Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 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

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 ☑ No ☐

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 ☑ No ☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Number of shares outstanding by each class of common stock, as of June 30, 2022:

Common Stock, $0.0001 par value - 641,197,918 shares outstanding

This document is also available through our website at http://ir.delta.com/.

Table of Contents
			Page
Forward Looking Statements			1
Report of Independent Registered Public Accounting Firm			2
Part I. Financial Information
Item 1. Financial Statements			3
Consolidated Balance Sheets			3
Condensed Consolidated Statements of Operations and Comprehensive Loss			4
Condensed Consolidated Statements of Cash Flows			5
Consolidated Statements of Stockholders' Equity			6
Notes to the Condensed Consolidated Financial Statements			7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3. Quantitative and Qualitative Disclosures About Market Risk			37
Item 4. Controls and Procedures			37
Part II. Other Information
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38
Item 6. Exhibits			39
Signature			40

Forward Looking Statements

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-Q (or otherwise made by us or on our behalf) that are not historical facts, including statements about our estimates, expectations, beliefs, intentions, projections, goals, aspirations, commitments 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 "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 ("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 except as required by law.

Delta Air Lines, Inc. June 2022 Form 10-Q 1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Delta Air Lines, Inc.

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of Delta Air Lines, Inc. (the Company) as of June 30, 2022, the related condensed consolidated statements of operations and comprehensive income/(loss) and consolidated statements of stockholders' equity for the three-month and six-month periods ended June 30, 2022 and 2021, the condensed consolidated statements of cash flows for the six-month periods ended June 30, 2022 and 2021, and the related notes (collectively referred to as the "condensed consolidated interim financial statements"). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2021, the related consolidated statements of operations, comprehensive income/(loss), cash flows, and stockholders' equity for the year then ended, and the related notes (not presented herein); and in our report dated February 11, 2022, we expressed an unqualified audit opinion on those Consolidated Financial Statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

			/s/ Ernst & Young LLP
Atlanta, Georgia
July 13, 2022

Delta Air Lines, Inc. June 2022 Form 10-Q 2

Financial Statements

DELTA AIR LINES, INC.

Consolidated Balance Sheets

(Unaudited)

(in millions, except share data)			June 30, 2022						December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents			$	9,221					$	7,933
Short-term investments			1,549						3,386
Accounts receivable, net of allowance for uncollectible accounts of $41 and $50			3,093						2,404
Fuel, expendable parts and supplies inventories, net of allowance for obsolescence of $152 and $176			1,734						1,098
Prepaid expenses and other			1,716						1,119
Total current assets			17,313						15,940
Noncurrent Assets:
Property and equipment, net of accumulated depreciation and amortization of $19,338 and $18,671			30,519						28,749
Operating lease right-of-use assets			7,189						7,237
Goodwill			9,753						9,753
Identifiable intangibles, net of accumulated amortization of $897 and $893			5,997						6,001
Equity investments			1,771						1,712
Deferred income taxes, net			1,219						1,294
Other noncurrent assets			1,044						1,773
Total noncurrent assets			57,492						56,519
Total assets			$	74,805					$	72,459
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of debt and finance leases			$	1,936					$	1,782
Current maturities of operating leases			726						703
Air traffic liability			9,664						6,228
Accounts payable			5,353						4,240
Accrued salaries and related benefits			2,565						2,457
Loyalty program deferred revenue			2,994						2,710
Fuel card obligation			1,100						1,100
Other accrued liabilities			1,986						1,746
Total current liabilities			26,324						20,966
Noncurrent Liabilities:
Debt and finance leases			22,903						25,138
Noncurrent air traffic liability			250						130
Pension, postretirement and related benefits			5,654						6,035
Loyalty program deferred revenue			4,763						4,849
Noncurrent operating leases			7,006						7,056
Other noncurrent liabilities			4,094						4,398
Total noncurrent liabilities			44,670						47,606
Commitments and Contingencies
Stockholders' Equity:
Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 651,700,403 and 649,720,387 shares issued			—						—
Additional paid-in capital			11,485						11,447
Accumulated deficit			(353)						(148)
Accumulated other comprehensive loss			(7,008)						(7,130)
Treasury stock, at cost, 10,502,485 and 9,752,872 shares			(313)						(282)
Total stockholders' equity			3,811						3,887
Total liabilities and stockholders' equity			$	74,805					$	72,459
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Delta Air Lines, Inc. June 2022 Form 10-Q 3

Financial Statements

DELTA AIR LINES, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss)

(Unaudited)

			Three Months Ended June 30,												Six Months Ended June 30,
(in millions, except per share data)			2022						2021						2022						2021
Operating Revenue:
Passenger			$	10,958					$	5,339					$	17,865					$	8,087
Cargo			272						251						561						466
Other			2,594						1,536						4,747						2,723
Total operating revenue			13,824						7,126						23,173						11,276
Operating Expense:
Salaries and related costs			2,955						2,328						5,782						4,530
Aircraft fuel and related taxes			3,223						1,487						5,315						2,504
Ancillary businesses and refinery			1,718						939						3,100						1,645
Contracted services			791						570						1,544						1,089
Landing fees and other rents			546						460						1,050						953
Regional carrier expense			528						403						1,018						804
Depreciation and amortization			510						501						1,016						993
Aircraft maintenance materials and outside repairs			522						287						988						581
Passenger commissions and other selling expenses			526						222						838						332
Passenger service			369						175						644						294
Aircraft rent			127						104						249						208
Profit sharing			54						—						54						—
Government grant recognition			—						(1,504)						—						(2,689)
Other			436						338						840						614
Total operating expense			12,305						6,310						22,438						11,858
Operating Income/(Loss)			1,519						816						735						(582)
Non-Operating Expense:
Interest expense, net			(269)						(338)						(543)						(700)
Equity method results			(12)						—						(12)						(54)
Gain/(loss) on investments, net			(221)						211						(368)						473
Loss on extinguishment of debt			(41)						(26)						(66)						(83)
Pension and related benefit/(expense)			73						119						145						226
Miscellaneous, net			(16)						(6)						(58)						(19)
Total non-operating expense, net			(486)						(40)						(902)						(157)
Income/(Loss) Before Income Taxes			1,033						776						(167)						(739)
Income Tax (Provision)/Benefit			(298)						(124)						(38)						214
Net Income/(Loss)			$	735					$	652					$	(205)					$	(525)
Basic Earnings/(Loss) Per Share			$	1.15					$	1.02					$	(0.32)					$	(0.82)
Diluted Earnings/(Loss) Per Share			$	1.15					$	1.02					$	(0.32)					$	(0.82)
Comprehensive Income/(Loss)			$	798					$	730					$	(83)					$	(369)
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Delta Air Lines, Inc. June 2022 Form 10-Q 4

Financial Statements

DELTA AIR LINES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

			Six Months Ended June 30,
(in millions)			2022						2021
Net Cash Provided by Operating Activities			$	4,306					$	2,557
Cash Flows from Investing Activities:
Property and equipment additions:
Flight equipment, including advance payments			(1,879)						(527)
Ground property and equipment, including technology			(845)						(672)
Purchase of short-term investments			(474)						(5,587)
Redemption of short-term investments			2,289						6,494
Purchase of equity investments			(100)						—
Other, net			108						258
Net cash used in investing activities			(901)						(34)
Cash Flows from Financing Activities:
Proceeds from long-term obligations			—						1,902
Payments on debt and finance lease obligations			(2,395)						(3,133)
Other, net			(27)						111
Net cash used in financing activities			(2,422)						(1,120)
Net Increase in Cash, Cash Equivalents and Restricted Cash Equivalents			983						1,403
Cash, cash equivalents and restricted cash equivalents at beginning of period			8,569						10,055
Cash, cash equivalents and restricted cash equivalents at end of period			$	9,552					$	11,458
Non-Cash Transactions:
Flight and ground equipment acquired under finance leases			$	81					$	752
Right-of-use assets acquired under operating leases			324						259
Operating leases converted to finance leases			140						26
Equity investments and other financings			330						240
The following table provides a reconciliation of cash, cash equivalents and restricted cash equivalents reported within the Consolidated Balance Sheets to the total of the same such amounts shown above:
			June 30,
(in millions)			2022						2021
Current assets:
Cash and cash equivalents			$	9,221					$	10,357
Restricted cash included in prepaid expenses and other			154						172
Noncurrent assets:
Restricted cash included in other noncurrent assets			177						929
Total cash, cash equivalents and restricted cash equivalents			$	9,552					$	11,458
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Delta Air Lines, Inc. June 2022 Form 10-Q 5

Financial Statements

DELTA AIR LINES, INC.

