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Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| ☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2022
| 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 |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þ
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 þ No o
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 þ No o
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. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2022 was approximately $18.6 billion.
On January 31, 2023, there were outstanding 641,238,655 shares of the registrant's common stock.
This document is also available on our website at http://ir.delta.com/.
Documents Incorporated By Reference
Part III of this Form 10-K incorporates by reference certain information from the registrant's definitive Proxy Statement for its 2022 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission.
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-K (or otherwise made by us or on our behalf) that are not historical facts, including statements about our estimates, expectations, beliefs, intentions, projections 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 "Risk Factors Relating to Delta" and "Risk Factors Relating to the Airline Industry" in "Item 1A. Risk Factors" of this 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.
Delta Air Lines, Inc. | 2022 10-K 1
Item 1. Business
Part I
ITEM 1. BUSINESS
General
As a global airline based in the United States, we connect customers across our expansive global network with a commitment to industry-leading customer service, safety and innovation. In 2022, demand for air travel accelerated significantly beginning late in the March quarter with continued improvement throughout the remainder of the year. For the full year, we served approximately 177 million customers.
Competitive Advantages and Brand Strength
The competitive advantages that support our trusted consumer brand include our people and culture, operational reliability, global network, customer loyalty and financial foundation. In 2022, we continued to differentiate Delta from the industry by strengthening our competitive advantages.
People and Culture
The Delta people and culture are our strongest competitive advantage. Our employees provide world-class travel experiences for our customers and best-in-class service, delivering customer satisfaction and brand preference. In 2022, we continued investing in our people and hired approximately 25,000 new team members as we continued to rebuild the airline. As a testament to our people-focused culture, Forbes recognized Delta as No. 6 on its list of the World’s Best Employers for 2022, making it the highest-ranked airline on the list. Glassdoor also recognized Delta as one of the Best Places to Work for the sixth year in a row, ranking No. 18 on the 2022 list of 100 large companies.
With our improved profitability, we returned to normal profit sharing and are planning a $563 million planned payout for eligible employees. Our industry-leading profit sharing program directly aligns our employees’ interests with the company’s long-term success. The company also maintains a Shared Rewards program to incentivize operational performance, and in 2022 $61 million was earned by employees under this program.
Operational Reliability
We remain committed to industry-leading reliability and are consistently among the industry’s best performers. We delivered the best completion factor and on-time arrival and departure rates among our network carrier peers in 2022 based on preliminary data. Since July 1, 2022, we had a system-wide completion factor of 98.6%, with 71.1% of our domestic flights arriving on time. In 2022, we were honored with the Cirium Platinum Award for global operational excellence as North America’s most on-time airline, reflecting Delta’s on-time performance. In January 2023, the Wall Street Journal named us the top airline of 2022 among the nine U.S. airlines in its annual airline scorecard for the second consecutive year, leading the industry in on-time arrivals, completion factor and involuntary denied boardings.
Global Network
We and our alliance partners collectively serve over 130 countries and territories and over 800 destinations around the world. At the end of 2022, we offered more than 4,000 daily flights to more than 275 destinations on six continents.
Our domestic network is centered around core hubs in Atlanta, Minneapolis-St. Paul, Detroit and Salt Lake City. Core hubs have strong local passenger share, a high penetration of customers loyal to Delta, a competitive cost position and strong margins. Core hub positions complement coastal hub positions in Boston, Los Angeles, New York-LaGuardia, New York-JFK and Seattle. Coastal hubs provide a strong presence in large revenue markets and enable growth in premium products and international service.
In 2022, we focused on solidifying our positions in our coastal hubs, securing leading positions in Boston and Los Angeles. We expect to leverage our coastal gateways and strategic relationships with international airline partners to further grow our international service. We increased local market share in our core hubs and plan to focus growth in 2023 in our core hubs as we complete our rebuild.
Delta Air Lines, Inc. | 2022 10-K 2
Item 1. Business
Internationally, we have significant hubs and market presence in Amsterdam, London-Heathrow, Mexico City, Paris-Charles de Gaulle and Seoul-Incheon. Through innovative alliances with Aeroméxico, LATAM Airlines Group S.A. ("LATAM"), Air France-KLM, China Eastern, Korean Air and Virgin Atlantic, we seek to bring more choice to customers worldwide. In particular, the U.S. Department of Transportation ("DOT") granted final regulatory approval for our joint venture agreement with LATAM in 2022. Our strategic relationships with these international airlines are an important part of our business as they improve our access to markets around the world and enable us to provide customers a more seamless global travel experience across our alliance network. The most significant of these arrangements are commercial joint ventures or cooperation agreements that include joint sales and marketing coordination, co-location of airport facilities and other commercial cooperation arrangements. In some cases, we have reinforced strategic alliances through equity investments where we have opportunity to create deep relationships and maximize commercial cooperation.
