Item 6. (RESERVED)

Delta Air Lines, Inc. 2021 Form 10-K 33

Item 7. MD&A

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our business and operating results continue to be significantly impacted by the COVID-19 pandemic. However, as described further below, we have seen improvement in our business beginning in March 2021 and progressing through 2021. Given the drastic and unprecedented impact of the pandemic on our operating results in 2020, we believe that for the financial highlights discussion below, a comparison of our results in 2021 to both 2020 and 2019 allows for a better understanding of the full impact of the COVID-19 pandemic and the progress of our recovery.

This section of Form 10-K, however, does not address certain items regarding the year ended December 31, 2019. Discussion and analysis of 2019 and year-to-year comparisons between 2020 and 2019 not included in this Form 10-K can be found in "Item 7. Management's Discussion and Analysis" of our Annual Report on Form 10-K for the year ended December 31, 2020. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited Consolidated Financial Statements and the related notes and other financial information as well as the material risk factors included elsewhere in this Annual Report on Form 10-K.

The table below shows certain key financial measures for the years ended December 31, 2021, 2020 and 2019:

			Year Ended December 31,															2021 vs 2020 % Increase (Decrease) (1)			2021 vs 2019 % Increase (Decrease) (1)
(in millions)			2021						2020						2019
Total operating revenue			$	29,899					$	17,095					$	47,007		75		%	(36)		%
Total operating expense			28,013						29,564						40,389			(5)		%	(31)		%
Total non-operating expense, net			(1,488)						(3,118)						(420)			(52)		%	NM
Income/(loss) before income taxes			398						(15,587)						6,198			NM			(94)		%

(1)Certain variances are labeled as not meaningful ("NM") throughout management's discussion and analysis.

Financial Highlights - 2021 Compared to 2019

Our pre-tax income for 2021 was $398 million, which includes recognition of $4.5 billion in grants from the Payroll Support Program Extension ("PSP2") and Payroll Support Program 3 ("PSP3"). This is a $5.8 billion decrease compared to 2019 primarily due to the impact of the COVID-19 pandemic on our business which resulted in a 36% decrease in revenue, partially offset by a reduction in operating expense, including the government grant recognition. Pre-tax loss, adjusted (a non-GAAP financial measure) which excludes the government grant recognition and other items was $3.4 billion, a decrease of $9.6 billion compared to 2019.

Revenue. Compared to 2019, our operating revenue decreased $17.1 billion, or 36% due to reduced demand resulting from the COVID-19 pandemic.

The length and severity of the reduction in travel demand due to the COVID-19 pandemic remains uncertain; however, with continued distribution of effective vaccines and easing of travel advisories and restrictions, we believe customer confidence will continue to grow, leading to increased demand during 2022. We expect domestic leisure travel to exceed 2019 levels in 2022, while we expect business travel to continue to return as many companies are expected to expand "return to office" plans throughout 2022. International demand recovery has been uneven as the COVID-19 variants and related travel restrictions impact various countries within our international network, though we believe demand will begin accelerating in the second half of 2022 as travel restrictions are lifted. We continue to monitor risks to the pace of recovery from COVID-19 variants, the effectiveness of vaccine programs and travel advisories and restrictions. We are planning for our system capacity to be approximately 15% lower in the March 2022 quarter than the March 2019 quarter and approximately 10% lower for the full year of 2022 compared to 2019.

Operating Expense. Total operating expense decreased $12.4 billion, or 31%, compared to 2019, primarily resulting from recognition of the grants from PSP2 and PSP3, lower volume-related expenses (mainly fuel and passenger commissions and other selling expenses), lower salaries and related costs and profit sharing expense, and significant cost reduction measures taken across all aspects of our operation in response to the COVID-19 pandemic. These decreases were partially offset by an increase in expenses related to refinery sales to third parties, reflected in ancillary business and refinery expense, as well as recovery related and transition costs incurred (e.g., aircraft reactivation, hiring, training, overtime and reservations volume) as we return closer to pre-pandemic levels of demand and capacity. Total operating expense, adjusted (a non-GAAP financial measure) decreased $10.9 billion, or 27% compared to 2019.