Consolidated Statements of Stockholders' Equity

(Unaudited)

			Common Stock						Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Treasury Stock
(in millions, except per share data)			Shares			Amount			Shares			Amount			Total
Balance at December 31, 2021			650			$	—		$	11,447		$	(148)		$	(7,130)		10			$	(282)		$	3,887
Net loss			—			—			—			(940)			—			—			—			(940)
Other comprehensive income			—			—			—			—			59			—			—			59
Common stock issued for employee equity awards(1)			2			—			15			—			—			1			(30)			(15)
Balance at March 31, 2022			652			$	—		$	11,462		$	(1,088)		$	(7,071)		11			$	(312)		$	2,991
Net income			—			—			—			735			—			—			—			735
Other comprehensive income			—			—			—			—			63			—			—			63
Common stock issued for employee equity awards(1)			—			—			23			—			—			—			(1)			22
Balance at June 30, 2022			652			$	—		$	11,485		$	(353)		$	(7,008)		11			$	(313)		$	3,811

(1)Treasury shares were withheld for payment of taxes, at a weighted average price per share of $41.00 and $38.11 in the March 2022 quarter and June 2022 quarter, respectively.

			Common Stock						Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Treasury Stock
(in millions, except per share data)			Shares			Amount			Shares			Amount			Total
Balance at December 31, 2020			647			$	—		$	11,259		$	(428)		$	(9,038)		9			$	(259)		$	1,534
Net loss			—			—			—			(1,177)			—			—			—			(1,177)
Other comprehensive income			—			—			—			—			78			—			—			78
Common stock issued for employee equity awards(1)			2			—			23			—			—			1			(20)			3
Government grant warrant issuance			—			—			44			—			—			—			—			44
Balance at March 31, 2021			649			$	—		$	11,326		$	(1,605)		$	(8,960)		10			$	(279)		$	482
Net income			—			—			—			652			—			—			—			652
Other comprehensive income			—			—			—			—			78			—			—			78
Common stock issued for employee equity awards(1)			1			—			28			—			—			—			(1)			27
Government grant warrant issuance			—			—			42			—			—			—			—			42
Balance at June 30, 2021			650			$	—		$	11,396		$	(953)		$	(8,882)		10			$	(280)		$	1,281

(1)Treasury shares were withheld for payment of taxes, at a weighted average price per share of $38.35 and $46.21 in the March 2021 quarter and June 2021 quarter, respectively.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Delta Air Lines, Inc. June 2022 Form 10-Q 6

Notes to the Consolidated Financial Statements

DELTA AIR LINES, INC.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Delta Air Lines, Inc. and our consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by GAAP for complete financial statements. As a result, this Form 10-Q should be read in conjunction with the Consolidated Financial Statements and accompanying Notes in our Form 10-K for the year ended December 31, 2021.

Management believes the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including normal recurring items, considered necessary for a fair statement of results for the interim periods presented.

Due to impacts from the COVID-19 pandemic and the ongoing recovery, seasonal variations in the demand for air travel, the volatility of aircraft fuel prices and other factors, operating results for the three and six months ended June 30, 2022 are not necessarily indicative of operating results for the entire year.

We reclassified certain prior period amounts to conform to the current period presentation. Unless otherwise noted, all amounts disclosed are stated before consideration of income taxes.

Recent Accounting Standards

Standards Effective in Future Years

Fair Value of Equity Investments. In 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions." Under this standard, a contractual restriction on the sale of an equity security is not considered in measuring the security's fair value. The standard also requires certain disclosures for equity securities that are subject to contractual restrictions. The ASU becomes effective January 1, 2024, and we are evaluating the potential impact of this standard on our investments.

NOTE 2. REVENUE RECOGNITION

Passenger Revenue

			Three Months Ended June 30,									Six Months Ended June 30,
(in millions)			2022			2021						2022			2021
Ticket			$	9,773		$	4,553					$	15,759		$	6,830
Loyalty travel awards			744			428						1,287			669
Travel-related services			441			358						819			588
Total passenger revenue			$	10,958		$	5,339					$	17,865		$	8,087

Ticket

We recognized approximately $3.3 billion and $1.4 billion in passenger revenue during the six months ended June 30, 2022 and 2021, respectively, that had been recorded in our air traffic liability balance at the beginning of those periods.

Delta Air Lines, Inc. June 2022 Form 10-Q 7

Notes to the Consolidated Financial Statements

In order to provide our customers more flexibility and time to plan or rebook their travel, we announced in January 2022 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. The air traffic liability classified as current as of June 30, 2022 represents our estimate of tickets and travel credits to be used within one year. We will continue to monitor our customers' travel behavior and may adjust our estimates in the future.

We estimate the value of tickets that will expire unused (“ticket breakage”) and recognize the related revenue at the scheduled flight date. Our ticket breakage estimates are primarily based on historical experience, ticket contract terms and customers’ travel behavior. Given the impact of the COVID-19 pandemic on customer behavior and changes made in ticket validity terms, as well as the elimination of change fees for most tickets, our estimates of revenue that will be recognized from the air traffic liability for unused tickets may vary in future periods.

Loyalty Travel Awards

Our SkyMiles loyalty program allows customers to earn mileage credits ("miles") by flying on Delta, Delta Connection and other airlines that participate in the loyalty program. Customers can also earn miles through participating companies, such as credit card companies, hotels, car rental agencies and ridesharing companies, who purchase miles from us. Our most significant contract to sell miles relates to our co-brand credit card relationship with American Express. During the six months ended June 30, 2022 and 2021, total cash sales from marketing agreements related to our loyalty program were $2.6 billion and $1.8 billion, respectively, which are allocated to travel and other performance obligations. Loyalty travel awards revenue is related to the redemption of miles for air travel.

Current Activity of the Loyalty Program. Miles are combined in one homogeneous pool and are not separately identifiable. Therefore, revenue is comprised of miles that were part of the loyalty program deferred revenue balance at the beginning of the period as well as miles that were issued during the period. The timing of mile redemptions can vary widely; however, the majority of miles have historically been redeemed within two years of being earned.

The table below presents the activity of the current and noncurrent loyalty program deferred revenue and includes miles earned through travel and miles sold to participating companies, which are primarily through marketing agreements.

Loyalty program activity
(in millions)						2022			2021
Balance at January 1						$	7,559		$	7,182
Miles earned						1,558			915
Miles redeemed for air travel						(1,287)			(669)
Miles redeemed for non-air travel and other						(73)			(27)
Balance at June 30						$	7,757		$	7,401

Travel-Related Services

Travel-related services are primarily composed of services performed in conjunction with a passenger’s flight and include baggage fees, on-board sales and administrative fees.

Other Revenue

			Three Months Ended June 30,									Six Months Ended June 30,
(in millions)			2022			2021						2022			2021
Refinery			$	1,514		$	777					$	2,700		$	1,317
Loyalty program			650			439						1,221			807
Ancillary businesses			206			185						416			371
Miscellaneous			224			135						410			228
Total other revenue			$	2,594		$	1,536					$	4,747		$	2,723

Delta Air Lines, Inc. June 2022 Form 10-Q 8

Notes to the Consolidated Financial Statements

Refinery. This represents refinery sales to third parties, which are at or near cost; accordingly, the recorded margin on these sales is de minimis.

Loyalty Program. This relates to brand usage by third parties and other performance obligations embedded in miles sold, including redemption of miles for non-air travel and other awards. These revenues are mainly included within the total cash sales from marketing agreements, discussed above.

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

Miscellaneous. This is primarily composed of revenues related to lounge access, including access provided to certain American Express cardholders, and codeshare agreements.

Revenue by Geographic Region

Operating revenue for the airline segment is recognized in a specific geographic region based on the origin, flight path and destination of each flight segment. A significant portion of the refinery segment's revenues typically consists of fuel sales to support the airline, which is eliminated in the Condensed Consolidated Financial Statements. The remaining operating revenue for the refinery segment is included in the domestic region. Our passenger and operating revenue by geographic region is summarized in the following tables:

Passenger revenue by geographic region
			Passenger Revenue
			Three Months Ended June 30,									Six Months Ended June 30,
(in millions)			2022			2021						2022			2021
Domestic			$	8,318		$	4,478					$	13,881		$	6,758
Atlantic			1,701			288						2,240			430
Latin America			745			485						1,425			749
Pacific			194			88						319			150
Total			$	10,958		$	5,339					$	17,865		$	8,087

Operating revenue by geographic region
			Operating Revenue
			Three Months Ended June 30,									Six Months Ended June 30,
(in millions)			2022			2021						2022			2021
Domestic			$	10,655		$	5,894					$	18,204		$	9,262
Atlantic			2,057			467						2,833			734
Latin America			854			586						1,665			967
Pacific			258			179						471			313
Total			$	13,824		$	7,126					$	23,173		$	11,276

Delta Air Lines, Inc. June 2022 Form 10-Q 9

Notes to the Consolidated Financial Statements

NOTE 3. FAIR VALUE MEASUREMENTS

Assets/(Liabilities) Measured at Fair Value on a Recurring Basis

(in millions)			June 30, 2022			Level 1			Level 2			Level 3
Cash equivalents			$	6,873		$	6,873		$	—		$	—
Restricted cash equivalents			331			331			—			—
Short-term investments			1,549			75			1,474			—
Long-term investments			1,089			958			34			97
Fuel hedge contracts			59			—			59			—

(in millions)			December 31, 2021			Level 1			Level 2			Level 3
Cash equivalents			$	5,450		$	5,450		$	—		$	—
Restricted cash equivalents			635			635			—			—
Short-term investments			3,386			1,376			2,010			—
Long-term investments			1,459			1,326			36			97
Fuel hedge contracts			(18)			—			(18)			—

Cash Equivalents and Restricted Cash Equivalents. Cash equivalents generally consist of money market funds. Restricted cash equivalents generally consist of money market funds, time deposits, commercial paper and negotiable certificates of deposit, which primarily relate to proceeds from debt issued to finance, among other things, a portion of the construction costs for our new terminal facilities at New York's LaGuardia Airport. Restricted cash equivalents are recorded in prepaid expenses and other and other noncurrent assets on our Consolidated Balance Sheet ("balance sheet"). The fair value of these cash equivalents is based on a market approach using prices generated by market transactions involving identical or comparable assets.