Our global network is supported by a fleet of approximately 1,250 aircraft as of December 31, 2022 that are varied in size and capabilities, giving us flexibility to adjust aircraft to the network. We are continuing to refresh our fleet by acquiring new and more fuel-efficient aircraft with increased premium seating and higher cargo capacity to replace older aircraft, and to reduce our fleet complexity with fewer fleet types. In 2022, we took delivery of 69 aircraft, including new A321neos, A220-100s, A220-300s, A330-900s, A350-900s and pre-owned CRJ-900s and Boeing 737-900ERs. Our new aircraft are on average 25% more fuel efficient per seat mile than retiring aircraft. In July 2022, we entered into a purchase agreement with Boeing for 100 Boeing 737-10 aircraft, the largest model in the 737 MAX family, to start delivery in 2025 with the option to purchase an additional thirty 737-10 aircraft.
Customer Loyalty
With operational excellence, best-in-class service and commitment to our customers, we have continued to earn our customers’ trust and preference by delivering the "Delta Difference." We are elevating the customer experience in key markets by deploying our newest aircraft and technology investments and by accelerating generational airport investments, including new facilities that opened at New York-LaGuardia, Los Angeles and Seattle in 2022. We believe our continued investment in customer service and experience, operations, product, airports and technology has shaped customer perception of our brand leading to improvements in our domestic net promoter scores and increased customer loyalty compared to pre-pandemic levels. In 2022, various outlets recognized Delta as a trusted consumer brand, including:
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Named the number one airline by corporate travel customers in the annual Business Travel News Airline Survey for the 12th year in a row and the No. 1 U.S. airline by Condé Nast Traveler readers.
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Received top honors from The Points Guy’s Readers’ Choice Awards for the Best U.S. Airline Loyalty Program, Best Airport Lounge Network and Best Airline Co-Branded Credit Card with the SkyMiles® Platinum American Express.
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Delta SkyMiles awarded as Americas’ top loyalty program by the Frequent Traveler People’s Awards in four of its five award categories.
Our award-winning SkyMiles program is designed to attract lifetime members and to grow customer loyalty by offering our customers a wide variety of benefits when traveling with us and our partners, and personalizing our engagement with them. We aim to increase the value of our program for customers and to deepen customer engagement with Delta through a growing ecosystem of partnerships with premier brands, extending the value of our SkyMiles currency beyond flight and introducing new technology initiatives.
In 2022, the SkyMiles program membership accelerated with a record 8.5 million new SkyMiles Members. We believe there is opportunity to continue this trend and expect the increased value we provide customers to deliver high-margin revenue and more resilient cash flows.
Financial Foundation
In 2022, we made significant progress restoring our financial foundation with strong profitability and positive free cash flow for the year. Our financial results are discussed in more detail in "Item 7. Management's Discussion and Analysis," which includes definitions and reconciliations of non-GAAP financial measures, including free cash flow, under the "Supplemental Information" section.
Delta Air Lines, Inc. | 2022 10-K 3
Item 1. Business
Restoring the strength of our balance sheet and reducing debt is a key financial priority. During 2022, we repaid approximately $4.5 billion in debt and finance lease obligations and the company remains committed to regaining investment grade metrics. The strength of our balance sheet supports our ability to obtain financing and was instrumental in protecting shareholders during the pandemic.
Over the last decade we have fundamentally transformed our business by investing in our people, our product and our reliability to alter the commodity-like nature of air travel and improve our financial foundation. We have diversified our business by growing high-margin revenue streams that leverage our competitive advantages, including:
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Our partnership with American Express, which provides us a co-brand revenue stream tied to broader consumer spending.
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Our continued focus on our premium products (including Delta One®, First Class, Delta Premium Select and Delta Comfort+®) and customer segmentation, which has reduced our reliance on the most price sensitive customer segment.
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Our complementary portfolio businesses, such as our cargo business, which has grown significantly during the pandemic, and our Maintenance, Repair and Overhaul ("MRO") operation, where we believe we remain well-positioned for growth through contractual agreements with jet engine manufacturers, including three next generation engine platforms.
Our premium yield growth has significantly outpaced main cabin with paid load factors higher in 2022 than in 2019, as demand for premium products continues to grow. In 2022, we also expanded our Delta Premium Select rollout, which will continue in 2023. The sale of premium products is facilitated through various distribution channels, with 63% of tickets sold through direct channels in 2022. These include digital channels, such as delta.com and the Fly Delta app, and our reservations specialists. Indirect distribution channels include online travel agencies and traditional "brick and mortar" agencies. We make fare and product information widely available across those channels in an effort to ensure customers receive the best information and service options, further supporting the growth of premium products.
Innovative Investments in Technology
Our objective is to make technology a strategic differentiator. We continue to invest in technological improvements that enhance the customer experience, support our operations and provide tools for our employees. These investments include innovations to customer facing applications and improvements to infrastructure and technology architecture to unify and improve access to data sources. We believe this digital transformation enhances interactions with our customers and allows our people to deliver more personalized service, further enhancing the customer experience and strengthening our brand.
