Item 2. MD&A - Operating Statistics

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Item 2. MD&A - Operating Statistics

Operating Statistics

Three Months Ended June 30,2022 vs. 2021 Increase (Decrease)2022 vs. 2019 Increase (Decrease)
Consolidated**(1)**202220212019
Revenue passenger miles (in millions) ("RPM")51,51933,28563,17355%(18)%
Available seat miles (in millions) ("ASM")58,90348,52971,75421%(18)%
Passenger mile yield21.27¢16.04¢18.00¢33%18%
Passenger revenue per available seat mile ("PRASM")18.60¢11.00¢15.84¢69%17%
Total revenue per available seat mile ("TRASM")23.47¢14.68¢17.47¢60%34%
TRASM, adjusted(2)20.90¢13.08¢17.35¢60%20%
Cost per available seat mile ("CASM")20.89¢13.00¢14.51¢61%44%
CASM-Ex(2)12.76¢11.42¢10.47¢12%22%
Passenger load factor87%69%88%18pts(1)pt
Fuel gallons consumed (in millions)8636901,09925%(22)%
Average price per fuel gallon(3)$3.74$2.16$2.0873%80%
Average price per fuel gallon, adjusted(2)(3)$3.82$2.12$2.0780%85%
Six Months Ended June 30,2022 vs. 2021 Increase (Decrease)2022 vs. 2019 Increase (Decrease)
Consolidated**(1)**202220212019
Revenue passenger miles (in millions) ("RPM")90,21851,233114,79076%(21)%
Available seat miles (in millions) ("ASM")110,71388,647134,16925%(17)%
Passenger mile yield19.80¢15.79¢17.96¢25%10%
Passenger revenue per available seat mile ("PRASM")16.14¢9.12¢15.37¢77%5%
Total revenue per available seat mile ("TRASM")20.93¢12.72¢17.15¢65%22%
TRASM, adjusted(2)18.49¢11.23¢17.01¢65%9%
Cost per available seat mile ("CASM")20.27¢13.38¢14.80¢51%37%
CASM-Ex(2)12.98¢12.14¢10.95¢7%19%
Passenger load factor81%58%86%23pts(5)pts
Fuel gallons consumed (in millions)1,6131,2352,06131%(22)%
Average price per fuel gallon(3)$3.29$2.03$2.0762%59%
Average price per fuel gallon, adjusted(2)(3)$3.34$2.03$2.0665%62%

(1)Includes the operations of our regional carriers under capacity purchase agreements.

(2)Non-GAAP financial measures defined and reconciled to TRASM, CASM and average fuel price per gallon, respectively, in "Supplemental Information" below.

(3)Includes the impact of fuel hedge activity, refinery segment results and carbon offset costs.

Delta Air Lines, Inc. June 2022 Form 10-Q 30

Item 2. MD&A - Fleet Information

Fleet Information

Our operating aircraft fleet, purchase commitments and options at June 30, 2022 are summarized in the following table.

Mainline aircraft information by fleet type
Current Fleet**(1)**Commitments**(1)**
Fleet TypeOwnedFinance LeaseOperating LeaseTotalAverage Age (Years)PurchaseOptions
A220-100414—452.5
A220-30011——111.33950
A319-10057——5720.3
A320-20060——6026.7
A321-2006922361273.5
A321-200neo3——30.215270
A330-20011——1117.2
A330-30028—33113.4
A330-900neo735151.623
A350-90015—11263.918
B-717-200105046421.0
B-737-800734—7720.8
B-737-900ER1082491596.44
B-757-200100——10024.9
B-757-30016——1619.4
B-767-300ER42——4225.9
B-767-400ER21——2121.5
Total6728510886514.3236120

(1)Includes both active and temporarily parked aircraft. Excludes certain aircraft we own or lease or that are operated by regional carriers on our behalf shown in the table below. We have also committed to purchase one CRJ-900 aircraft for Endeavor Air, Inc.

The table below summarizes the aircraft operated by regional carriers on our behalf at June 30, 2022.

Regional aircraft information by fleet type and carrier
Fleet Type**(1)**
CarrierCRJ-200CRJ-700CRJ-900Embraer 170Embraer 175Total
Endeavor Air, Inc.(2)5118126——195
SkyWest Airlines, Inc.9644—71130
Republic Airways, Inc.———114657
Total602417011117382

(1)Includes both active and temporarily parked aircraft.