Short-Term Investments. Short-term investments consist of U.S. government and agency securities. The fair values of these investments are based on a market approach using industry standard valuation techniques that incorporate observable inputs such as quoted market prices, interest rates, benchmark curves, credit ratings of the security and other observable information.

As of June 30, 2022, the estimated fair value of our short-term investments was $1.5 billion. Of these investments, $821 million are expected to mature in one year or less, with the remainder maturing by the first half of 2024. Investments with maturities beyond one year when purchased are classified as short-term investments if they are expected to be available to support our short-term liquidity needs.

Long-Term Investments. Our long-term investments measured at fair value primarily consist of equity investments, which are valued based on market prices or other observable transactions and inputs, and are recorded in equity investments on our balance sheet. Our equity investments in private companies are classified as Level 3 in the fair value hierarchy as their equity is not traded on a public exchange and our valuations incorporate certain unobservable inputs, including non-public equity issuances and forecasts provided by our investees. Fair value measurement using unobservable inputs is inherently uncertain, and a change in significant inputs could result in different fair values. See Note 4, "Investments," for further information on our equity investments.

Fuel Hedge Contracts. Our derivative contracts to hedge the financial risk from changing fuel prices are primarily related to inventory at our wholly-owned subsidiary, Monroe Energy, LLC ("Monroe"). Our fuel hedge portfolio may consist of a combination of options, swaps or futures contracts, most of which have a duration of less than three months. Option and swap contracts are valued under income approaches using option pricing models and discounted cash flow models, respectively, based on data either readily observable in public markets, derived from public markets or provided by counterparties who regularly trade in public markets. Futures contracts and options on futures contracts are traded on a public exchange and valued based on quoted market prices. We recognized losses of $239 million and $478 million on our fuel hedge contracts in aircraft fuel and related taxes on our Condensed Consolidated Statements of Operations and Comprehensive Loss ("income statement") for the three and six months ended June 30, 2022, respectively, compared to losses of $63 million and $120 million, for the three and six months ended June 30, 2021, respectively. The losses recognized during 2022 are composed of $555 million of settlements on contracts and $77 million of mark-to-market adjustments. Expense from the settlement of closed contracts is offset by higher operating profits at Monroe from higher pricing. See Note 9, "Segments," for further information on our Monroe refinery segment.

Delta Air Lines, Inc. June 2022 Form 10-Q 10

Notes to the Consolidated Financial Statements

NOTE 4. INVESTMENTS

We have developed strategic relationships with a number of airlines and airline services companies through joint ventures and other forms of cooperation and support, including equity investments. Our equity investments reinforce our commitment to these relationships and generally enhance our ability to offer input to the investee on strategic issues and direction, in some cases through representation on the board of directors.

Fair Value Investments. Changes in the valuation of investments accounted for at fair value are recorded in gain/(loss) on investments, net in our income statement within non-operating expense and are driven by changes in stock prices, foreign currency fluctuations and other valuation techniques for investments in companies without publicly-traded shares.

Equity Method Investments. We record our share of our equity method investees' financial results in our income statement as described in the table below.

Equity investments ownership interest and carrying value
			Accounting Treatment						Ownership Interest									Carrying Value
(in millions)									June 30, 2022			December 31, 2021						June 30, 2022			December 31, 2021
Air France-KLM			Fair Value						3		%	6		%				$	86		$	165
China Eastern			Fair Value						2		%	2		%				179			177
CLEAR			Fair Value						6		%	6		%				166			260
Grupo Aeroméxico			Equity Method(1)						20		%	51		%				420			—
Hanjin-KAL			Fair Value						13		%	13		%				419			455
Unifi Aviation			Equity Method(2)						49		%	49		%				163			159
Wheels Up			Fair Value(3)						21		%	21		%				101			241
Other investments			Various															237			255
Equity investments																		$	1,771		$	1,712

(1)Results are included in equity method results in our income statement under non-operating expense.

(2)Results are included in contracted services in our income statement as this entity is integral to the operations of our business by providing services at many of our airport locations.

(3)We elected to account for our investment under the fair value option.

Air France-KLM. During the June 2022 quarter, Air France-KLM ("AFKL") executed a €2.3 billion rights issue, through the issuance of 1.9 billion new AFKL shares. We participated in the rights issue on a cash neutral basis by subscribing to approximately 36 million new AFKL shares using the proceeds from the sale of part of our rights to a third party. The net impact of these transactions reduced our ownership interest to approximately 3% and the change in the fair value of our investment in AFKL is recorded in gain/(loss) on investments, net in our income statement within non-operating expense.

Grupo Aeroméxico. In March 2022, Grupo Aeroméxico ("Aeroméxico") emerged from its voluntary proceedings to reorganize under Chapter 11 of the United States bankruptcy code ("bankruptcy process"). At the conclusion of the bankruptcy process, Aeroméxico's previously outstanding capital stock was consolidated and exchanged for less than 0.01% of new capital stock, which effectively eliminated our historical 51% ownership stake. Upon emergence, Delta received a 20% equity stake in the newly restructured Aeroméxico in exchange for (1) our receivables under Aeroméxico's debtor-in-possession financing, (2) $100 million (recorded as an investing outflow on our Condensed Consolidated Statements of Cash Flows), and (3) our agreement to provide expanded commercial services to Aeroméxico in future periods. We account for our investment in Aeroméxico under the equity method of accounting and record our share of Aeroméxico's financial results in equity method results in our income statement.

Other Investments. This category includes various investments that are accounted for at fair value or under the equity method, depending on our ownership interest and the level of influence conveyed by our investment.

Virgin Atlantic. Virgin Atlantic has completed an out-of-court restructuring, during which we provided and continue to provide strategic and operational assistance. The carrying value of our investment in Virgin Atlantic remains zero as of June 30, 2022. We maintained our 49% equity interest and continue to track our share of Virgin Atlantic's losses under the equity method of accounting, which are only recorded to the extent we make additional investments in Virgin Atlantic.

Delta Air Lines, Inc. June 2022 Form 10-Q 11

Notes to the Consolidated Financial Statements

LATAM. LATAM Airlines Group S.A. ("LATAM") is undergoing voluntary proceedings to reorganize under Chapter 11 of the United States bankruptcy code, and the carrying value of our investment in LATAM remains zero as of June 30, 2022. In order to support our relationship with LATAM, we are providing strategic and operational assistance through the bankruptcy process. After LATAM's refinancing in April 2022, we have a $71 million noncurrent receivable outstanding associated with LATAM's debtor-in-possession financing. LATAM's plan of reorganization has been confirmed by the Bankruptcy Court and is expected to take effect before the end of 2022. As our pre-bankruptcy equity ownership of approximately 20% will be substantially diluted to a de minimis level, we expect to participate in certain of the offerings contemplated under the reorganization plan at an additional investment level commensurate with an equity stake not to exceed approximately 10% in the reorganized LATAM.

NOTE 5. DEBT

Summary of outstanding debt by category
			Maturity									Interest Rate(s) Per Annum at									June 30,			December 31,
(in millions)			Dates									June 30, 2022									2022			2021
Unsecured Payroll Support Program Loans			2030			to			2031			1.00%									$	3,496		$	3,496
Unsecured notes			2023			to			2029			2.90%			to			7.38%			3,146			4,354
Financing arrangements secured by SkyMiles assets:
SkyMiles Notes(1)			2023			to			2028			4.50%			and			4.75%			6,000			6,000
SkyMiles Term Loan(1)(2)			2023			to			2027			4.81%									2,820			2,820
Financing arrangements secured by aircraft:
Certificates(1)			2022			to			2028			2.00%			to			8.00%			1,867			1,932
Notes(1)(2)			2022			to			2033			1.99%			to			5.75%			987			1,139
NYTDC Special Facilities Revenue Bonds(1)			2023			to			2045			4.00%			to			5.00%			2,838			2,894
Financing arrangements secured by slots, gates and/or routes:
2020 Senior Secured Notes			2025									7.00%									2,019			2,589
2018 Revolving Credit Facility(2)			2023			to			2024			Undrawn									—			—
Other financings(1)(2)			2022			to			2030			2.51%			to			5.00%			68			68
Other revolving credit facilities(2)			2023			to			2024			Undrawn									—			—
Total secured and unsecured debt																					23,241			25,292
Unamortized (discount)/premium and debt issue cost, net and other																					(176)			(208)
Total debt																					23,065			25,084
Less: current maturities																					(1,621)			(1,502)
Total long-term debt																					$	21,444		$	23,582

(1)Due in installments during the years shown above.