Through the development of innovative new technologies, we can better serve customers and give our employees the best tools. For our customers, we are making investments in the digital platforms on the ground and in the air. We are evolving the Fly Delta app into a digital travel concierge for our customers to offer convenient services on the day of travel and deliver thoughtful notifications to make their travel journeys more seamless. On the ground, we are investing to create a smoother, less stressful and increasingly contactless travel experience. Onboard the aircraft, we continue to invest in in-flight entertainment and announced fast, free and unlimited Wi-Fi for all customers through a free SkyMiles account on most domestic mainline flights, with full availability on international and regional aircraft expected by the end of 2024. We also introduced Delta Sync to create personalized experiences and further elevate the consumer experience across the travel journey, including partnerships with leading brands. For our employees, we are investing in applications that allow our people to have more meaningful interactions with our customers.
SkyMiles Program
Our SkyMiles program provides its members with the ability to earn miles when traveling on Delta, Delta Connection and our partner airlines. Miles may also be earned by using certain services offered by program partners, such as credit card companies, hotels, car rental agencies and ridesharing companies. To facilitate transactions with participating companies, we sell miles to non-airline businesses, customers and other airlines.
Delta Air Lines, Inc. | 2022 10-K 4
Item 1. Business
Miles may be used toward award redemptions such as flights and upgrades on Delta, our regional carriers and other participating airlines as well as donations with specific charities and more. In 2022, 10% of revenue miles flown on Delta were from award travel, as program members redeemed miles in the loyalty program for approximately 25 million award tickets. Our most significant and valuable contract to sell miles relates to our co-brand credit card relationship with American Express. In 2022, the Delta American Express co-branded card grew by 1.2 million new cardholders, with remuneration from American Express surpassing $5.5 billion.
Commercial Arrangements with Other Airlines
We have marketing alliances with other airlines to enhance our access to domestic and international markets.
Joint Venture/Cooperation Agreements. We have implemented four separate joint venture or joint cooperation agreements with foreign carriers as described below, each of which has been granted antitrust immunity from the DOT. We have sought to reinforce a number of the agreements through equity investments in those carriers. See Note 4 of the Notes to the Consolidated Financial Statements for additional information about our equity investments.
Each of our joint venture or cooperation arrangements provides for joint commercial cooperation with the relevant partner within the geographic scope of the arrangement, including the sharing of revenues and/or profits and losses generated by the parties on the joint venture routes, as well as joint marketing and sales, coordinated pricing and revenue management, network and schedule planning and other coordinated activities with respect to the parties' operations on joint venture routes. Our implemented commercial joint ventures consist of the following:
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A combined joint venture with Air France, KLM and Virgin Atlantic with respect to transatlantic traffic flows. In addition to the joint venture, we own a non-controlling 49% equity stake in Virgin Atlantic Limited, the parent company of Virgin Atlantic Airways and a 3% ownership stake in the parent company of Air France and KLM.
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A joint cooperation agreement with Aeroméxico with respect to trans-border traffic flows between the U.S. and Mexico. In addition to the joint cooperation agreement, we currently own an approximately 20% equity stake in Grupo Aeroméxico, S.A.B. de C.V., the parent company of Aeroméxico. In March 2022, Grupo Aeroméxico emerged from its voluntary proceedings to reorganize under Chapter 11 of the United States bankruptcy code.
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A joint venture agreement with LATAM with respect to traffic flows between North and South America, allowing our passengers to access more than 300 destinations between the United States/Canada and South America (Brazil, Chile, Colombia, Paraguay, Peru and Uruguay). Upon completion of LATAM's restructuring process in November 2022, we acquired an approximately 10% equity stake in LATAM.
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A joint venture with Korean Air with respect to traffic flows between the United States and certain countries in Asia. In addition to the joint venture, we own just under 15% of the outstanding common stock of Hanjin-KAL, the largest shareholder of Korean Air.
Enhanced Commercial Agreements with China Eastern. We own a 2% equity interest in China Eastern, with whom we have a strategic joint marketing and commercial cooperation arrangement covering traffic flows between China and the U.S., which includes reciprocal codesharing, loyalty program participation, airport lounge access and joint sales cooperation.
SkyTeam. In addition to our marketing alliance agreements with individual foreign airlines, we are a member of the SkyTeam global airline alliance. The other members of SkyTeam are Aerolíneas Argentinas, Aeroméxico, Air Europa, Air France, China Airlines, China Eastern, Czech Airlines, Garuda Indonesia, ITA Airways, Kenya Airways, KLM, Korean Air, Middle East Airlines, Saudia, TAROM, Vietnam Airlines and Xiamen Airlines. Virgin Atlantic is expected to join the SkyTeam alliance in early 2023. Through alliance arrangements with other SkyTeam carriers, we are able to link our network with the route networks of the other member airlines, providing opportunities to increase connecting traffic while offering enhanced customer service through reciprocal codesharing and loyalty program participation, airport lounge access and cargo operations.
Delta Air Lines, Inc. | 2022 10-K 5
Item 1. Business
Regional Carriers
We have air service agreements with domestic regional air carriers that feed traffic to our route system by serving passengers primarily in small and medium-sized cities in the domestic market. These arrangements enable us to better match capacity with demand in these markets.
