Item 2. MD&A - Refinery Segment

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Item 2. MD&A - Refinery Segment

Refinery Segment

The refinery operated by Monroe primarily produces gasoline, diesel and jet fuel. Monroe exchanges non-jet fuel products the refinery produces with third parties for jet fuel consumed in our airline operations. The jet fuel produced and procured through exchanging gasoline and diesel fuel produced by the refinery typically provides approximately 200,000 barrels per day, or approximately 75% of our consumption, for use in our airline operations. The refinery regularly optimizes its sales and exchange activities based on market conditions. The refinery generated lower operating income in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily as a result of lower pricing in the first half of 2024.

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

Refinery segment financial information
Three Months Ended June 30,Increase (Decrease)Six Months Ended June 30,Increase (Decrease)
(in millions, except per gallon data)2024202320242023
Exchanged products$361$618$(257)$798$1,330$(532)
Sales of refined products4689(43)86215(129)
Sales to airline segment39336528780961(181)
Third party refinery sales1,2519652862,4361,882554
Operating revenue$2,051$2,037$14$4,100$4,388$(288)
Operating income$60$44$16$108$266$(158)
Refinery segment impact on airline average price per fuel gallon$(0.06)$(0.04)$(0.02)$(0.05)$(0.14)$0.09

Operating Statistics

Three Months Ended June 30,% Increase (Decrease)Six Months Ended June 30,% Increase (Decrease)
Consolidated**(1)**2024202320242023
Revenue passenger miles (in millions) ("RPM")65,24160,8047%119,448110,4918%
Available seat miles (in millions) ("ASM")74,65668,9938%140,198130,3458%
Passenger mile yield21.22¢21.72¢(2)%20.91¢21.37¢(2)%
Passenger revenue per available seat mile ("PRASM")18.54¢19.14¢(3)%17.81¢18.12¢(2)%
Total revenue per available seat mile ("TRASM")22.31¢22.58¢(1)%21.69¢21.74¢—%
TRASM, adjusted(2)20.64¢21.18¢(2.6)%19.95¢20.30¢(2)%
Cost per available seat mile ("CASM")19.28¢18.97¢2%19.63¢20.04¢(2)%
CASM-Ex(2)13.14¢13.06¢0.6%13.58¢13.44¢1%
Passenger load factor87%88%(1)pt85%85%—pts
Fuel gallons consumed (in millions)1,0669977%1,9981,8856%
Average price per fuel gallon(3)$2.64$2.525%$2.71$2.75(1)%
Average price per fuel gallon, adjusted(2)(3)$2.64$2.525%$2.69$2.77(3)%

(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 and refinery segment results.

Delta Air Lines, Inc. | June 2024 Form 10-Q 24

Item 2. MD&A - Fleet Information

Fleet Information

Our operating aircraft fleet, purchase commitments and options at June 30, 2024 are summarized in the following table.

Mainline aircraft information by fleet type
Current Fleet**(1)**Commitments
Fleet TypeOwnedFinance LeaseOperating LeaseTotalAverage Age (Years)PurchaseOptions
A220-10045——454.5
A220-30026——261.974
A319-10057——5722.3
A320-20060——6028.7
A321-2007015421275.5
A321-200neo61——611.19470
A330-20011——1119.2
A330-30028—33115.4
A330-900neo2025272.51210
A350-90019—11305.21410
A350-1000—————20
B-717-2001070—8022.8
B-737-800734—7722.8
B-737-900ER114—491638.5
B-737-10—————10030
B-757-20094——9426.6
B-757-30016——1621.4
B-767-300ER43——4328.1
B-767-400ER21——2123.5
Total7689111096914.9314120

(1)Excludes certain aircraft we own or lease that are operated by regional carriers on our behalf shown in the table below.

The table below summarizes the aircraft operated by regional carriers on our behalf at June 30, 2024.

Regional aircraft information by fleet type and carrier
Fleet Type**(1)(2)**
CarrierCRJ-700CRJ-900Embraer 170Embraer 175Total
Endeavor Air, Inc.(3)9120——129
SkyWest Airlines, Inc.837—85130
Republic Airways, Inc.——114657
Total1715711131316

(1)We own 192 and have operating leases for three of these regional aircraft. The remainder are owned or leased by SkyWest Airlines, Inc. or Republic Airways, Inc.