(2)Certain financings are comprised of variable rate debt. All variable rates are equal to LIBOR (generally subject to a floor) or another index rate plus a specified margin.

Availability Under Revolving Credit Facilities

As of June 30, 2022, we had approximately $2.8 billion undrawn and available under our revolving credit facilities. In addition, we had outstanding letters of credit as of June 30, 2022, including approximately $100 million that reduced the availability under our revolving credit facilities and approximately $300 million that did not affect the availability of our revolving credit facilities.

Delta Air Lines, Inc. June 2022 Form 10-Q 12

Notes to the Consolidated Financial Statements

Fair Value of Debt

Market risk associated with our fixed- and variable-rate debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates. The fair value of debt shown below is principally based on reported market values, recently completed market transactions and estimates based on interest rates, maturities, credit risk and underlying collateral. Debt is primarily classified as Level 2 within the fair value hierarchy.

Fair value of outstanding debt
(in millions)			June 30, 2022			December 31, 2021
Net carrying amount			$	23,065		$	25,084
Fair value			$	22,200		$	26,900

Covenants

Our debt agreements contain various affirmative, negative and financial covenants. We were in compliance with the covenants in our debt agreements at June 30, 2022.

NOTE 6. EMPLOYEE BENEFIT PLANS

Employee benefit plans net periodic (benefit) cost
			Pension Benefits									Other Postretirement and Postemployment Benefits
(in millions)			2022			2021						2022			2021
Three Months Ended June 30,
Service cost			$	—		$	—					$	18		$	21
Interest cost			153			146						32			29
Expected return on plan assets			(330)			(381)						(4)			(9)
Amortization of prior service credit			—			—						(1)			(2)
Recognized net actuarial loss			64			88						13			15
Net periodic (benefit) cost			$	(113)		$	(147)					$	58		$	54
Six Months Ended June 30,
Service cost			$	—		$	—					$	35		$	43
Interest cost			306			291						64			59
Expected return on plan assets			(660)			(761)						(8)			(17)
Amortization of prior service credit			—			—						(3)			(3)
Recognized net actuarial loss			127			177						28			27
Net periodic (benefit) cost			$	(227)		$	(293)					$	116		$	109

Service cost is recorded in salaries and related costs in our income statement, while all other components are recorded within pension and related benefit/(expense) under non-operating expense.

Expected Long-Term Rate of Return. Based on our funded status as of December 31, 2021, we have modified the strategic asset allocation mix to reduce the investment risk of the portfolio. As a result of the lower risk profile of the portfolio, the weighted average expected long-term rate of return on our defined benefit pension plan assets for 2022 net periodic benefit cost is 7.0%.

Delta Air Lines, Inc. June 2022 Form 10-Q 13

Notes to the Consolidated Financial Statements

NOTE 7. COMMITMENTS AND CONTINGENCIES

Aircraft Purchase Commitments

Our future aircraft purchase commitments totaled approximately $15.1 billion at June 30, 2022.

Aircraft purchase commitments
(in millions)			Total
Six months ending December 31, 2022			$	2,320
2023			3,170
2024			3,480
2025			2,890
2026			2,240
Thereafter			960
Total			$	15,060

Our future aircraft purchase commitments included the following aircraft at June 30, 2022:

Aircraft purchase commitments by fleet type
Aircraft Type			Purchase Commitments
A220-300			39
A321-200neo			152
A330-900neo			23
A350-900			18
B-737-900ER			4
CRJ-900			1
Total			237

Aircraft Orders

During the June 2022 quarter, we agreed to acquire four B-737-900ER and one A330-900 aircraft. Deliveries of the pre-owned B-737-900ER aircraft are expected to occur by the end of 2022 and delivery of the A330-900 aircraft is expected to occur in 2024.

Legal Contingencies

We are involved in various legal proceedings related to employment practices, environmental issues, antitrust matters and other matters concerning our business. We record liabilities for losses from legal proceedings when we determine that it is probable that the outcome in a legal proceeding will be unfavorable and the amount of loss can be reasonably estimated. Although the outcome of the legal proceedings in which we are involved cannot be predicted with certainty, we believe that the resolution of current matters will not have a material adverse effect on our Condensed Consolidated Financial Statements.

Other Contingencies

General Indemnifications

We are the lessee under many commercial real estate leases. It is common in these transactions for us, as the lessee, to agree to indemnify the lessor and the lessor's related parties for tort, environmental and other liabilities that arise out of or relate to our use or occupancy of the leased premises. This type of indemnity would typically make us responsible to indemnified parties for liabilities arising out of the conduct of, among others, contractors, licensees and invitees at, or in connection with, the use or occupancy of the leased premises. This indemnity often extends to related liabilities arising from the negligence of the indemnified parties but usually excludes any liabilities caused by either their sole or gross negligence or their willful misconduct.

Delta Air Lines, Inc. June 2022 Form 10-Q 14

Notes to the Consolidated Financial Statements

Our aircraft and other equipment lease and financing agreements typically contain provisions requiring us, as the lessee or obligor, to indemnify the other parties to those agreements, including certain of those parties' related persons, against virtually any liabilities that might arise from the use or operation of the aircraft or other equipment.

We believe that our insurance would cover most of our exposure to liabilities and related indemnities associated with the commercial real estate leases and aircraft and other equipment lease and financing agreements described above. While our insurance does not typically cover environmental liabilities, we have insurance policies in place as required by applicable environmental laws.

Some of our aircraft and other financing transactions include provisions that require us to make payments to preserve an expected economic return to the lenders if that economic return is diminished due to specified changes in laws or regulations. In some of these financing transactions, we also bear the risk of changes in tax laws that would subject payments to non-U.S. lenders to withholding taxes.

We cannot reasonably estimate our potential future payments under the indemnities and related provisions described above because we cannot predict (1) when and under what circumstances these provisions may be triggered and (2) the amount that would be payable if the provisions were triggered because the amounts would be based on facts and circumstances existing at such time.

Other

We have certain contracts for goods and services that require us to pay a penalty, acquire inventory specific to us or purchase contract-specific equipment, as defined by each respective contract, if we terminate the contract without cause prior to its expiration date. Because these obligations are contingent on our termination of the contract without cause prior to its expiration date, no obligation would exist unless such a termination occurs.

NOTE 8. ACCUMULATED OTHER COMPREHENSIVE LOSS

Components of accumulated other comprehensive loss
(in millions)			Pension and Other Benefit Liabilities			Other			Total
Balance at January 1, 2022 (net of tax effect of $1,184)			$	(7,170)		$	40		$	(7,130)
Reclassifications into earnings (net of tax effect of $37)(1)			122			—			122
Balance at June 30, 2022 (net of tax effect of $1,147)			$	(7,048)		$	40		$	(7,008)

Balance at January 1, 2021 (net of tax effect of $1,764)			$	(9,078)		$	40		$	(9,038)
Reclassifications into earnings (net of tax effect of $47)(1)			156			—			156
Balance at June 30, 2021 (net of tax effect of $1,717)			$	(8,922)		$	40		$	(8,882)

(1)Amounts reclassified from accumulated other comprehensive loss for pension and other benefit liabilities are recorded in pension and related benefit/(expense) in non-operating expense in our income statement.

Delta Air Lines, Inc. June 2022 Form 10-Q 15

Notes to the Consolidated Financial Statements

NOTE 9. SEGMENTS

Refinery Operations

Our refinery segment operates for the benefit of the airline segment by providing jet fuel to the airline segment from its own production and through jet fuel obtained through agreements with third parties. The refinery's production consists of jet fuel, as well as non-jet fuel products. We use several counterparties to exchange the non-jet fuel products produced by the refinery for jet fuel consumed in our airline operations. The gross fair value of the products exchanged under these agreements during the three and six months ended June 30, 2022 was $1.0 billion and $1.8 billion, respectively, compared to $536 million and $1.0 billion for the three and six months ended June 30, 2021, respectively.

Segment Reporting

Segment results are prepared based on our internal accounting methods described below, with reconciliations to consolidated amounts in accordance with GAAP. Our segments are not designed to measure operating income or loss directly related to the products and services included in each segment on a stand-alone basis.

Financial information by segment
(in millions)			Airline			Refinery						Intersegment Sales/Other						Consolidated
Three Months Ended June 30, 2022
Operating revenue:			$	12,310		$	3,353											$	13,824
Sales to airline segment												$	(761)		(1)
Exchanged products												(982)			(2)
Sales of refined products												(96)			(3)
Operating income			1,250			269						—						1,519
Interest expense, net			269			2						(2)						269
Depreciation and amortization			510			23						(23)			(4)			510
Total assets, end of period			71,766			3,065						(26)						74,805
Net fair value obligations, end of period			—			(556)						—						(556)
Capital expenditures			928			30						—						958
Three Months Ended June 30, 2021
Operating revenue:			$	6,349		$	1,434											$	7,126
Sales to airline segment												$	(108)		(1)
Exchanged products												(536)			(2)
Sales of refined products												(13)			(3)
Operating income/(loss)			973			(157)						—						816
Interest expense, net			338			1						(1)						338
Depreciation and amortization			501			24						(24)			(4)			501
Total assets, end of period			73,491			1,825						(7)						75,309
Net fair value obligations, end of period			—			(507)						—						(507)
Capital expenditures			752			9						—						761

(1)Represents transfers, valued on a market price basis, from the refinery to the airline segment for use in airline operations. We determine market price for jet fuel from the refinery by reference to the market index for the primary delivery location, which is New York Harbor.