Through our regional carrier program, Delta Connection®, we have contractual arrangements with regional carriers to operate aircraft using our "DL" designator code. We currently have contractual arrangements with:
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Endeavor Air, Inc., a wholly owned subsidiary of ours ("Endeavor").
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Republic Airways, Inc.
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SkyWest Airlines, Inc. ("SkyWest Airlines").
Our contractual agreements with regional carriers are primarily capacity purchase arrangements, under which we control the scheduling, pricing, reservations, ticketing and seat inventories for the regional carriers' flights operating under our "DL" designator code. We are entitled to all ticket, cargo, mail, in-flight and ancillary revenues associated with the flights under these capacity purchase arrangements. We pay those airlines an amount, as defined in the applicable agreement, which is based on a determination of their cost of operating those flights and other factors intended to approximate market rates for those services. These capacity purchase agreements are long-term agreements, usually with initial terms of at least ten years, which grant us the option to extend the initial term. Certain of these agreements provide us the right to terminate the entire agreement, or in some cases remove some of the aircraft from the scope of the agreement, for convenience at certain future dates.
SkyWest Airlines operates some flights for us under a revenue proration agreement. This proration agreement establishes a fixed dollar or percentage division of revenues for tickets sold to passengers traveling on connecting flight itineraries.
Cargo
Through our global network, our cargo operations are able to connect the world’s major freight gateways. We generate cargo revenues in domestic and international markets through the use of cargo space on regularly scheduled passenger aircraft. We are a member of SkyTeam Cargo, an international airline cargo alliance with ten other airlines that offer a network spanning six continents, through which we provide global solutions to our customers by connecting our network with those partners.
In 2022, cargo revenues increased year over year as ongoing supply chain challenges, elevated market yields and increased capacity benefited our cargo operations.
Other Complementary Businesses
We have various other businesses arising from our airline operations, including the following:
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In addition to providing maintenance and engineering support for our fleet of approximately 1,250 mainline and regional aircraft, our MRO operation, known as Delta TechOps, serves aviation and airline customers from around the world. With agreements to service multiple next-generation aircraft engines, Delta TechOps is positioned as a leading global service provider for state-of-the-art, more sustainable engines.
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Our vacation wholesale subsidiary, Delta Vacations, provides vacation packages to third-party consumers.
In 2022, the total revenue from our MRO operation and Delta Vacations was approximately $850 million.
Delta Air Lines, Inc. | 2022 10-K 6
Item 1. Business
Environmental Sustainability
Over the course of 2022, Delta made continued progress on our previously announced plan to invest $1.0 billion through the end of 2030 toward airline carbon neutrality and our climate goals for our airline operations that align with the applicable framework of the Science Based Targets initiative ("SBTi"). These climate goals also are helping inform the evolution of our foundational goals as we pursue a more sustainable airline. In July 2022, SBTi validated our medium-term goal to reduce well-to-wake (lifecycle) scope 1 and 3 jet fuel greenhouse gas emissions by 45% per revenue tonne kilometer by 2035 from a 2019 base year. SBTi also determined that our scope 1 and 2 target ambition is in line with the Paris Agreement's goal of limiting global warming to well below two degrees Celsius above pre-industrial levels. We are awaiting validation of our long-term goal submission, aiming to achieve net zero greenhouse gas emissions across the airline operation and its value chain (scopes 1, 2 and 3) no later than 2050, as outlined by the SBTi Net Zero Standard Criteria.
The global aviation industry is viewed as a hard-to-abate sector, meaning it is innately difficult to decarbonize. Our path toward achievement of these targets and our overall environmental sustainability efforts will focus on two main pillars:
Eliminate our Climate Impact from Flying
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Fleet**: Our fleet renewal efforts have the largest impact on reducing emissions and emissions intensity from our airline operation. In 2022, Delta took delivery of 69 aircraft that were, on average, 25% more fuel efficient per seat mile than retiring aircraft, contributing to a fleet-wide fuel efficiency improvement of 4.1% compared to 2019. We also announced a series of new aircraft purchase agreements, which will continue to improve fuel efficiency. We expect our fleet renewal plans to continue to improve fuel efficiency in future periods.
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Fuel**: Sustainable aviation fuel ("SAF") is central to reducing the lifecycle emissions from aviation fuel; however, it is not currently available at the scale or cost necessary to meet the industry’s needs. We have established a goal of replacing 10% of our jet fuel consumption with SAF by the end of 2030, which we expect will require at least 400 million gallons of SAF annually. At the end of 2022, Delta had agreements in place with multiple suppliers for an aggregate offtake of 200 million gallons of SAF annually by 2030, subject to third-party investment and timely facility development.
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Aircraft operations**: Our Carbon Council is a cross-divisional senior leadership team that is focused on executing and tracking operational initiatives that reduce jet fuel consumption improving our emissions intensity. This work includes those things we can improve on immediately within flight operations as well as collaborating with outside experts such as MIT to evaluate new technologies. Our efforts also supplement industry-wide efforts to support the modernization of the air traffic control system, which would allow for more fuel-efficient and less carbon-intensive flying.