(2)Excluded from the total operating count above are nine CRJ-700 and three CRJ-900 aircraft which are owned and temporarily parked as of June 30, 2024.

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

Delta Air Lines, Inc. | June 2024 Form 10-Q 25

Item 2. MD&A - Financial Condition and Liquidity

Financial Condition and Liquidity

As of June 30, 2024, we had $7.2 billion in cash, cash equivalents, short-term investments and aggregate undrawn principal amount available 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 and cash flows from operations. We expect to meet our long-term liquidity needs with cash flows from operations and financing arrangements.

Undrawn Lines of Credit. As of June 30, 2024, we had approximately $2.9 billion undrawn and available under our revolving credit facilities.

Sources and Uses of Liquidity

Operating Activities

We generated cash flows from operations of $4.9 billion and $4.8 billion in the six months ended June 30, 2024 and 2023, respectively. We expect to continue generating positive cash flows from operations during the remainder of 2024.

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.

Fuel. Fuel expense represented approximately 20% of our total operating expense for the six months ended June 30, 2024 and 2023. The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations. For example, the market price for jet fuel was 5% higher in the June 2024 quarter compared to the June 2023 quarter after it was 15% lower in the March 2024 quarter compared to the March 2023 quarter. Fuel consumption was higher during the three and six months ended June 30, 2024 compared to the prior year period due to the increase in capacity. We continue to expect that fuel consumption throughout 2024 will increase compared to 2023 aligned with capacity, partially offset by increases in the fuel efficiency of our fleet.

Profit Sharing. We paid $1.4 billion in profit sharing payments in February 2024 related to our 2023 pre-tax profit in recognition of our employees' contributions toward achieving the year's financial results. This is an increase compared to our profit sharing payment made in February 2023 of $563 million related to our 2022 pre-tax profit.

Our broad-based employee profit sharing program provides that for each year in which we have an annual pre-tax profit, as defined by the terms of the program, we will pay a specified portion of that profit to eligible employees. In determining the amount of profit sharing, the program defines profit as pre-tax profit adjusted for profit sharing and certain other items. During the six months ended June 30, 2024, we accrued $644 million in profit sharing expense based on the year-to-date performance and current expectations for 2024 profit.

Sale of Miles to Participating Companies. Customers earn miles based on their spending with participating companies such as credit card, retail, ridesharing, car rental and hotel companies with which we have marketing agreements to sell miles. Payments are typically due to us monthly based on the volume of miles sold during the period. Our most significant contract to sell miles relates to our co-brand credit card relationship with American Express. Total cash sales to American Express were $3.6 billion in the six months ended June 30, 2024, an increase of 7% compared to the prior year period. See Note 2 of the Notes to the Condensed Consolidated Financial Statements for further information regarding the cash sales from marketing agreements.

Delta Air Lines, Inc. | June 2024 Form 10-Q 26

Item 2. MD&A - Financial Condition and Liquidity

Investing Activities

Short-Term Investments. During the six months ended June 30, 2024, we redeemed a net of $1.0 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 $2.5 billion for each of the six months ended June 30, 2024 and 2023. 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. Our expected 2024 capital spend of approximately $5.0 billion, excluding the New York-LaGuardia airport project discussed below, 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 of New York and New Jersey to replace Terminals C and D with a new state-of-the-art terminal facility. Construction is ongoing with completion expected by the end of 2024.

Using funding primarily provided by existing financing arrangements and other sources of funding, we expect to spend approximately $400 million on this project during 2024, of which $163 million was incurred in the six months ended June 30, 2024.

Financing Activities

Debt and Finance Leases. In the six months ended June 30, 2024, we had cash outflows of $2.1 billion related to repayments of our debt and finance lease obligations, including approximately $900 million of early repayments. This included early extinguishment of $744 million in principal related to a portion of the SkyMiles Term Loan and various secured and unsecured notes, and approximately $150 million on finance leases that were scheduled to be paid later in 2024. We continue to seek opportunities to pre-pay our debt, in addition to periodic amortization and scheduled maturities.

In February 2024, Moody's credit rating agency affirmed our credit rating and upgraded its outlook for Delta to positive.

Capital Return to Shareholders. In the June 2024 quarter, the Board of Directors approved a quarterly dividend of $0.10 per share, which we paid on June 4, 2024 for total cash dividends of $64 million. Total cash dividends for the six months ended June 30, 2024 were $128 million.