(2)Represents value of products delivered under our exchange agreements, as discussed above, determined on a market price basis.

(3)These sales were at or near cost; accordingly, the margin on these sales is de minimis.

(4)Refinery segment operating results, including depreciation and amortization, are included within aircraft fuel and related taxes in our income statement.

Delta Air Lines, Inc. June 2022 Form 10-Q 16

Notes to the Consolidated Financial Statements

Financial information by segment
(in millions)			Airline			Refinery						Intersegment Sales/Other						Consolidated
Six Months Ended June 30, 2022
Operating revenue:			$	20,473		$	5,666											$	23,173
Sales to airline segment												$	(1,053)		(1)
Exchanged products												(1,791)			(2)
Sales of refined products												(122)			(3)
Operating income			412			323						—						735
Interest expense, net			543			4						(4)						543
Depreciation and amortization			1,016			47						(47)			(4)			1,016
Capital expenditures			2,676			48						—						2,724
Six Months Ended June 30, 2021
Operating revenue:			$	9,959		$	2,481											$	11,276
Sales to airline segment												$	(108)		(1)
Exchanged products												(1,039)			(2)
Sales of refined products												(17)			(3)
Operating loss			(299)			(283)						—						(582)
Interest expense, net			700			3						(3)						700
Depreciation and amortization			993			48						(48)			(4)			993
Capital expenditures			1,177			22						—						1,199

(1)Represents transfers, valued on a market price basis, from the refinery to the airline segment for use in airline operations. We determine market price for jet fuel from the refinery by reference to the market index for the primary delivery location, which is New York Harbor.

(2)Represents value of products delivered under our exchange agreements, as discussed above, determined on a market price basis.

(3)These sales were at or near cost; accordingly, the margin on these sales is de minimis.

(4)Refinery segment operating results, including depreciation and amortization, are included within aircraft fuel and related taxes in our income statement.

Fair Value Obligations

The net fair value obligations presented in the financial information by segment for the three month periods table above are related to renewable fuel compliance costs, are presented net of any related assets or fixed price purchase agreements and are based on quoted market prices and other observable information and are therefore classified as Level 2 in the fair value hierarchy. Our obligation as of June 30, 2022 was calculated using the U.S. Environmental Protection Agency's ("EPA") Renewable Fuel Standard ("RFS") volume requirements, which were finalized in June 2022. The compliance deadlines to retire our obligations for 2020 and 2021 are in the fourth quarter of 2022 and first quarter of 2023, respectively.

Delta Air Lines, Inc. June 2022 Form 10-Q 17

Notes to the Consolidated Financial Statements

NOTE 10. EARNINGS/(LOSS) PER SHARE

We calculate basic earnings/(loss) per share and diluted loss per share by dividing net income/(loss) by the weighted average number of common shares outstanding, excluding restricted shares. We calculate diluted earnings per share by dividing net income by the weighted average number of common shares outstanding plus the dilutive effect of outstanding share-based instruments, including stock options, restricted stock awards and warrants. Antidilutive common stock equivalents excluded from the diluted earnings per share calculation are not material. The following table shows the computation of basic and diluted earnings/(loss) per share:

Basic and diluted earnings/(loss) per share
			Three Months Ended June 30,									Six Months Ended June 30,
(in millions, except per share data)			2022			2021						2022			2021
Net income/(loss)			$	735		$	652					$	(205)		$	(525)
Basic weighted average shares outstanding			638			637						638			636
Dilutive effect of share-based instruments			3			5						—			—
Diluted weighted average shares outstanding			641			642						638			636
Basic earnings/(loss) per share			$	1.15		$	1.02					$	(0.32)		$	(0.82)
Diluted earnings/(loss) per share			$	1.15		$	1.02					$	(0.32)		$	(0.82)

Delta Air Lines, Inc. June 2022 Form 10-Q 18

Item 2. MD&A

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited Consolidated Financial Statements and related notes included in our 2021 Form 10-K.

June 2022 Quarter Financial Overview

Although our business remained affected by the impact of the COVID-19 pandemic in the first two months of the year, we have seen continued improvement during the June 2022 quarter, which we expect to continue throughout 2022. Given the drastic and unprecedented impact of the COVID-19 pandemic on our operating results in 2021 and 2020, we believe that a comparison of our results in the June 2022 quarter to both the June 2021 and June 2019 quarters in this overview section allows for a better understanding of the full impact of the COVID-19 pandemic and the progress of our recovery.

The table below shows selected key financial and statistical measures for the three months ended June 30, 2022, 2021 and 2019.

			Three Months Ended June 30,															2022 vs. 2021 % Increase (Decrease) (1)			2022 vs. 2019 % Increase (Decrease) (1)
(in millions)			2022						2021						2019
Total operating revenue			$	13,824					$	7,126					$	12,536		94		%	10		%
Total operating expense			12,305						6,310						10,408			95		%	18		%
Operating income			1,519						816						2,128			86		%	(29)		%
Available seat miles ("ASM")			58,903						48,529						71,754			21		%	(18)		%

Our operating income for the June 2022 quarter was $1.5 billion, an improvement of $703 million compared to the June 2021 quarter. This improvement was primarily due to a $5.6 billion, or 105%, increase in passenger revenue as a result of increased demand and capacity, partially offset by a $1.7 billion increase in fuel expense and increases in other volume-related expenses as we continue to restore our operation. Operating income in the June 2021 quarter also benefited from the recognition of $1.5 billion of Payroll Support Programs ("PSP") grant proceeds.

Compared to operating income of $2.1 billion in the June 2019 quarter, our operating income in the June 2022 quarter was lower primarily from a 41% increase in fuel expense and a 4% decrease in passenger revenue on 18% lower system capacity, as we continue to rebuild our operations following the COVID-19 pandemic.

Revenue. Compared to the June 2021 quarter, our operating revenue increased $6.7 billion, or 94%, due primarily to increased travel demand and higher refinery third party sales.

Compared to the June 2019 quarter, our operating revenue was $1.3 billion higher, or 10%, due primarily to higher refinery third party sales and improved yield. We expect system capacity to be 83% to 85% recovered in the September 2022 quarter compared to the September 2019 quarter.

Consumer demand continued to improve through the June 2022 quarter with a strong beginning to the summer season. The sale of tickets to domestic business customers (i.e., both corporate and contracted small- and medium-sized enterprises), including tickets for travel during and beyond the quarter (“advance sales”), continued to improve during the June 2022 quarter.

International revenue has lagged the recovery in domestic travel, but improved in the June 2022 quarter to approximately 80% recovered compared to the June 2019 quarter as travel restrictions eased and many countries ended testing requirements, including the U.S. The sale of tickets to international business customers (i.e., both corporate and contracted small- and medium-sized enterprises), including advance sales, also significantly improved during the June 2022 quarter, led by the Atlantic region. Despite the recent policy changes and improved advance sales, we still expect the recovery of international revenue to continue to trail domestic revenue through 2022.

Delta Air Lines, Inc. June 2022 Form 10-Q 19

Item 2. MD&A

Operating Expense. Total operating expense in the June 2022 quarter increased $6.0 billion, or 95%, compared to the June 2021 quarter, primarily resulting from increased fuel costs, due to both an increase in fuel price and increased capacity, as well as higher salaries and related costs, including premium pay and overtime as we continue to rebuild the operation, and an increase in expenses related to refinery sales to third parties, reflected in ancillary businesses and refinery expense. The increase also resulted from $1.5 billion of PSP grant proceeds recognized during the June 2021 quarter, which reduced expenses in that quarter. Total operating expense, adjusted (a non-GAAP financial measure) for the June 2022 quarter increased $3.9 billion, or 55%, compared to the June 2021 quarter. Adjustments were primarily to exclude expenses related to PSP grant proceeds in the June 2021 quarter and refinery sales to third parties.

Total operating expense in the June 2022 quarter increased $1.9 billion, or 18%, compared to the June 2019 quarter, primarily resulting from increased fuel costs and increased expenses related to refinery sales to third parties, reflected in ancillary businesses and refinery expense. Total operating expense, adjusted for the June 2022 quarter increased $558 million, or 5%, compared to the June 2019 quarter. Adjustments were primarily to exclude expenses related to refinery sales to third parties.

Our total operating cost per available seat mile ("CASM") increased 44% to 20.89 cents compared to the June 2019 quarter, primarily due to the higher costs discussed above and an 18% decrease in capacity. Non-fuel unit costs ("CASM-Ex", a non-GAAP financial measure) increased 22% to 12.76 cents primarily due to the 18% decrease in capacity.