Delta Air Lines, Inc. 2021 Form 10-K 34

Item 7. MD&A - Financial Highlights

Our total operating cost per available seat mile ("CASM") decreased 2% to 14.40 cents compared to 2019, primarily due to the cost reductions discussed above and partially offset by a 29% decrease in capacity. Non-fuel unit costs ("CASM-Ex", a non-GAAP financial measure) increased 11% to 12.12 cents due to the 29% decrease in capacity, despite a decline in adjusted operating expenses.

Minimizing unit cost increases is important to delivering on our overall financial objectives. During 2022, however, we expect non-fuel unit costs to increase 7%-10% compared to 2019. This expected unit cost increase is primarily due to 2022 capacity projected to be lower than 2019, costs associated with rebuilding our network, investments to support an elevated customer experience and our premium brand focus, and inflation and labor cost escalation in the underlying business. We expect non-fuel unit cost increases compared to 2019 to moderate in future years as we return to and exceed pre-pandemic capacity and benefit from cost reduction measures implemented during 2020 that were structural in nature.

We have experienced, and expect to continue experiencing, increased cost inflation as a result of global macroeconomic trends, actions we took in response to the COVID-19 pandemic and labor shortages at our suppliers. Actions we have taken to mitigate the impact of expected inflation include leveraging scale and efficiency in our underlying business through improved asset utilization and seeking productivity improvements through increased scale efficiencies and technology enhancements.

Non-Operating Results. Total non-operating expense was $1.5 billion in 2021, $1.1 billion higher than 2019, primarily due to higher interest expense as a result of our increased debt balances due to the financing arrangements entered into during 2020.

Cash Flow. Our liquidity at December 31, 2021 was $14.2 billion, an $8.2 billion increase compared to December 31, 2019 as a result of proceeds from loans and debt issuances and other liquidity initiatives. During 2021, operating activities provided $3.3 billion, including $4.5 billion from the payroll support program grants, which was partially offset by the $1.5 billion in contributions we made to our defined benefit pension plans. During 2021, we incurred approximately $900 million of net investing cash outflows, primarily for $3.2 billion capital expenditures, partially offset by $2.4 billion of net redemptions of short-term investments. Capital expenditures primarily related to the purchase of aircraft, fleet modifications, our airport redevelopment projects and technology enhancements. These results generated $1.3 billion of free cash flow (a non-GAAP financial measure) in 2021 compared to $4.2 billion in 2019. Also, during 2021 we had cash outflows of approximately $5.8 billion related to repayments of our debt and finance leases, including approximately $3.8 billion for early repayments and the remainder from scheduled maturities.

The non-GAAP financial measures pre-tax loss, adjusted, operating expense, adjusted, CASM-Ex and free cash flow used above are defined and reconciled in "Supplemental Information" below.

Financial Highlights - 2021 Compared to 2020

Our 2021 pre-tax income improved $16.0 billion compared to 2020. This was primarily due to the restructuring charges, investment impairments and equity method losses recorded during 2020 and a partial recovery in the demand for air travel during 2021, which resulted in a 75% increase in revenue. Pre-tax loss, adjusted (a non-GAAP financial measure) was $3.4 billion, an increase of $5.6 billion compared to 2020.

Revenue. Compared to 2020, our 2021 operating revenue increased $12.8 billion, or 75%, primarily due to increased travel demand.

Operating Expense. Total operating expense decreased $1.6 billion, or 5%, compared to 2020, primarily resulting from the reduction in restructuring charges and recognition of the PSP2 and PSP3 grants. These decreases were almost fully offset by higher volume-related expenses associated with the increase in capacity and demand, mainly fuel and aircraft maintenance and higher salaries and related costs and an increase in expenses related to refinery sales to third parties, reflected in ancillary business and refinery expense. Total operating expense, adjusted (a non-GAAP financial measure) increased $5.1 billion, or 21% compared to 2020.

Our CASM decreased 35% to 14.40 cents compared to 2020, primarily due to a 45% increase in capacity and reduction in operating expense from the reduction in restructuring charges and recognition of the PSP2 and PSP3 grants as noted above. CASM-Ex (a non-GAAP financial measure) decreased 22% to 12.12 cents.