On June 20, 2024, the Board of Directors approved and we will pay a quarterly dividend of $0.15 per share on August 20, 2024 to shareholders of record as of July 30, 2024.

Covenants. We were in compliance with the covenants in our debt agreements at June 30, 2024.

Critical Accounting Estimates

There have been no material changes in our Critical Accounting Estimates from the information provided in 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.

Delta Air Lines, Inc. | June 2024 Form 10-Q 27

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 to provide comparability between the reported periods, if applicable, and for the reasons indicated below:

*•*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.

*•*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.

  • 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.

  • One-time pilot agreement expenses. In the March 2023 quarter, Delta pilots ratified a new four-year Pilot Working Agreement effective January 1, 2023. The agreement included a provision for a one-time payment made upon ratification in the March 2023 quarter of $735 million. Additionally, we recorded adjustments to other benefit-related items of approximately $130 million. Adjusting for these expenses allows investors to better understand and analyze our core cost performance.

Total revenue, adjusted reconciliation
Three Months Ended June 30,
(in millions)20242023
Total revenue$16,658$15,578
Adjusted for:
Third-party refinery sales(1,251)(965)
Total revenue, adjusted$15,407$14,613
Operating expense, adjusted reconciliation
Three Months Ended June 30,
(in millions)20242023
Operating expense$14,391$13,087
Adjusted for:
Third-party refinery sales(1,251)(965)
MTM adjustments and settlements on hedges(1)(3)
Operating expense, adjusted$13,138$12,119

Delta Air Lines, Inc. | June 2024 Form 10-Q 28

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)2024202320242023
Total fuel expense$2,813$2,516$2.64$2.52
Adjusted for:
MTM adjustments and settlements on hedges(1)(3)——
Total fuel expense, adjusted$2,811$2,513$2.64$2.52
Average Price Per Gallon
Six Months Ended June 30,Six Months Ended June 30,
(in millions, except per gallon data)2024202320242023
Total fuel expense$5,410$5,192$2.71$2.75
Adjusted for:
MTM adjustments and settlements on hedges(28)39(0.01)0.02
Total fuel expense, adjusted$5,382$5,231$2.69$2.77
TRASM, adjusted reconciliation
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
TRASM (cents)22.31¢22.58¢21.69¢21.74¢
Adjusted for:
Third-party refinery sales(1.68)(1.40)(1.74)(1.44)
TRASM, adjusted20.64¢21.18¢19.95¢20.30¢
CASM-Ex reconciliation
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
CASM (cents)19.28¢18.97¢19.63¢20.04¢
Adjusted for:
Aircraft fuel and related taxes(3.77)(3.65)(3.86)(3.98)
Third-party refinery sales(1.68)(1.40)(1.74)(1.44)
Profit sharing(0.70)(0.86)(0.46)(0.51)
One-time pilot agreement expenses———(0.66)
CASM-Ex13.14¢13.06¢13.58¢13.44¢

Delta Air Lines, Inc. | June 2024 Form 10-Q 29

Item 2. MD&A - Supplemental Information

Free Cash Flow

The following table shows a reconciliation of net cash provided by operating and used in investing activities (GAAP measures) to free cash flow (a non-GAAP financial measure). We present free cash flow because management believes this metric is helpful to investors to evaluate the company's ability to generate cash that is available for use for debt service or general corporate initiatives. Adjustments include:

  • Net redemptions of short-term investments. Net redemptions of short-term investments represent the net purchase and sale activity of investments and marketable securities in the period, including gains and losses. We adjust for this activity to provide investors a better understanding of the company's free cash flow generated by our operations.

*•*Net cash flows related to certain airport construction projects and other. Cash flows related to certain airport construction projects are included in our GAAP operating activities and capital expenditures. We have adjusted for these items because management believes investors should be informed that a portion of these capital expenditures from airport construction projects are either reimbursed by a third party or funded with restricted cash specific to these projects.

Free cash flow reconciliation
Three Months Ended June 30,
(in millions)2024
Net cash provided by operating activities$2,450
Net cash used in investing activities(809)
Adjusted for:
Net redemptions of short-term investments(467)
Net cash flows related to certain airport construction projects and other99
Free cash flow$1,274

Delta Air Lines, Inc. | June 2024 Form 10-Q 30

Item 3. Market Risk

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