Item 6. (RESERVED)

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Item 7. MD&A

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

This section of Form 10-K does not address certain items regarding the year ended December 31, 2021. Discussion and analysis of 2021 and year-to-year comparisons between 2022 and 2021 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, 2022. 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.

2023 Financial Overview

Our 2023 operating income was $5.5 billion, an improvement of $1.9 billion compared to 2022, while operating income, adjusted (a non-GAAP financial measure) which excludes one-time pilot agreement expenses and other items was $6.3 billion, an increase of $2.8 billion compared to 2022. Operating income and operating income, adjusted increased primarily from increases in revenue as described below.

Revenue. Compared to 2022, our 2023 operating revenue increased $7.5 billion, or 15%, primarily due to a 17% increase in capacity driven by an increase in demand for international travel and continuing strength in demand for domestic travel and premium products. Total revenue, adjusted (a non-GAAP financial measure) increased in 2023 by $9.1 billion, or 20%, compared to 2022. Adjustments were primarily to exclude revenue related to refinery sales to third parties.

Operating Expense. Total operating expense increased $5.6 billion, or 12%, compared to 2022, primarily resulting from higher employee related costs from increased wages and profit sharing, pilot agreement and related expenses and higher volume-related expenses associated with the 17% increase in capacity, partially offset by lower 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 $6.3 billion, or 15%, compared to 2022. Adjustments were primarily to exclude expenses related to refinery sales to third parties and the pilot agreement and related expenses.

Our total operating cost per available seat mile ("CASM") decreased 4% compared to 2022 to 19.31 cents, primarily due to a 17% increase in 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), which excludes fuel, expenses related to refinery sales to third parties, and other items, increased 2.3% to 13.17 cents.

Non-Operating Results. Total non-operating income was $87 million in 2023 compared to total non-operating expense of $1.7 billion in 2022 primarily due to mark-to-market gains on certain of our equity investments and lower interest expense as a result of our debt reduction initiatives, partially offset by increased pension related expenses.

Cash Flow. During 2023, operating activities provided cash flows of $6.5 billion, primarily from ticket sales. Investing activities resulted in net cash outflows of approximately $3.1 billion, primarily for $5.3 billion of capital expenditures, partially offset by $2.2 billion of net redemptions of short-term investments. After adjusting for the pilot agreement payment and certain other activities, these results generated $2.0 billion of free cash flow (a non-GAAP financial measure) in 2023.

Also, during 2023 we had cash outflows of approximately $4.1 billion related to repayments of our debt and finance leases, including approximately $2.0 billion for early repayments and the remainder from scheduled maturities. Our cash, cash equivalents, short-term investments and aggregate principal amount committed and available to be drawn under our revolving credit facilities ("liquidity") at December 31, 2023 was $6.8 billion.

The non-GAAP financial measures of operating income, adjusted, total revenue, adjusted, total operating expense, adjusted, CASM-Ex and free cash flow used above are defined and reconciled in "Supplemental Information" below.

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Item 7. MD&A - Results of Operations

Results of Operations

Operating Revenue

(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 $7.5 billion, or 15%, compared to 2022 due primarily to a 17% increase in capacity driven by an increase in demand for international travel and continuing strength in demand for domestic travel, with growth in revenue from premium products outpacing main cabin. This increase was partially offset by lower third-party refinery sales recorded in other revenue. Total revenue per available seat mile ("TRASM") decreased 2% in large part as a result of the decline in third-party refinery sales.

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

Passenger Revenue by Geographic Region

Domestic

Domestic passenger unit revenue ("PRASM") for 2023 increased 2% compared to 2022 due to a 12% increase in revenue on a 10% increase in capacity and a slight increase in load factor.

Domestic revenue in 2023 was above 2022 levels as we experienced strong revenue results across the domestic network, with coastal hub markets such as New York and Boston improving significantly compared to the prior year, domestic business travel revenue improving and a 10% increase in domestic capacity compared to 2022. We believe spending patterns for services are returning to historical levels compared to spending on goods. We also experienced higher growth in premium product revenue (including Delta One, First Class, Delta Premium Select and Delta Comfort+) compared to main cabin with the delivery of new aircraft that include more premium seat capacity and an increase in yield in premium products compared to main cabin, as we see more consumers choosing these premium offerings. In 2024, we expect moderate capacity growth of single digits.

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Item 7. MD&A - Results of Operations

International

International passenger revenue for 2023 increased 49% with capacity up 31% compared to 2022. Passenger revenue increased in each geographic region with the Atlantic region experiencing the largest absolute improvement, as travel to many European destinations increased.

Consumers showed a strong desire for transatlantic travel, driving higher revenue and passenger unit revenue during 2023 on 30% capacity growth compared to 2022. This has been led by demand for travel to leisure destinations in Europe and premium products.

Latin America region revenue increased during 2023 compared to 2022, due to strong demand for leisure destinations in South America and the Caribbean on a 16% increase in capacity. In addition, during the first year of our joint venture with LATAM, we have streamlined travel between North and South America while expanding connections in each of our key hub airports.

The Pacific region benefited from improved demand for travel to the region, particularly to Japan, on 75% increased capacity following the lifting of pandemic-related travel restrictions and the performance of our joint venture with Korean Air.

Other Revenue

Refinery. This represents refinery sales to third parties. These sales decreased $1.6 billion compared to 2022. The decrease in third-party refinery sales resulted from lower pricing and a turnaround which was completed between September and November 2023. 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. This relates to revenues from brand usage by third parties and other performance obligations embedded in miles sold, as well as redemption of miles for non-travel awards. These revenues are mainly driven by customer spend on American Express cards and new cardholder acquisitions. Revenues from our relationship with American Express increased compared to 2022 driven by co-brand card spend growth.

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

Miscellaneous. This is primarily composed of lounge access, including access provided to certain American Express cardholders, and codeshare revenues. The increase in miscellaneous is primarily due to increased revenue from Delta Sky Club access.

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