Delta Air Lines, Inc. 2021 Form 10-K 35

Item 7. MD&A - Financial Highlights

Non-Operating Results. Total non-operating expense was $1.5 billion in 2021, $1.6 billion lower than 2020 primarily due to impairments and our proportionate share of equity method losses related to our investments in LATAM and Grupo Aeroméxico in 2020, which were zero in 2021, and mark-to-market gains on certain of our other equity investments. These decreases were partially offset by higher interest expense as a result of our increased debt balances due to the financing arrangements entered into during 2020 and losses on debt extinguishment.

Cash Flow. The $1.3 billion of free cash flow generated in 2021 compared to $4.3 billion of negative free cash flow in 2020.

Environmental Sustainability

During 2021, we built on our previously announced plan to invest $1.0 billion through the end of 2030 toward airline carbon neutrality by committing to, among other things, set medium- and long-term climate goals that are aligned with applicable SBTi frameworks, as described further in Part I, Item 1, "Business - Environmental Sustainability." We expect our path toward achievement of these ambitious climate goals to depend heavily on increased use of SAF, which is not presently available at scale or at prices competitive to jet fuel, and improved fuel efficiency from fleet renewal and operational initiatives. During 2021, we signed agreements with numerous corporate and agency customers to offset the premium from our SAF purchases. While we do not expect a material adverse effect on our Consolidated Financial Statements in the near term from the use of SAF, we are unable to predict the financial impact of increased use of SAF on our Consolidated Financial Statements over the longer term, as government policies and incentives for, and sufficient third-party investment in, SAF are necessary to make its use in larger quantities commercially and economically feasible. In addition, our fleet renewal efforts will require extensive capital investment in future periods.

In the near-term and subject to market dynamics, we also expect to continue the purchase and retirement of verified carbon offsets in support of our $1.0 billion airline carbon neutrality goal. During 2021, we incurred $95 million of expense related to carbon offsets. This amount consists of $30 million to address 13 million metric tons of carbon emissions generated by our airline segment from March 1 to December 31, 2020 through carbon offsets, as well as an additional $65 million for the purchase and retirement of carbon offsets related to a portion of our airline segment's 2021 carbon emissions. The cost of carbon offsets increased significantly during 2021 and will likely continue to do so, which could adversely affect our financial results as we purchase such offsets either in support of our $1.0 billion airline carbon neutrality goal or in satisfaction of future obligations under CORSIA, which are described further in Part I, Item 1, "Business - Environmental Regulation."

Delta Air Lines, Inc. 2021 Form 10-K 36

Item 7. MD&A - Results of Operations

Results of Operations

Operating Revenue

			Year Ended December 31,						Increase (Decrease)			% Increase (Decrease)
(in millions) (1)			2021			2020
Ticket - Main cabin			$	11,626		$	6,676					$	4,950		74		%
Ticket - Business cabin and premium products			7,713			4,294						3,419			80		%
Loyalty travel awards			1,786			935						851			91		%
Travel-related services			1,394			978						416			43		%
Total passenger revenue			$	22,519		$	12,883					$	9,636		75		%
Cargo			1,032			608						424			70		%
Other			6,348			3,604						2,744			76		%
Total operating revenue			$	29,899		$	17,095					$	12,804		75		%
TRASM (cents)			15.37		¢	12.73		¢				2.64		¢	21		%
Third-party refinery sales (2)			(1.66)			(0.86)						(0.80)			93		%
TRASM, adjusted (cents)			13.71		¢	11.87		¢				1.84		¢	16		%

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

(2)For additional information on adjustments to TRASM, see "Supplemental Information" below.

Operating Revenue

Our operating revenue increased $12.8 billion, or 75%, compared to the year ended December 31, 2020 due primarily to increased demand in 2021 as a result of the continued recovery from the COVID-19 pandemic. The increase in operating revenue, on a 45% increase in capacity, generated a 21% increase in total revenue per available seat mile ("TRASM") and a 16% increase in TRASM, adjusted (a non-GAAP financial measure) compared to 2020.

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

We have historically generated cargo revenues in domestic and international markets through the use of cargo space on regularly scheduled passenger aircraft. In 2020, following the onset of the COVID-19 pandemic, reduced industry cargo capacity drove a significant increase in our cargo yield, and we also generated cargo revenue through the operation of cargo-only charter flights (i.e., using aircraft in our fleet not being utilized for passenger travel to fly cargo internationally). This trend continued in 2021, and we would expect capacity constraints and elevated market yields to continue through 2022 while the industry rebuilds international networks to pre-pandemic levels. Compared to 2020, we flew additional cargo volume as international networks returned, coupled with a continued increase in yield driven by a combination of constrained capacity and increased demand.