(2)Endeavor Air, Inc. is a wholly owned subsidiary of Delta.

Delta Air Lines, Inc. June 2022 Form 10-Q 31

Item 2. MD&A - Financial Condition and Liquidity

Financial Condition and Liquidity

As of June 30, 2022, we had $13.6 billion in cash, cash equivalents, short-term investments and aggregate principal amount committed and available to be drawn under our revolving credit facilities ("liquidity"). We expect to meet our liquidity needs for the next twelve months with cash and cash equivalents, short-term investments, restricted cash equivalents and cash flows from operations. We expect to meet our long-term liquidity needs with cash flows from operations and financing arrangements. We are continuing to evaluate the appropriate level of liquidity to maintain following the COVID-19 pandemic although, at least in the near term, we expect this level to be higher than the liquidity maintained prior to the pandemic. By 2024, we expect liquidity to be between $5 billion and $6 billion as we work to reduce our financial obligations and reinvest in the business.

Sources and Uses of Liquidity

Operating Activities

We generated cash flows from operations of $4.3 billion and $2.6 billion in the six months ended June 30, 2022 and 2021, respectively. We expect to continue generating positive cash flows from operations during the remainder of 2022.

Our operating cash flow is impacted by the following factors:

Seasonality of Advance Ticket Sales. We sell tickets for air travel in advance of the customer's travel date. When we receive a cash payment at the time of sale, we record the cash received on advance sales as deferred revenue in air traffic liability. The air traffic liability typically increases during the winter and spring months as advance ticket sales grow prior to the summer peak travel season and decreases during the summer and fall months.

From the onset of the COVID-19 pandemic in the March 2020 quarter through 2021, reduced demand for air travel resulted in a lower level of advance bookings and the associated cash received than we had historically experienced, which had been impacting the typical seasonal trend of air traffic liability. However, demand has improved during 2022 as consumers have regained confidence to travel and increased ticket purchases for travel further in advance. Air traffic liability increased approximately $805 million during the June 2022 quarter, which exceeds our historical seasonal change, reflecting the continued restoration of our business and robust demand environment. Our air traffic liability remains above historical levels with no material change to the travel credit balance compared to December 31, 2021.

Fuel. Fuel expense represented approximately 24% and 21% of our total operating expense for the six months ended June 30, 2022 and 2021, respectively. The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations. The average fuel price per gallon increased substantially during the six months ended June 30, 2022. We expect elevated jet fuel prices to continue throughout 2022 due to current market conditions, further exacerbated by geopolitical events. Fuel consumption was also higher during the six months ended June 30, 2022 compared to the prior year period due to the increase in capacity. We expect that fuel consumption will continue to increase throughout 2022, compared to 2021, as we expect to return closer to pre-pandemic levels of capacity and demand for air travel, partially offset by increases in fuel efficiency of our fleet.

New York-JFK Airport Expansion. During 2021, the Port Authority of New York and New Jersey ("Port Authority") approved modified project plans to renovate and expand Terminal 4 in order to facilitate Delta's relocation from Terminal 2 and consolidation of its operations into the single facility. The project will add 10 new gates and other complementary facilities, including an additional Delta Sky Club and a new Delta One lounge. The project is estimated to cost approximately $1.5 billion and will be funded primarily with bonds issued in April 2022 by the New York Transportation Development Corporation ("NYTDC") for which our landlord, JFK International Air Terminal LLC, is the obligor. In April 2022, we amended our sublease to provide for the expansion project, including the adjustment of our subleased space and rentals. Based on our assessment of the project, we concluded that we do not control the underlying assets being constructed, and therefore, we do not have the project asset or related obligation recorded on our balance sheet. The majority of project costs are being used to expand or modify Delta's leased premises, and thus will increase Delta's lease liability which we will pay via rent through 2043. Construction started in late 2021, with Delta's portion of the project estimated to be complete by the end of 2023.

Delta Air Lines, Inc. June 2022 Form 10-Q 32

Item 2. MD&A - Financial Condition and Liquidity

Investing Activities

Short-Term Investments. During the six months ended June 30, 2022, we redeemed a net of $1.8 billion in short-term investments. See Note 3 of the Notes to the Condensed Consolidated Financial Statements for further information on these investments.