Embed Sustainability in Everything we Do
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Travel experience**: We are accelerating our efforts to build a more sustainable travel experience reducing single-use plastics on board. In early 2022, we refreshed our onboard product offerings, which are expected to reduce onboard single-use plastic consumption by approximately 4.9 million pounds per year.
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Supply chain**: In 2022, we integrated more than 50% of our top 200 Supply Chain vendors based on spend in EcoVadis’ ESG ratings platform. EcoVadis’ scorecard allows us to measure the impact of our supply chain, encourage vendors to take action to improve their scores and identify potential new vendors with strong sustainability ratings.
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Ground operations and facilities**: As of December 2022, 25% of our eligible core and critical ground equipment fleets necessary to service an aircraft at the gate such as baggage tractors, belt loaders, aircraft tow tractors, and other essential ground equipment ("eligible GSE") are electrified. Additionally, we have made investments to update airport facilities, modernizing the customer experience, while also creating more sustainable facilities incorporating technology to reduce our impact on the environment. We continue to work with airports throughout our network to add additional charging infrastructure to support our goal of electrifying 50% of our eligible GSE fleet by 2025.
Achieving these ambitious goals will require significant capital investment from manufacturers and other stakeholders. We are committed to engaging our stakeholders and building coalitions to increase production and consumption of alternative fuels, develop new technologies and help drive down costs. In 2022, we hired the airline industry's only C-Suite level Chief Sustainability Officer to lead the continuing development of our climate strategy and transition plan. We are members of aviation industry-specific and broader coalitions in an effort to achieve our climate goals and to influence climate and sustainability policy development.
Delta Air Lines, Inc. | 2022 10-K 7
Item 1. Business
Employee Matters
Human Capital and Commitment to Diversity, Equity and Inclusion
We believe that Delta people are our strongest competitive advantage, and the high-quality service that they provide sets us apart from other airlines. As of December 31, 2022, we had approximately 95,000 full-time employee equivalents, of which approximately 93,000 were based in the U.S. In 2022, as we continued to restore our business, we hired approximately 25,000 new full-time employees across our business, including pilots, flight attendants, and customer service agents.
Our principal human capital management objectives are to attract, retain and develop people who understand and are committed to delivering the "Delta Difference" that is core to our brand. To support these objectives, we have put in place programs that seek to:
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Reward our people through highly competitive total compensation designed to share Delta’s success with our employees who make it possible and promote teamwork and collaboration across the business.
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Achieve high performance by fostering our people’s holistic wellbeing including physical, emotional, social and financial wellbeing.
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Drive employees’ professional and community engagement.
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Prepare our employees for key roles and future leadership positions through a variety of training and development programs.
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Enhance our culture through efforts aimed at making our workplace more engaging, equitable and inclusive.
The health and safety of our employees is foundational to achieving these objectives. We have long led the airline industry in employee safety and seek to achieve world-class personal safety performance.
Our commitment to diversity, equity and inclusion is critical to effective human capital management at Delta. As a global airline, we are in the business of bringing people together, and we believe our business should reflect the diversity of our customer base. To achieve this goal, we seek diverse talent internally and externally in an effort to achieve broader representation throughout our organization. We also promote inclusion through education, training and development opportunities as well as by leveraging insights from our ten employee resource groups, which we refer to as business resource groups, totaling membership of more than 30,000 as of December 31, 2022. In 2022, we extended our enhanced inclusion training for the benefit of our new employees and invested in our leadership’s equity education and understanding with nearly 70% of officers having participated in a voluntary two-day racial equity workshop by the end of 2022. In addition, we are reviewing and revising systems, practices and policies in support of our commitment to diversity, equity and inclusion and with a focus on achieving equitable outcomes. Two key areas on which we are focused are (1) reinforcement of our diverse talent pipeline by, among other things, requiring hiring candidate slates and interview panels to reflect diversity and creating new pathways to certain roles by removing college degree requirements and introducing a skills-first talent approach, and (2) closing diversity gaps in senior leadership positions by increasing the representation of women, Black and other underrepresented racial and ethnic groups in those roles, including doubling the percentage of Black officers and director-level employees by 2025 as compared to 2020. In 2022, we made meaningful progress towards this goal by increasing the percentage of Black officers and director-level employees to 8.5% from 5.8% in 2020, although much work remains to be done to provide additional internal and external career pathways to senior leadership roles.
We believe that listening, engaging and connecting with employees furthers our human capital management objectives. We have historically done so primarily through our open-door policy, digital communication across all levels of the company, in-person events with senior management and company-wide and division-specific surveys to evaluate employee satisfaction. Members of senior management participate in regular company-wide town hall discussions with our employees and our senior executive leadership team regularly shares memos with all employees regarding our ongoing commitment to our people and our culture. We have also continued to conduct periodic employee surveys to seek feedback on engagement levels in general, our well-being programs, diversity, equity and inclusion efforts and our culture of safety.