Passenger Revenue by Geographic Region

						Increase (Decrease) vs. Year Ended December 31, 2020
(in millions)			Year Ended December 31, 2021			Passenger Revenue			RPMs (Traffic)			ASMs (Capacity)			Passenger Mile Yield			PRASM			Load Factor
Domestic			$	18,468		84		%	98		%	45		%	(7)		%	27		%	20			pts
Atlantic			1,777			52		%	56		%	42		%	(3)		%	7		%	5			pts
Latin America			1,873			68		%	82		%	79		%	(8)		%	(6)		%	1			pt
Pacific			401			(28)		%	(55)		%	(2)		%	58		%	(26)		%	(27)			pts
Total passenger revenue			$	22,519		75		%	83		%	45		%	(5)		%	21		%	15			pts

Delta Air Lines, Inc. 2021 Form 10-K 37

Item 7. MD&A - Results of Operations

Domestic

Domestic passenger unit revenue ("PRASM") for the year ended December 31, 2021 increased 27% with capacity up 45% compared to the year ended December 31, 2020 as a result of the low levels of capacity and demand during 2020 due to the COVID-19 pandemic and the ongoing recovery throughout 2021.

Beginning in the latter half of the March 2021 quarter, we began to see bookings, primarily leisure, improve from the low levels of 2020. Throughout 2021, demand continued to improve, with some variability in periods of rising COVID-19 cases attributable to variants of the virus. We remain optimistic about the ultimate recovery of business travel which has been recovering at a slower pace than consumer. We expect this demand to continue to be led by small- and medium-sized businesses and accelerate in the first half of 2022 as more corporate offices reopen; we are, however, unable to fully predict the pace of that recovery.

International

International passenger revenue for the year ended December 31, 2021 increased 43% with capacity up 45% compared to the year ended December 31, 2020 as travel to certain destinations has resumed or increased. Additionally, while some countries have removed or eased travel restrictions, many countries maintained or reinstituted international testing requirements and travel restrictions, which have restrained demand in the short term but are expected to support the long-term recovery of international air travel.

In November 2021, travel restrictions on most fully vaccinated foreign visitors to the United States were lifted. This action made travel to the U.S. by many foreign nationals possible for the first time in 18 months. Despite this policy change, we expect the significantly lower international demand environment to continue through at least the beginning of 2022, with the recovery pace continuing to trail domestic travel.

The Atlantic and Pacific regions continue to be the most impacted by the restrictions described above. However, during 2021, we began, resumed or increased our service to certain countries in the Atlantic region based on their lifting or easing of travel restrictions. Travel in the Pacific region is largely limited to essential travel, and we expect only small demand improvements until government restrictions ease with minimal improvement until at least the second half of 2022. We will continue to be agile in the restoration of our international network based on changes in government restrictions and consumer demand.

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

Ticket Validity Flexibility

In order to provide our customers more flexibility and time to plan or rebook their travel, we made the following changes to our ticket and travel credit expiration dates.

In the March 2021 quarter, we announced the extension of the validity of all passenger tickets and travel credits purchased or expiring in 2021 to December 31, 2022, which allowed for tickets to be rebooked through December 31, 2022 for travel through 2023.

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

During 2020, with the exception of Basic Economy, we eliminated change fees for all tickets originating in North America and waived change fees for tickets originating outside of North America. We also implemented a temporary waiver that allowed Basic Economy tickets with travel for 2021, which are normally non-changeable, to be changed without paying a fee regardless of origin or destination. Starting January 1, 2022, Basic Economy tickets may be cancelled for a fee to receive a partial ticket credit. We do not expect the updated change fee policies to materially affect our revenue in future periods; however, our estimates of revenue that will be recognized for tickets that expire unused ("ticket breakage") may vary in future periods due to the extension of the validity of passenger tickets and travel credits.