We now expect non-fuel costs for the full year 2022 to be approximately 17% higher than 2019, which is eight points above the mid-point of our initial expectations from the beginning of 2022 of 7% to 10% higher. The increased unit costs are primarily due to lower capacity and additional costs associated with rebuilding our network and restoring the operational reliability and integrity that we believe is one of our competitive advantages. We now expect capacity for the full year 2022 to be approximately 85% restored to 2019, which is five percentage points lower than our initial expectations from the beginning of 2022 of 90% restored to 2019.

Cash Flow. Our cash, cash equivalents, short-term investments and aggregate principal amount committed and available to be drawn under our revolving credit facilities ("liquidity") as of June 30, 2022 was $13.6 billion. During the June 2022 quarter, operating activities generated $2.5 billion.

During the June 2022 quarter, the air traffic liability increased $805 million. We sell tickets for air travel in advance of the customer's travel date and the cash received on these advance sales is recorded as deferred revenue in our air traffic liability. Passenger revenue is recognized and the air traffic liability is reduced when we provide transportation services. The increase in the air traffic liability exceeds our historical seasonal increase, reflecting the continued restoration of our business and a robust demand environment.

As discussed above, consumer demand for travel accelerated through the quarter. Domestic corporate advance sales for the June 2022 quarter were nearly 80% recovered compared to the June 2019 quarter which was approximately 25 percentage points higher compared to the domestic advance sales recovery in the March 2022 quarter. The international corporate advance sales recovery for the June 2022 quarter was approximately 65% compared to the June 2019 quarter which was approximately 30 percentage points higher as compared to the March 2022 quarter, primarily driven by improvement in the Atlantic region.

Additionally, total cash sales to American Express were $1.4 billion in the June 2022 quarter up 35% compared to the June 2019 quarter.

Also during the quarter, investing activities used a net of $152 million, primarily for capital expenditures, partially offset by net redemptions of short-term investments. During the June 2022 quarter we had cash outflows of approximately $952 million related to repayments of our debt and finance leases.

The non-GAAP financial measure referenced above for operating expense, adjusted is defined and reconciled in "Supplemental Information" below.

Environmental Sustainability. During 2022, we are continuing to develop our climate transition plan and to have our medium- and long-term climate goals, including our goal of achieving net zero greenhouse gas emissions no later than 2050, validated by the Science Based Targets initiative, as described in our 2021 Form 10-K. We expect our path toward achievement of these goals to depend heavily on improved fuel efficiency from fleet renewal, increased use of sustainable aviation fuel ("SAF") which is not presently available at scale or at prices competitive to jet fuel, operational initiatives and technological innovation. In the six months ended June 30, 2022, we incurred $72 million of expense related to carbon offset credits, which relates to a portion of our airline segment's 2021 carbon emissions.

Delta Air Lines, Inc. June 2022 Form 10-Q 20

Item 2. MD&A - Results of Operations

Results of Operations - Three Months Ended June 30, 2022 and 2021

Operating Revenue

			Three Months Ended June 30,						Increase (Decrease)			% Increase (Decrease)
(in millions)(1)			2022			2021
Ticket - Main cabin			$	5,664		$	2,752					$	2,912		106		%
Ticket - Premium products			4,109			1,801						2,308			128		%
Loyalty travel awards			744			428						316			74		%
Travel-related services			441			358						83			23		%
Total passenger revenue			$	10,958		$	5,339					$	5,619		105		%
Cargo			272			251						21			8		%
Other			2,594			1,536						1,058			69		%
Total operating revenue			$	13,824		$	7,126					$	6,698		94		%
TRASM (cents)			23.47		¢	14.68		¢				8.79		¢	60		%
Third-party refinery sales			(2.57)			(1.60)						(0.97)			61		%
TRASM, adjusted(2)			20.90		¢	13.08		¢				7.82		¢	60		%

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

(2)TRASM, adjusted is a non-GAAP financial measure. For additional information on adjustments to TRASM, see "Supplemental Information" below.

Compared to the June 2021 quarter, our operating revenue increased $6.7 billion, or 94%, due to the continued recovery in demand from the COVID-19 pandemic and higher refinery third party sales. The increase in operating revenue, on a 21% increase in capacity, resulted in a 60% increase in total revenue per available seat mile ("TRASM") and TRASM, adjusted compared to the June 2021 quarter. The growth in passenger revenue was due to increased demand in both main cabin and premiums products, with paid load factor and yield growth in premium products outpacing main cabin.

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

We have historically generated cargo revenues in domestic and international markets through the use of cargo space on regularly scheduled passenger aircraft. In 2020 and 2021, following the onset of the COVID-19 pandemic, reduced industry cargo capacity drove a significant increase in our cargo yield. The increase in revenue compared to the June 2021 quarter was primarily driven by additional cargo volume as yield stabilized. We expect capacity growth in the industry to pressure yields in the September 2022 quarter as the industry rebuilds international networks to pre-pandemic levels.

Passenger Revenue by Geographic Region

						Increase (Decrease) vs. Three Months Ended June 30, 2021
(in millions)			Three Months Ended June 30, 2022			Passenger Revenue			RPMs (Traffic)			ASMs (Capacity)			Passenger Mile Yield			PRASM			Load Factor
Domestic			$	8,318		86		%	31		%	9		%	41		%	70		%	15			pts
Atlantic			1,701			491		%	402		%	158		%	18		%	129		%	41			pts
Latin America			745			53		%	19		%	(4)		%	29		%	59		%	16			pts
Pacific			194			121		%	174		%	(21)		%	(19)		%	181		%	46			pts
Total			$	10,958		105		%	55		%	21		%	33		%	69		%	18			pts

Domestic

Domestic passenger unit revenue ("PRASM") increased in the June 2022 quarter compared to the June 2021 quarter as a result of demand increasing faster than capacity during the June 2022 quarter.

The June 2022 quarter domestic consumer revenue was above June 2021 quarter levels. Domestic consumer revenue also now exceeds pre-pandemic levels, even though capacity has not been fully restored, as consumers continue to return to travel and we believe spending patterns are shifting post-pandemic to experiences instead of goods.

Delta Air Lines, Inc. June 2022 Form 10-Q 21

Item 2. MD&A - Results of Operations

We also remain optimistic about the ultimate recovery of business travel, which is comprised of both corporate managed travel and small- and medium-sized businesses, and expect the recovery of both of these components to continue to increase throughout 2022. Business travel demand in the June 2022 quarter was the highest since the onset of the COVID-19 pandemic.

International

International passenger revenue for the June 2022 quarter increased compared to the June 2021 quarter in each geographic region, with the Atlantic region experiencing the most significant improvement.

In November 2021, travel restrictions for 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. Further, in June 2022, the United States lifted its testing requirement for international travel. Since the removal of U.S. pre-departure test requirements, we have seen a modest improvement in international demand.

While some countries have removed or eased travel restrictions, others still maintain international testing requirements and travel restrictions (primarily in the Pacific region), which continue to restrain demand in some markets

The Atlantic region has shown the greatest recovery of the international regions, despite the ongoing conflict in Ukraine, as western European countries removed or eased travel restrictions. Revenue in this region has nearly restored to pre-pandemic levels in the June 2022 quarter as consumers continue to show increased desire for trans-Atlantic travel. This has been led by demand for premium leisure products and demand for leisure destinations in Europe.

Latin America region revenue was near pre-pandemic levels during the June 2022 quarter, due to continued strong demand for leisure destinations in the Caribbean, Mexico and Central America. We expect this trend to continue throughout 2022 as demand for leisure destinations remains strong and travel to South America continues to recover.

The Pacific region continues to be the most impacted by travel restrictions, although we began to experience some demand improvement in the June 2022 quarter as South Korea and Australia re-opened to international tourists and travel restrictions to Japan are easing.

Overall, we still expect a lower international revenue environment through 2022, with the recovery of international revenue continuing to trail domestic revenue.

Ticket Validity Flexibility

In order to provide our customers more flexibility and time to plan or rebook their travel, we announced in January 2022 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.

We estimate the value of ticket breakage and recognize the related revenue at the scheduled flight date. Our ticket breakage estimates are primarily based on historical experience, ticket contract terms and customers’ travel behavior. Given the impact of the COVID-19 pandemic on customer behavior and changes made in ticket validity terms, as well as the elimination of change fees for most tickets, our estimates of revenue that will be recognized from the air traffic liability for unused tickets may vary in future periods.

Delta Air Lines, Inc. June 2022 Form 10-Q 22

Item 2. MD&A - Results of Operations

Other Revenue

			Three Months Ended June 30,						Increase (Decrease)			% Increase (Decrease)
(in millions)			2022			2021
Refinery			$	1,514		$	777					$	737		95		%
Loyalty program			650			439						211			48		%
Ancillary businesses			206			185						21			11		%
Miscellaneous			224			135						89			66		%
Total other revenue			$	2,594		$	1,536					$	1,058		69		%

Refinery. This represents refinery sales to third parties. These sales increased $737 million compared to the June 2021 quarter. The increase in third-party refinery sales resulted from higher pricing and production during the June 2022 quarter compared to the June 2021 quarter. See "Refinery Segment" below for additional details on the refinery's operations, including third party refinery sales recorded in other revenue.