Delta Air Lines, Inc. | 2022 10-K 8
Item 1. Business
Collective Bargaining
As of December 31, 2022, we had approximately 95,000 full-time equivalent employees, approximately 20% of whom were represented by unions.
| Domestic airline employees represented by collective bargaining agreements by group | ||||||||||||||
| Employee Group | Approximate Number of Employees Represented | Union | Date on which Collective Bargaining Agreement Becomes Amendable | |||||||||||
| Delta Pilots | 15,040 | ALPA | December 31, 2019 | |||||||||||
| Delta Flight Superintendents (Dispatchers) | 450 | PAFCA | November 1, 2024 | |||||||||||
| Endeavor Pilots | 1,750 | ALPA | January 1, 2029 | |||||||||||
| Endeavor Flight Attendants | 1,800 | AFA | March 31, 2027 |
We have been in mediated discussions with the representative of the Delta pilots regarding terms of their amendable collective bargaining agreement under the auspices of the National Mediation Board ("NMB"). In January 2023, a tentative agreement was ratified by ALPA’s Delta Master Executive Council ("MEC") and is subject to ratification by Delta’s pilots through a vote that is scheduled to close on March 1, 2023.
In addition to the domestic airline employee groups discussed above, approximately 200 refinery employees of our wholly owned subsidiary, Monroe Energy, LLC ("Monroe") are represented by the United Steel Workers under an agreement that expires on February 28, 2026. This agreement is governed by the National Labor Relations Act ("NLRA"), which generally allows either party to engage in self-help upon the expiration of the agreement. Certain of our employees outside the U.S. are represented by unions, work councils or other local representative groups.
Labor unions periodically engage in organizing efforts to represent various groups of our employees, including at our operating subsidiaries, that are not represented for collective bargaining purposes.
Fuel
Our results of operations are significantly impacted by changes in the price and availability of aircraft fuel. We purchase most of our aircraft fuel under contracts that establish the price based on various market indices and therefore do not provide material protection against price increases or assure the availability of our fuel supplies. We also purchase aircraft fuel on the spot market, from offshore sources and under contracts that permit the refiners to set the price. We are currently able to obtain adequate supplies of aircraft fuel, including fuel produced by Monroe or procured through the exchange of gasoline, diesel and other refined petroleum products ("non-jet fuel products") the refinery produces, and crude oil for Monroe's operations.
The following table shows our aircraft fuel consumption and costs:
| Fuel consumption and expense by year | ||||||||||||||
| Year | Gallons Consumed**(1)** (in millions) | Cost**(1)(2)** (in millions) | Average Price Per Gallon**(1)(2)** | Percentage of Total Operating Expense**(1)(2)** | ||||||||||
| 2022 | 3,412 | $ | 11,482 | $ | 3.36 | 24 | % | |||||||
| 2021 | 2,778 | $ | 5,633 | $ | 2.02 | 20 | % | |||||||
| 2020 | 1,935 | $ | 3,176 | $ | 1.64 | 11 | % |
(1)Includes the operations of our regional carriers operating under capacity purchase agreements.
(2)Includes the impact of fuel hedge activity, refinery segment results and carbon offset costs.
Monroe Energy
Our Monroe subsidiaries operate the Trainer refinery and related logistics assets located near Philadelphia, Pennsylvania. The facilities include pipelines and terminal assets that allow the refinery to supply jet fuel to our airline operations throughout the Northeastern U.S., including our New York hubs at LaGuardia and JFK. These companies are distinct from us, operating under their own management teams and with their own boards. We own Monroe as part of our strategy to mitigate the cost of the refining margin reflected in the price of jet fuel, as well as to maintain sufficiency of supply to our New York operations.
Delta Air Lines, Inc. | 2022 10-K 9
Item 1. Business
Refinery Operations. The facility is capable of refining approximately 200,000 barrels of crude oil per day and operations returned to pre-pandemic levels throughout 2022. Monroe sources domestic and foreign crude oil supply from a variety of providers.
Strategic Agreements. Monroe has agreements in place to exchange the non-jet fuel products the refinery produces with third parties for jet fuel consumed in our airline operations.
Environmental Sustainability. Delta is evaluating operational pathways for integrating Monroe into Delta's net zero future. Monroe’s sustainability ambitions include being one of the most energy efficient refineries in the country with the lowest energy intensity and GHG emissions on an absolute and per barrel basis. For example, Monroe is implementing a plan to replace steam driven turbines that currently power pumps at the facility with more efficient and reliable electric motors, which will reduce the amount of steam required from the facility’s natural gas-fired boilers. Monroe is also recovering and utilizing methane, a potent GHG, instead of flaring it to the atmosphere. Finally, in support of Delta’s 10% SAF goal, Monroe is evaluating the possibility of producing SAF and other renewable fuels at the Trainer refinery, although additional analyses must be conducted to determine economic and operational viability of various SAF production pathways.
Fuel Hedging Program
Our derivative contracts to hedge the financial risk from changing fuel prices are primarily related to Monroe’s inventory. We may utilize different contract and commodity types in this program and frequently test their economic effectiveness against our financial targets. We closely monitor the hedge portfolio and rebalance the portfolio based on market conditions, which may result in locking in gains or losses on hedge contracts prior to their settlement dates.