Delta Air Lines, Inc. 2021 Form 10-K 38

Item 7. MD&A - Results of Operations

Other Revenue

			Year Ended December 31,						Increase (Decrease)			% Increase (Decrease)
(in millions)			2021			2020
Refinery			$	3,229		$	1,150					$	2,079		181		%
Loyalty program			1,770			1,458						312			21		%
Ancillary businesses			793			648						145			22		%
Miscellaneous			556			348						208			60		%
Total other revenue			$	6,348		$	3,604					$	2,744		76		%

Refinery. This represents refinery sales to third parties. These sales, which are at or near cost, increased $2.1 billion compared to 2020. The increase in third-party refinery sales resulted from the refinery's shift to producing and selling more non-jet fuel products due to the lower level of demand for jet fuel compared to historical levels, in addition to higher pricing during 2021. See "Refinery Segment" below for additional details on the refinery's operations, including third-party refinery sales recorded in other revenue, during each period.

Loyalty Program. Loyalty program revenues relate to brand usage by third parties and other performance obligations embedded in miles sold, including redemption of miles for non-travel awards. These revenues are mainly driven by customer spend on American Express cards and new cardholder acquisitions. As co-brand card spend and card acquisitions continue to be strong, revenues from our relationship with American Express increased in the year ended December 31, 2021 compared to 2020.

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

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

Delta Air Lines, Inc. 2021 Form 10-K 39

Item 7. MD&A - Results of Operations

Operating Expense

			Year Ended December 31,						Increase (Decrease)			% Increase (Decrease)
(in millions)			2021			2020
Salaries and related costs			$	9,728		$	9,001					$	727		8		%
Aircraft fuel and related taxes			5,633			3,176						2,457			77		%
Ancillary businesses and refinery			3,957			1,785						2,172			122		%
Contracted services			2,420			1,953						467			24		%
Landing fees and other rents			2,019			1,833						186			10		%
Depreciation and amortization			1,998			2,312						(314)			(14)		%
Regional carrier expense			1,736			1,584						152			10		%
Aircraft maintenance materials and outside repairs			1,401			822						579			70		%
Passenger commissions and other selling expenses			953			643						310			48		%
Passenger service			756			551						205			37		%
Aircraft rent			430			399						31			8		%
Restructuring charges			(19)			8,219						(8,238)			(100)		%
Profit sharing			108			—						108			NM
Government grant recognition			(4,512)			(3,946)						(566)			14		%
Other			1,405			1,232						173			14		%
Total operating expense			$	28,013		$	29,564					$	(1,551)		(5)		%

In response to the reduced demand and related reduction in revenue following the onset of the COVID-19 pandemic in early 2020, we quickly reduced capacity to more closely align with demand, implemented cost saving initiatives related to our fleet and operations, offered employees voluntary separation programs and delayed or eliminated nearly all discretionary spending.

During 2021, distribution of vaccines continued, travel restrictions and advisories eased and customer confidence continued to grow despite the negative impact of COVID-19 virus variants in the second half of 2021. As a result, we saw revenue and capacity return and related operating expense line items increase. The continued restoration of our operations was the primary driver for the increases in contracted services, landing fees and other rents, passenger commissions and other selling expenses, passenger service and other expense. Other year-over-year fluctuations are discussed below.

Salaries and Related Costs. In the second half of 2020, approximately 18,000 employees elected to participate in voluntary separation programs, which initially reduced our workforce by approximately 20%, though some of those positions have subsequently been filled. Since the beginning of 2021, we have hired approximately 11,000 employees in certain areas, including flight operations, airport customer service and reservations and customer care, in order to support our operations as demand and capacity return.

Beginning in March 2020 and continuing through December 2020, we reduced salaries by 100% for our CEO and 50% for our officers. In addition, we reduced work hours by 25% for all other management and most front-line employee work groups. On January 1, 2021, employees were restored to full work hours, officer salaries were restored and during 2021 we recalled approximately 1,700 pilots from inactive status back to active service. Additionally, we offered voluntary unpaid leaves of absence for periods ranging from 30 days up to 12 months and approximately 50,000 and 20,000 of our employees elected to take a leave of absence at various times throughout 2020 and 2021, respectively. These actions resulted in higher salaries and related costs in 2021 compared to 2020.

Delta Air Lines, Inc. 2021 Form 10-K 40