Item 6. (RESERVED)

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, 2022. Discussion and analysis of 2022 and year-to-year comparisons between 2023 and 2022 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, 2023. 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.

2024 Financial Overview

Our 2024 operating income was $6.0 billion, an improvement of $474 million compared to 2023, and operating income, adjusted (a non-GAAP financial measure) was $6.0 billion, a decrease of $318 million compared to 2023. Operating income, adjusted in 2023 excluded one-time pilot agreement expenses and other items. The changes in operating income and operating income, adjusted are primarily resulting from increases in both revenue and operating expenses as described below. As a result of our strong performance in 2023 and 2024, we paid profit sharing of $1.4 billion in February 2024 to our employees and will pay another $1.4 billion in February 2025 in recognition of these achievements.

Revenue. Compared to 2023, our 2024 operating revenue increased $3.6 billion, or 6%, primarily due to a 6% increase in capacity driven by continued strength in demand for domestic and international travel and premium products, as well as an increase in revenue related to refinery sales to third parties. Total revenue, adjusted (a non-GAAP financial measure) increased in 2024 by $2.3 billion, or 4.3%, compared to 2023. Adjustments were to exclude revenue related to refinery sales to third parties. In July 2024, our operations were significantly disrupted by the CrowdStrike-caused outage. We estimate that this disruption led to a direct revenue impact of approximately $380 million related to approximately 7,000 flight cancellations over five days, which reduced our expected year-over-year capacity growth by approximately 0.4 percentage points during 2024.

Operating Expense. Total operating expense increased $3.1 billion, or 6%, compared to 2023, primarily resulting from higher employee-related costs from increased wages and related expenses, higher volume-related expenses associated with the 6% increase in capacity and an increase in expenses related to refinery sales to third parties. The CrowdStrike-caused outage and operational recovery resulted in approximately $170 million of additional operating expenses primarily due to customer expense reimbursements and crew-related costs. Fuel expense was approximately $50 million lower than it would have been as a result of the flight cancellations. Total operating expense, adjusted (a non-GAAP financial measure) increased $2.7 billion, or 5%, compared to 2023. Current year adjustments were primarily to exclude expenses related to refinery sales to third parties, while prior year adjustments also excluded the pilot agreement and related expenses.

Our total operating cost per available seat mile ("CASM") of 19.30 cents was comparable to 2023, primarily due to lower fuel expense and a 6% increase in capacity offset by higher expenses associated with the increase in capacity and 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 2.8% to 13.54 cents compared to 2023.

Non-Operating Results. Total non-operating expense was $1.3 billion in 2024, compared to total non-operating income of $87 million in 2023, primarily due to mark-to-market gains on certain of our equity investments in 2023 partially offset by lower expenses in 2024 associated with our debt reduction initiatives.

Cash Flow. During 2024, operating activities generated $8.0 billion, primarily from ticket sales and the sale of SkyMiles to our partners. Total cash sales of SkyMiles to American Express were $7.4 billion during 2024, an increase of approximately 8% compared to 2023. Investing activities resulted in net cash outflows of approximately $3.7 billion, primarily for $5.1 billion of capital expenditures, partially offset by $1.1 billion of net redemptions of short-term investments. After adjusting for certain activities, these results generated $3.4 billion of free cash flow (a non-GAAP financial measure) in 2024.

Also, during 2024 we had cash outflows of approximately $4.0 billion primarily related to repayment of our debt and finance leases, including approximately $1.1 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, 2024 was $6.1 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.

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 $3.6 billion, or 6%, compared to 2023 related to a 6% increase in capacity resulting from continued strength in demand for domestic and international travel, particularly for our premium products (including Delta One, First Class, Delta Premium Select and Delta Comfort+), as well as increased revenue related to refinery sales to third parties and loyalty travel awards. Total revenue per available seat mile ("TRASM") remained flat as revenues increased at the same rate as capacity.

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 2024 decreased 1% compared to 2023 due to a 4% increase in revenue on a 5% increase in capacity.

Domestic revenue in 2024 was above 2023 levels as we experienced strong demand across the domestic network. We generated higher growth in premium products revenue 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.

Item 7. MD&A - Results of Operations

International

International passenger revenue for 2024 increased 5% with capacity up 8% compared to 2023. Revenue in each international region increased in 2024, with the Pacific growing at the greatest rate as we continue to restore capacity in the region.

Demand for transatlantic travel remained at high levels throughout 2024 with revenue increasing slightly on flat capacity compared to 2023. Revenue growth in the Atlantic was led by demand for travel to European leisure destinations and our premium product offerings.

Latin America region revenue increased during 2024 compared to 2023, due to strong demand for leisure destinations in South America and the Caribbean on a 15% increase in capacity. We continued to build on the strength of our joint venture with LATAM in South America through additional routes, greater network connectivity, and a more streamlined airport experience.

The Pacific region benefited from improved demand for travel to the region, particularly to South Korea and Japan, on 32% increased capacity. Our performance in South Korea benefited from the strength of our joint venture partnership with Korean Air, which enables passengers to more seamlessly connect to over 80 destinations in Asia. Revenue from flights to Japan increased due to higher demand for travel from the United States due in part to weakness in the Japanese Yen compared to the U.S. dollar.

Other Revenue

Refinery. This represents refinery sales of non-jet fuel products to third parties. These sales increased $1.3 billion compared to 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-air travel and other awards. These revenues are mainly driven by customer spend on American Express cards and new cardholder acquisitions. Revenues from our relationship with American Express increased compared to 2023 driven by co-brand card spend growth and card account acquisitions.

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

Miscellaneous. This is primarily composed of revenues related to lounge access, including access provided to certain American Express cardholders, codeshare agreements and certain other commercial relationships. The increase in revenues was primarily driven by codeshare agreements and other commercial relationships.