Competition
The airline industry is highly competitive, marked by significant competition with respect to routes, fares, schedules (both timing and frequency), operational reliability, services, products, customer service and loyalty programs. The industry has evolved through mergers and new entry, both domestically and internationally, and evolution in international alliances. Consolidation in the airline industry, the presence of subsidized government-sponsored international carriers, changes in international alliances and the creation of immunized joint ventures have altered, and will continue to alter, the competitive landscape in the industry, resulting in the formation of airlines and alliances with significant financial resources, extensive global networks and competitive cost structures.
Domestic
Our domestic operations are subject to significant competition from traditional network carriers, including American Airlines and United Airlines, national point-to-point carriers, including Alaska Airlines, JetBlue Airways and Southwest Airlines, and other discount or ultra-low-cost carriers, including Spirit Airlines, Frontier Airlines, Allegiant Air, Breeze Airways and Avelo Airlines, some of which may have lower costs than we do and provide service at low fares to destinations served by Delta. In particular, we face significant competition at our domestic hubs and key airports either directly at those airports or at the hubs of other airlines that are located in close proximity. We also face competition in small- to medium-sized markets from regional jet operations of other carriers.
International
Our international operations are subject to competition from both foreign and domestic carriers, including from point-to-point carriers on certain international routes. Through alliance and other marketing and codesharing agreements with foreign carriers, U.S. carriers have increased their ability to sell international transportation, such as services to and beyond traditional European, Asian and Latin American gateway cities. Similarly, foreign carriers have obtained increased access to interior U.S. passenger traffic beyond traditional U.S. gateway cities through these relationships.
In particular, several joint ventures among U.S. and foreign carriers, including several of our joint ventures as well as those of our competitors, have received grants of antitrust immunity allowing the participating carriers to coordinate networks, schedules, pricing, sales and inventory. In addition, alliances formed by domestic and foreign carriers, including SkyTeam, the Star Alliance (among United Airlines, Lufthansa German Airlines, Air Canada and others) and the oneworld alliance (among American Airlines, British Airways, Qantas and others) have enhanced competition in international markets.
Delta Air Lines, Inc. | 2022 10-K 10
Item 1. Business
Regulatory Matters
The DOT and the Federal Aviation Administration (the "FAA") exercise regulatory authority over air transportation in the U.S. The DOT has authority to issue certificates of public convenience and necessity required for airlines to provide air transportation. An air carrier that the DOT finds fit, willing, and able to perform the proposed service is given authority to operate domestic and international air transportation (including the carriage of passengers and cargo), as applicable. Since the passage of the Airline Industry Deregulation Act in 1978, airlines have generally been free to launch or terminate service to U.S airports without restriction, except with respect to certain slot-controlled and schedule-facilitated airports, as well as certain constraints related to service to small communities governed by the "Essential Air Services" program.
The DOT has jurisdiction over certain economic and consumer protection matters, such as unfair or deceptive practices and methods of competition, advertising, denied boarding compensation, baggage liability and disabled passenger transportation. The DOT also has authority to review certain joint venture agreements between domestic and international carriers. The DOT engages in regulation of economic matters such as transactions involving allocation of "slots" or similar regulatory mechanisms which limit the rights of carriers to conduct operations at airports where such mechanisms are in place. The FAA has primary responsibility for matters relating to the safety of air carrier flight operations, including airline operating certificates, control of navigable air space, flight personnel, aircraft certification and maintenance and other matters affecting air safety.
Authority to operate international routes and international codesharing arrangements is regulated by the DOT and by the governments of the foreign countries involved. International certificate authorities are also subject to the approval of the U.S. President for conformance with national defense and foreign policy objectives.
The Transportation Security Administration and the U.S. Customs and Border Protection, each a division of the Department of Homeland Security, are responsible for certain civil aviation security matters, including passenger and baggage screening at U.S. airports and international passenger prescreening prior to entry into or departure from the U.S.
Airlines are also subject to various other federal, state, local and foreign laws and regulations. For example, the U.S. Department of Justice has jurisdiction over some airline competition matters. The U.S. Postal Service has authority over certain aspects of the transportation of mail. Labor relations in the airline industry, as discussed below, are generally governed by the Railway Labor Act with oversight by the NMB. Environmental matters are regulated by various federal, state, local and foreign governmental entities. Privacy of passenger and employee data is regulated by domestic and foreign laws and regulations.
Fares and Rates
Airlines set ticket prices in all domestic and most international city-pairs with minimal governmental regulation, and the industry is characterized by significant price competition. Certain international fares and rates are subject to the jurisdiction of the DOT and the governments of the foreign countries involved. Many of our tickets are sold by travel agents, and fares are subject to commissions, overrides and discounts paid to travel agents, brokers and wholesalers.