Capital Expenditures. Our capital expenditures were $2.7 billion and $1.2 billion for the six months ended June 30, 2022 and 2021, respectively. Our capital expenditures are primarily related to the purchases of aircraft, airport construction projects, fleet modifications and technology enhancements.

We have committed to future aircraft purchases and have obtained, but are under no obligation to use, long-term financing commitments for a substantial portion of the purchase price of the aircraft. Excluding the New York-LaGuardia airport project discussed below, our expected 2022 capital expenditures of approximately $6.0 billion will be primarily for aircraft, including deliveries and advance deposit payments, as well as fleet modifications and technology enhancements and may vary depending on financing decisions.

New York-LaGuardia Redevelopment. As part of the terminal redevelopment project at LaGuardia Airport, we are partnering with the Port Authority to replace Terminals C and D with a new state-of-the-art terminal facility. Completion is expected by 2025. In June 2022, we achieved a significant milestone by opening the 455,000 square foot headhouse, the terminal roadways and Concourse E - the second of four new concourses to be built. Construction is approximately 75% complete and will continue to be phased to support airline operations while minimizing customer inconvenience.

We currently expect our net project costs to be approximately $3.5 billion and we bear the risks of project construction, including any potential cost over-runs. Using funding primarily provided by existing financing arrangements, we expect to spend approximately $725 million on this project during 2022, of which $402 million was incurred in the six months ended June 30, 2022.

Los Angeles International Airport ("LAX"). The City of Los Angeles ("the City") owns and operates LAX and we have an ongoing terminal redevelopment project at LAX to modernize, update and provide post-security connection to Terminals 2 and 3. In April 2022, we reached the next major phasing milestone of the project with the opening of a new consolidated headhouse for both terminals, which includes ticketing, security, baggage claim and a new Delta Sky Club lounge, and in May opened the Terminal 3 concourse with the initial three of 14 planned new gates. Construction is expected to be completed in 2023 and the project is expected to cost approximately $2.3 billion. A substantial majority of the project costs are being funded through the Regional Airports Improvement Corporation ("RAIC"), a California public benefit corporation, using a revolving credit facility provided by a group of lenders. The credit facility was executed in 2017 and we have guaranteed the obligations of the RAIC under the credit facility. The revolving credit facility agreement was amended in January 2022, increasing the revolver capacity from $800 million to $1.1 billion. Loans made under the credit facility are being repaid with the proceeds from the City's purchase of completed project assets.

Financing Activities

Debt and Finance Leases. In the six months ended June 30, 2022, we had cash outflows of approximately $2.4 billion related to repayments of our debt and finance lease obligations, including $839 million for the early repurchase of various secured and unsecured notes. 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.

The principal amount of our debt and finance leases was $25.0 billion at June 30, 2022.

Undrawn Lines of Credit

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.

Covenants

We were in compliance with the covenants in our debt agreements at June 30, 2022.

Delta Air Lines, Inc. June 2022 Form 10-Q 33

Item 2. MD&A - Critical Accounting Estimates

Critical Accounting Estimates

Except as set forth below, for information regarding our Critical Accounting Estimates, see the "Critical Accounting Estimates" section of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K.

Defined Benefit Pension Plans

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%.

Recent Accounting Standards

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.

Delta Air Lines, Inc. June 2022 Form 10-Q 34

Item 2. MD&A - Supplemental Information

Supplemental Information

We sometimes use information (non-GAAP financial measures) that is derived from the Condensed Consolidated Financial Statements, but that is not presented in accordance with GAAP. Under the U.S. Securities and Exchange Commission rules, non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results.

Included below are reconciliations of non-GAAP measures used within this Form 10-Q to the most directly comparable GAAP financial measures. Reconciliations below may not calculate exactly due to rounding. These reconciliations include certain adjustments to GAAP measures that are directly related to the impact of COVID-19 and our response. These adjustments are made to provide comparability between the reported periods, if applicable, as indicated below:

  • Restructuring charges. During 2020, we recorded restructuring charges for items such as fleet impairments and voluntary early retirement and separation programs following strategic business decisions in response to the COVID-19 pandemic. In the June 2022 quarter, we recognized $1 million of net adjustments to certain of those restructuring charges, representing changes in our estimates, compared to $8 million of net adjustments in the June 2021 quarter.