Loyalty Program. This relates 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 June 2022 quarter compared to the June 2021 quarter.

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

Miscellaneous. This is primarily composed of revenues related to lounge access, including access provided to certain American Express cardholders, and codeshare agreements. The volume of these transactions has increased compared to the June 2021 quarter due to the ongoing recovery of our business. 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. June 2022 Form 10-Q 23

Item 2. MD&A - Results of Operations

Operating Expense

			Three Months Ended June 30,						Increase (Decrease)			% Increase (Decrease)****(1)
(in millions)			2022			2021
Salaries and related costs			$	2,955		$	2,328					$	627		27		%
Aircraft fuel and related taxes			3,223			1,487						1,736			117		%
Ancillary businesses and refinery			1,718			939						779			83		%
Contracted services			791			570						221			39		%
Landing fees and other rents			546			460						86			19		%
Regional carrier expense			528			403						125			31		%
Depreciation and amortization			510			501						9			2		%
Aircraft maintenance materials and outside repairs			522			287						235			82		%
Passenger commissions and other selling expenses			526			222						304			137		%
Passenger service			369			175						194			111		%
Aircraft rent			127			104						23			22		%
Profit sharing			54			—						54			NM
Government grant recognition			—			(1,504)						1,504			NM
Other			436			338						98			29		%
Total operating expense			$	12,305		$	6,310					$	5,995		95		%

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

Salaries and Related Costs. During 2021, we continued to offer voluntary unpaid leaves of absence in response to the COVID-19 pandemic for periods ranging from 30 days up to 12 months and approximately 8,000 of our employees elected to take a leave of absence during the June 2021 quarter. In the June 2022 quarter, we no longer offered these leaves of absence as the program terminated by the end of the September 2021 quarter. Additionally, we have hired approximately 18,000 employees since the June 2021 quarter, in certain areas, including flight operations, in-flight service, reservations and customer care and airport customer service, in order to support our operations as demand and capacity returns. These actions, a 4% base pay increase effective May 1, 2022 for eligible employees, and additional premium pay and overtime resulted in the increases in salaries and related costs during the June 2022 quarter compared to the June 2021 quarter.

Aircraft Fuel and Related Taxes. Fuel expense increased $1.7 billion compared to the June 2021 quarter primarily due to a 119% increase in the market price of jet fuel and a 25% increase in consumption. We expect elevated jet fuel prices to continue throughout 2022 due to current market conditions, further exacerbated by geopolitical events.

Additionally, during the June 2022 quarter, we purchased and retired $25 million of carbon offset credits, which relate to a portion of our airline segment's 2021 carbon emissions. During the June 2021 quarter, we purchased and retired $20 million of carbon offset credits, which related to a portion of our airline segment's 2020 and 2021 carbon emissions. In the table below, these costs are shown in the carbon offset costs line item.

See "Refinery Segment" below for additional details on the refinery's operations.

Fuel expense and average price per gallon
															Average Price Per Gallon
			Three Months Ended June 30,						Increase (Decrease)			Three Months Ended June 30,						Increase (Decrease)
(in millions, except per gallon data)			2022			2021						2022			2021
Fuel purchase cost(1)			$	3,540		$	1,286					$	2,254		$	4.10		$	1.87					$	2.23
Carbon offset costs			25			20						5			0.03			0.03						—
Fuel hedge impact			(73)			24						(97)			(0.08)			0.03						(0.11)
Refinery segment impact			(269)			157						(426)			(0.31)			0.23						(0.54)
Total fuel expense			$	3,223		$	1,487					$	1,736		$	3.74		$	2.16					$	1.58

(1)Market price for jet fuel at airport locations, including related taxes and transportation costs.

Delta Air Lines, Inc. June 2022 Form 10-Q 24

Item 2. MD&A - Results of Operations

Ancillary Businesses and Refinery. Ancillary businesses and refinery includes expenses associated with refinery sales to third parties, aircraft maintenance services we provide to third parties and our vacation wholesale operations. Increased expenses were primarily related to refinery sales to third parties. The refinery cost of sales increased $737 million compared to the June 2021 quarter. The increase in third-party refinery sales resulted from higher pricing and production during the June 2022 quarter compared to the June 2021 quarter.

Contracted Services. During the June 2022 quarter, demand and capacity increased compared to the June 2021 quarter due to the ongoing recovery from the COVID-19 pandemic. The continued restoration of our operations and associated higher volume-related expenses was the primary driver for the increase in contracted services.

Regional Carrier Expense. Regional carrier expense increased compared to the June 2021 quarter due to an increase in utilization and volume-related expenses as a result of increased demand.

Aircraft Maintenance Materials and Outside Repairs. Maintenance expense increased compared to the June 2021 quarter as we returned aircraft to service and to support our operational reliability.

Passenger Commissions and Other Selling Expenses. Compared to the June 2021 quarter, passenger revenue increased 105% in the June 2022 quarter, leading to higher volume-related expenses, which was the primary reason for the increase in passenger commissions and other selling expenses.

Passenger Service. Passenger service expenses increased compared to the June 2021 quarter due to higher volume-related expenses associated with increased demand.

Profit Sharing. Our profit sharing program pays 10% to all eligible employees for the first $2.5 billion of annual pre-tax profit and 20% of annual pre-tax profit above $2.5 billion, as defined by the terms of the program.

Government Grant Recognition. During the June 2021 quarter, we recognized $1.5 billion of government PSP grant proceeds as contra-expense that were used exclusively for the payment of employee wages, salaries and benefits.

Delta Air Lines, Inc. June 2022 Form 10-Q 25

Item 2. MD&A - Results of Operations

Results of Operations - Six Months Ended June 30, 2022 and 2021

Operating Revenue

			Six Months Ended June 30,						Increase (Decrease)			% Increase (Decrease)
(in millions)(1)			2022			2021
Ticket - Main cabin			$	9,111		$	4,105					$	5,006		122		%
Ticket - Premium products			6,648			2,725						3,923			144		%
Loyalty travel awards			1,287			669						618			92		%
Travel-related services			819			588						231			39		%
Total passenger revenue			$	17,865		$	8,087					$	9,778		121		%
Cargo			561			466						95			20		%
Other			4,747			2,723						2,024			74		%
Total operating revenue			$	23,173		$	11,276					$	11,897		106		%
TRASM (cents)			20.93		¢	12.72		¢				8.21		¢	65		%
Third-party refinery sales(2)			(2.44)			(1.49)						(0.95)			64		%
TRASM, adjusted			18.49		¢	11.23		¢				7.26		¢	65		%

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

(2)TRASM, adjusted in a non-GAAP financial measure. For additional information on adjustments to TRASM, see "Supplemental Information" below.

Unless otherwise discussed below, the changes in operating revenue line items, as well as the underlying reasons for these changes, compared to the six months ended June 30, 2021 are consistent with the discussion above under Results of Operations - Three Months Ended June 30, 2022 and 2021.

Compared to the six months ended June 30, 2021, our operating revenue increased $11.9 billion, or 106%, due to the continued recovery in demand from the COVID-19 pandemic and higher refinery third party sales. The increase in operating revenue, on a 25% increase in capacity, resulted in a 65% increase in TRASM and TRASM, adjusted compared to the six months ended June 30, 2021. See "Refinery Segment" below for additional details on the refinery's operations, including third party refinery sales recorded in other revenue.

Passenger Revenue by Geographic Region

						Increase (Decrease) vs. Six Months Ended June 30, 2021
(in millions)			Six Months Ended June 30, 2022			Passenger Revenue			RPMs (Traffic)			ASMs (Capacity)			Passenger Mile Yield			PRASM			Load Factor
Domestic			$	13,881		105		%	57		%	18		%	31		%	74		%	21			pts
Atlantic			2,240			421		%	375		%	139		%	10		%	118		%	39			pts
Latin America			1,425			90		%	48		%	(2)		%	28		%	95		%	28			pts
Pacific			319			112		%	144		%	(10)		%	(13)		%	137		%	31			pts
Total			$	17,865		121		%	76		%	25		%	25		%	77		%	23			pts

Domestic passenger unit revenue for the six months ended June 30, 2022 increased compared to the six months ended June 30, 2021 as a result of the higher levels of capacity and demand during the six months ended June 30, 2022 due to the ongoing recovery in the period. International passenger revenue for the six months ended June 30, 2022 increased 200% on 44% higher capacity compared to the six months ended June 30, 2021.