Route Authority
Our flight operations are authorized by certificates of public convenience and necessity and also by exemptions and limited-entry frequency awards issued by the DOT. The requisite approvals of other governments for international operations are controlled by bilateral agreements (and a multilateral agreement in the case of the U.S. and the European Union ("EU")) with, or permits or approvals issued by, foreign countries. Because international air transportation is governed by bilateral or other agreements between the U.S. and the foreign country or countries involved, changes in U.S. or foreign government aviation policies could result in the alteration or termination of such agreements, diminish the value of our international route authorities or otherwise affect our international operations. Bilateral agreements between the U.S. and various foreign countries that we serve are subject to renegotiation from time to time. The U.S. government has negotiated "Open Skies" agreements with many countries, which allow unrestricted access between the U.S. and these foreign markets.
Certain of our international route authorities are subject to periodic renewal requirements. We request extension of these authorities when and as appropriate. While the DOT usually renews temporary authorities on routes where the authorized carrier is providing a reasonable level of service, there is no assurance this practice will continue in general or with respect to a specific renewal. Dormant route authorities may not be renewed in some cases, especially where another U.S. carrier indicates a willingness to provide service.
Delta Air Lines, Inc. | 2022 10-K 11
Item 1. Business
Airport Access
Operations at three major domestic airports and certain foreign airports that we serve are regulated by governmental entities through allocations of "slots" or similar regulatory mechanisms. Each slot represents the authorization to land at or take off from the particular airport during a specified time period.
In the U.S., the FAA currently regulates the allocation of slots, slot exemptions, operating authorizations or similar capacity allocation mechanisms at Reagan National in Washington, D.C. and LaGuardia and JFK in the New York City area. Our operations at these airports generally require the allocation of slots or analogous regulatory authorizations. Similarly, our operations at London's Heathrow airport, Tokyo's Haneda airport and other international airports are regulated by local slot coordinators pursuant to the International Air Transport Association's Worldwide Scheduling Guidelines and applicable local law. We currently have sufficient slots or analogous authorizations to operate our existing flights, and we have generally been able to obtain the rights to expand our operations and to change our schedules. There is no assurance, however, that we will be able to do so in the future because, among other reasons, such allocations are subject to changes in governmental policies.
Airline Labor Regulation
In the U.S., airlines and labor unions are governed by the Railway Labor Act. Under the Railway Labor Act, a labor union seeking to represent an unrepresented craft or class of employees is required to file with the NMB an application alleging a representation dispute, along with authorization cards signed by at least 50% of the employees in that craft or class. The NMB then investigates the dispute and, if it finds the labor union has obtained a sufficient number of authorization cards, conducts an election to determine whether to certify the labor union as the collective bargaining representative of that craft or class. A labor union will be certified as the representative of the employees in a craft or class if more than 50% of votes cast are for representation. A certified labor union would then commence negotiations toward a collective bargaining agreement with the employer.
Under the Railway Labor Act, a collective bargaining agreement between an airline and a labor union does not expire, but instead becomes amendable as of a stated date. Either party may request that the NMB appoint a federal mediator to participate in the negotiations for a new or amended agreement. If no agreement is reached in mediation, the NMB may determine, at any time, that an impasse exists and offer binding arbitration. If either party rejects binding arbitration, a 30-day "cooling off" period begins. At the end of this 30-day period, the parties may engage in "self-help," unless the U.S. President appoints a Presidential Emergency Board ("PEB") to investigate and report on the dispute. The appointment of a PEB maintains the "status quo" for an additional 60 days. If the parties do not reach agreement during this period, the parties may then engage in self-help. Self-help includes, among other things, a strike by the union or the imposition of proposed changes to the collective bargaining agreement by the airline. The U.S. Congress and the President have the authority to prevent self-help by enacting legislation that, among other things, imposes a settlement on the parties.
Environmental Regulation
Environmental Compliance Obligations. Our operations are subject to numerous international, federal, state and local laws and regulations governing protection of the environment, including regulation of greenhouse gases and other air emissions, noise reduction, water discharges, aircraft drinking water, storage and use of petroleum products and other regulated substances, and the management and disposal of hazardous waste, substances and materials.
We are also subject to certain environmental laws and contractual obligations governing the management and release of regulated substances, which may require the investigation and remediation of affected sites. Soil and/or ground water impacts have been identified at certain of our current or former leaseholds at several domestic airports. To address these impacts, we have a program in place to investigate and, if appropriate, remediate these sites. Although the ultimate outcome of these matters cannot be predicted with certainty, we believe that the resolution of these matters will not have a material adverse effect on our Consolidated Financial Statements.
In 2022 the U.S. Environmental Protection Agency (the "EPA") proposed regulations to define certain per- and polyfluoroalkyl substances ("PFAS") as "hazardous substances" under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). Numerous states have adopted regulations governing these substances as well. PFAS are used in a wide variety of consumer and industrial products, including the firefighting foams used to extinguish fuel-based fires at airports and refineries. The EPA's proposed rule, once finalized, could subject airports, airlines, and refineries, among others, to potential liability for cleanup of historical PFAS contamination associated with use of PFAS-containing firefighting foam. The ultimate impact and associated cost to Delta of this rulemaking cannot be predicted at this time.
Delta Air Lines, Inc. | 2022 10-K 12