  • Government grant recognition. We recognized $1.5 billion and $2.7 billion of the grant proceeds from the payroll support program extensions as contra-expense during the June 2021 quarter and six months ended June 2021, respectively. We recognized the grant proceeds as contra-expense based on the periods that the funds were intended to compensate and have fully used all proceeds from the payroll support program extensions.

We also regularly adjust certain GAAP measures for the following items, if applicable, for the reasons indicated below:

*•MTM adjustments and settlements on hedges. Mark-to-market ("*MTM") adjustments are defined as fair value changes recorded in periods other than the settlement period. Such fair value changes are not necessarily indicative of the actual settlement value of the underlying hedge in the contract settlement period, and therefore we remove this impact to allow investors to better understand and analyze our core performance. Settlements represent cash received or paid on hedge contracts settled during the applicable period.

*•*Third-party refinery sales. Refinery sales to third parties, and related expenses, are not related to our airline segment. Excluding these sales therefore provides a more meaningful comparison of our airline operations to the rest of the airline industry.

  • Aircraft fuel and related taxes. The volatility in fuel prices impacts the comparability of year-over-year financial performance. The adjustment for aircraft fuel and related taxes allows investors to better understand and analyze our non-fuel costs and year-over-year financial performance.

  • Profit sharing. We adjust for profit sharing because this adjustment allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.

*•*Delta Private Jets adjustment. Because we combined Delta Private Jets with Wheels Up in January 2020, we have excluded the impact of Delta Private Jets from 2019 results for comparability.

Operating expense, adjusted reconciliation
Three Months Ended June 30,
(in millions)202220212019
Operating expense$12,305$6,310$10,408
Adjusted for:
Restructuring charges1(8)—
Government grant recognition—1,504—
MTM adjustments and settlements on hedges73(24)(10)
Third-party refinery sales(1,514)(777)(40)
Delta Private Jets adjustment——(50)
Operating expense, adjusted$10,866$7,005$10,308

Delta Air Lines, Inc. June 2022 Form 10-Q 35

Item 2. MD&A - Supplemental Information

Fuel expense, adjusted reconciliation
Average Price Per Gallon
Three Months Ended June 30,Three Months Ended June 30,
(in millions, except per gallon data)202220212019202220212019
Total fuel expense$3,223$1,487$2,291$3.74$2.16$2.08
Adjusted for:
MTM adjustments and settlements on hedges73(24)(10)0.08(0.03)(0.01)
Delta Private Jets adjustment——(8)——(0.01)
Total fuel expense, adjusted$3,296$1,463$2,274$3.82$2.12$2.07
Average Price Per Gallon
Six Months Ended June 30,Six Months Ended June 30,
(in millions, except per gallon data)202220212019202220212019
Total fuel expense$5,315$2,504$4,269$3.29$2.03$2.07
Adjusted for:
MTM adjustments and settlements on hedges77(1)(17)0.05—(0.01)
Delta Private Jets adjustment——(15)——(0.01)
Total fuel expense, adjusted$5,392$2,504$4,237$3.34$2.03$2.06
TRASM, adjusted reconciliation
Three Months Ended June 30,Six Months Ended June 30,
202220212019202220212019
TRASM (cents)23.47¢14.68¢17.47¢20.93¢12.72¢17.15¢
Adjusted for:
Third-party refinery sales(2.57)(1.60)(0.06)(2.44)(1.49)(0.07)
Delta Private Jets adjustment——(0.07)——(0.07)
TRASM, adjusted20.90¢13.08¢17.35¢18.49¢11.23¢17.01¢
CASM-Ex reconciliation
Three Months Ended June 30,Six Months Ended June 30,
202220212019202220212019
CASM (cents)20.89¢13.00¢14.51¢20.27¢13.38¢14.80¢
Adjusted for:
Restructuring charges—(0.02)—0.010.04—
Government grant recognition—3.10——3.03—
Aircraft fuel and related taxes(5.47)(3.06)(3.19)(4.80)(2.82)(3.18)
Third-party refinery sales(2.57)(1.60)(0.06)(2.44)(1.49)(0.07)
Profit sharing(0.09)—(0.72)(0.05)—(0.55)
Delta Private Jets adjustment——(0.06)——(0.06)
CASM-Ex12.76¢11.42¢10.47¢12.98¢12.14¢10.95¢

Delta Air Lines, Inc. June 2022 Form 10-Q 36

Item 3. Market Risk

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