion, excluding the LaGuardia project. It targeted liquidity of $5 billion–$6 billion by 2024 while reducing obligations and reinvesting in the business.
- Key uncertainties include the pandemic and travel demand, fuel prices, inflation and labor availability, pilot contract negotiations, regional-carrier pilot shortages, refinancing and covenant risks, and the financial health of airline partners. Delta also identified cybersecurity, operational disruption, competition and regulatory risks.
- Environmental commitments include a $1.0 billion investment through 2030 toward airline carbon neutrality, a goal to use SAF for 10% of jet fuel by 2030, and proposed science-based emissions goals. Their execution depends on technology, third-party investment, fuel availability and government support; carbon offsets cost $95 million in 2021.
- Notable obligations include $16.2 billion of aircraft purchase commitments, $11.7 billion of minimum third-party regional-carrier obligations and $9.8 billion of minimum operating lease payments. Delta also disclosed a $497 million net fair-value obligation related to renewable-fuel compliance. The pending capacity antitrust litigation was described as vigorously defended; Delta said it did not expect current legal matters to materially affect its financial statements.
Important facts for investors to verify
- How much of reported earnings and cash generation reflects payroll-support grants, and how results compare using the company’s non-GAAP adjustments.
- Whether revenue recovery—especially business and international travel—supports the capacity, unit-cost and positive-cash-flow outlook.
- Debt repayment progress, scheduled maturities, interest costs, liquidity headroom and compliance with financial covenants.
- Exposure to fuel-price changes, inflation, labor constraints and the cost or availability of sustainable aviation fuel and carbon offsets.
- Execution, funding and potential cost overruns for airport projects and aircraft commitments, alongside the collectability and restructuring outcomes of airline-partner exposures.
Ernst & Young issued an unqualified opinion on the financial statements and internal control over financial reporting as of December 31, 2021.