Other Revenue

			Six Months Ended June 30,						Increase (Decrease)			% Increase (Decrease)
(in millions)			2022			2021
Refinery			$	2,700		$	1,317					$	1,383		105		%
Loyalty program			1,221			807						414			51		%
Ancillary businesses			416			371						45			12		%
Miscellaneous			410			228						182			80		%
Total other revenue			$	4,747		$	2,723					$	2,024		74		%

Delta Air Lines, Inc. June 2022 Form 10-Q 26

Item 2. MD&A - Results of Operations

Operating Expense

			Six Months Ended June 30,						Increase (Decrease)			% Increase (Decrease)
(in millions)			2022			2021
Salaries and related costs			$	5,782		$	4,530					$	1,252		28		%
Aircraft fuel and related taxes			5,315			2,504						2,811			112		%
Ancillary businesses and refinery			3,100			1,645						1,455			88		%
Contracted services			1,544			1,089						455			42		%
Landing fees and other rents			1,050			953						97			10		%
Regional carrier expense			1,018			804						214			27		%
Depreciation and amortization			1,016			993						23			2		%
Aircraft maintenance materials and outside repairs			988			581						407			70		%
Passenger commissions and other selling expenses			838			332						506			152		%
Passenger service			644			294						350			119		%
Aircraft rent			249			208						41			20		%
Profit sharing			54			—						54			NM
Government grant recognition			—			(2,689)						2,689			NM
Other			840			614						226			37		%
Total operating expense			$	22,438		$	11,858					$	10,580		89		%

Unless otherwise discussed below, the changes in operating expense line items, as well as the underlying reasons for these changes, compared to the six months ended June 30, 2021 are consistent with the discussion above under Results of Operations - Three Months Ended June 30, 2022 and 2021.

Aircraft Fuel and Related Taxes. Fuel expense increased $2.8 billion compared to the six months ended June 30, 2021 due to a 31% increase in consumption and a 98% increase in the market price per gallon of jet fuel.

Additionally, during the six months ended June 30, 2022, we purchased and retired $72 million of carbon offset credits, which relate to a portion of our airline segment's 2021 carbon emissions. During the six months ended June 30, 2021, we purchased and retired $40 million of carbon offset credits, which related to a portion of our airline segment's 2020 and 2021 carbon emissions. In the table below, these costs are shown in the carbon offset costs line item.

See "Refinery Segment" below for additional details on the refinery's operations.

Fuel expense and average price per gallon
															Average Price Per Gallon
			Six Months Ended June 30,						Increase (Decrease)			Six Months Ended June 30,						Increase (Decrease)
(in millions, except per gallon data)			2022			2021						2022			2021
Fuel purchase cost(1)			$	5,643		$	2,180					$	3,463		$	3.50		$	1.77					$	1.73
Carbon offset costs			72			40						32			0.04			0.03						0.01
Fuel hedge impact			(77)			1						(78)			(0.05)			—						(0.05)
Refinery segment impact			(323)			283						(606)			(0.20)			0.23						(0.43)
Total fuel expense			$	5,315		$	2,504					$	2,811		$	3.29		$	2.03					$	1.26

(1)Market price for jet fuel at airport locations, including related taxes and transportation costs.

Ancillary Businesses and Refinery. The changes in ancillary businesses and refinery expenses were primarily related to refinery sales to third parties, which increased by $1.4 billion compared to the six months ended June 30, 2021.

Government Grant Recognition. During the six months ended June 30, 2021, we recognized $2.7 billion of government PSP grant proceeds as contra-expense that were used exclusively for the payment of employee wages, salaries and benefits.

Delta Air Lines, Inc. June 2022 Form 10-Q 27

Item 2. MD&A - Non-Operating Results

Non-Operating Results

			Three Months Ended June 30,									Favorable (Unfavorable)						Six Months Ended June 30,						Favorable (Unfavorable)
(in millions)			2022			2021									2022			2021
Interest expense, net			$	(269)		$	(338)					$	69					$	(543)		$	(700)		$	157
Equity method results			(12)			—						(12)						(12)			(54)			42
Gain/(loss) on investments, net			(221)			211						(432)						(368)			473			(841)
Loss on extinguishment of debt			(41)			(26)						(15)						(66)			(83)			17
Pension and related benefit/(expense)			73			119						(46)						145			226			(81)
Miscellaneous, net			(16)			(6)						(10)						(58)			(19)			(39)
Total non-operating expense, net			$	(486)		$	(40)					$	(446)					$	(902)		$	(157)		$	(745)

Interest expense, net. Interest expense, net includes interest expense and interest income. This decreased compared to the prior year periods as a result of our debt reduction initiatives since the December 2020 quarter. During 2021, we made payments of approximately $5.8 billion related to our debt and finance leases, which included approximately $3.8 billion for early repayments. We have continued to pay down our debt during the six months ended June 30, 2022 with $2.4 billion of payments on debt and finance lease obligations, including $839 million for the early repurchase of various secured and unsecured notes through repurchases on the open market. We continue to seek opportunities to pre-pay our debt, in addition to periodic amortization and scheduled maturities, during the remainder of 2022 and beyond.

Equity method results. Equity method results in 2022 consist of our share of Aeroméxico's net losses and in 2021 reflected our share of Virgin Atlantic's net losses. See Note 4 of the Notes to the Condensed Consolidated Financial Statements for additional information on our equity investments.

Gain/(loss) on investments, net. Changes in the valuation of investments accounted for at fair value are recorded in gain/(loss) on investments, net and are driven by changes in stock prices, foreign currency fluctuations and other valuation techniques for investments in companies without publicly-traded shares. See Note 4 of the Notes to the Condensed Consolidated Financial Statements for additional information on our equity investments measured at fair value on a recurring basis.

Loss on extinguishment of debt. Loss on extinguishment of debt reflects the losses incurred in the early repayment of the notes mentioned above.

Pension and related benefit/(expense). Pension and related benefit/(expense) reflects the net periodic benefit/(cost) of our pension and other postretirement and postemployment benefit plans. Based on our funded status as of December 31, 2021, we have modified the strategic asset allocation mix to reduce the investment risk of the portfolio. As a result of the lower risk profile of the portfolio, the weighted average expected long-term rate of return on our defined benefit pension plan assets for 2022 net periodic benefit cost is 7.0%.

Miscellaneous, net. Miscellaneous, net primarily includes foreign exchange gains/(losses) and charitable contributions.

Income Taxes

We project that our annual effective tax rate for 2022 will be approximately 25%. In certain interim periods, we may have adjustments to our net deferred tax assets as a result of changes in prior year estimates and tax laws enacted during the period, which will impact the effective tax rate for that interim period.

Delta Air Lines, Inc. June 2022 Form 10-Q 28

Item 2. MD&A - Refinery Segment

Refinery Segment

The refinery operated by Monroe primarily produces gasoline, diesel and jet fuel. Monroe exchanges the non-jet fuel products the refinery produces with third parties for jet fuel consumed in our airline operations. Historically, the jet fuel produced and procured through exchanging gasoline and diesel fuel produced by the refinery provided approximately 200,000 barrels per day, or approximately 75% of our pre-COVID-19 pandemic consumption, for use in our airline operations.

During the three and six months ended June 30, 2022, the refinery operated at near pre-pandemic production levels and a summary of the refinery results is shown below.

Refinery segment financial information
			Three Months Ended June 30,									Increase (Decrease)			Six Months Ended June 30,						Increase (Decrease)
(in millions, except per gallon data)			2022			2021						2022			2021
Exchange products			$	982		$	536					$	446		$	1,791		$	1,039		$	752
Sales of refined products			96			13						83			122			17			105
Sales to airline segment			761			108						653			1,053			108			945
Third party refinery sales			1,514			777						737			2,700			1,317			1,383
Operating revenue			$	3,353		$	1,434					$	1,919		$	5,666		$	2,481		$	3,185
Operating income/(loss)			$	269		$	(157)					$	426		$	323		$	(283)		$	606
Refinery segment impact on airline average price per fuel gallon			$	(0.31)		$	0.23					$	(0.54)		$	(0.20)		$	0.23		$	(0.43)

Refinery revenues increased compared to the three and six months ended June 30, 2021 due primarily to higher pricing and production. The refinery generated operating income in the three and six months ended June 30, 2022 compared to an operating loss in the three and six months ended June 30, 2021, which was driven by the revenue and production increases described in the Results of Operations section above, and partially offset by higher crude oil acquisition costs and increased expense associated with the higher levels of production.

A refinery is subject to annual U.S. Environmental Protection Agency ("EPA") requirements to blend renewable fuels into the gasoline and on-road diesel fuel it produces. Alternatively, a refinery may purchase Renewable Identification Numbers ("RINs") from third parties in the secondary market. The Monroe refinery purchases the majority of its RINs in the secondary market. Observable RINs prices increased during 2022 and Monroe incurred $223 million and $308 million in RINs compliance costs during the three and six months ended June 30, 2022, respectively, compared to $252 million and $410 million in the three and six months ended June 30, 2021, respectively. The higher expense in the 2021 periods resulted from a larger increase in observable RINs prices during that period compared to the increase in the 2022 periods.

At June 30, 2022, we had a net fair value obligation of $556 million related to RINs compliance costs. Our obligation as of June 30, 2022 was calculated using the Renewable Fuel Standard ("RFS") volume requirements, which were finalized in June 2022. The compliance deadlines to retire our obligations for 2020 and 2021 are in the fourth quarter of 2022 and first quarter of 2023, respectively.

For more information regarding the refinery's results, see Note 9 of the Notes to the Condensed Consolidated Financial Statements.

Delta Air Lines, Inc. June 2022 Form 10-Q 29