01—Abstract
Summary
Summary of the 10-K filed February 12, 2021. Cited figures are marked; the original filing is the authoritative source.
Delta Air Lines, Inc. reported a 2020 pre-tax loss of $15.6 billiona and a net loss of $12.4 billion, compared with pre-tax income of $6.2 billion and net income of $4.8 billion in 2019.
Operating revenue fell $29.9 billionb, or 64%, to $17.1 billion, as the COVID-19 pandemic cut demand, and system capacity was reduced approximately 50% versus 2019. Operating expense fell 27% to $29.6 billion, but restructuring charges of $8.2 billion, including $4.4 billion of fleet impairments and $3.4 billion of voluntary program charges, drove the operating loss to $12.5 billion. The company also recorded $3.9 billion of CARES Act payroll support grant recognition as a contra-expense and $2.4 billion of investment impairments and equity method losses.
Liquidity was $16.7 billionc at December 31, 2020, supported by approximately $25.9 billion of financing transactions and $5.6 billion of CARES Act payroll support. Free cash flow was negative $4.3 billion, compared with positive $4.2 billion in 2019. Total debt and finance leases principal reached $29.4 billion, and stockholders' equity fell to $1.5 billion from $15.4 billion.
Management expects capacity and demand to recover through 2021, with a March 2021 quarter capacity forecast down 30% to 40% versus the March 2019 quarter, and expects positive operating cash flow for 2021 if demand evolves as planned. The company suspended dividends and share repurchases, and under the January 2021 payroll support extension it is restricted from these actions through March 2022. Management also cites a $2.9 billiond expected payroll support extension payment and the continuing uncertainty of the pandemic's duration as key factors for investors to monitor.
02—Key points
Key Highlights
- Pre-tax loss of $15.6 billion in 2020 versus pre-tax income of $6.2 billion in 2019; net loss of $12.4 billion, or $(19.49) per diluted share.
- Operating revenue declined 64% to $17.1 billion; passenger revenue fell 70% on a 51% decrease in capacity (ASMs).
- Restructuring charges of $8.2 billion, including $4.4 billion for fleet retirements and $3.4 billion for voluntary separation programs; approximately 18,000 employees took voluntary separation.
- Liquidity of $16.7 billion at year-end, supported by approximately $25.9 billion of financing transactions and $5.6 billion of CARES Act payroll support.
- Free cash flow was negative $4.3 billion in 2020 compared with positive $4.2 billion in 2019; operating activities used $3.8 billion.
- Principal amount of debt and finance leases was $29.4 billion at December 31, 2020; stockholders' equity declined to $1.5 billion from $15.4 billion.
- Dividends and share repurchases are suspended, with payroll support program conditions restricting them through March 2022.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 12, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $17.09B$47.01B | −63.6% |
| Operating Expenses | $29.56B$40.39B | −26.8% |
| Operating Income | -$12.47B$6.62B | −288.4% |
| Net Income | -$12.38B$4.77B | −359.8% |
| EPS (Basic) | $-19.49$7.32 | −366.3% |
| EPS (Diluted) | $-19.49$7.30 | −367.0% |
| Shares Outstanding (Basic) | 636.00M651.00M | −2.3% |
| Shares Outstanding (Diluted) | 636.00M653.00M | −2.6% |
05—Questions
Frequently Asked Questions
How did the COVID-19 pandemic affect Delta's 2020 financial results?
Demand for air travel fell sharply beginning in March 2020. Operating revenue dropped $29.9 billion, or 64%, to $17.1 billion, and the company reduced system capacity by approximately 50% versus 2019. The pre-tax loss was $15.6 billion, and the company recorded $8.2 billion of restructuring charges and $2.4 billion of investment impairments and equity method losses.
How much liquidity does Delta have and how was it raised?
Liquidity, defined as cash, short-term investments and undrawn revolving credit availability, was $16.7 billion at December 31, 2020, an increase of $10.8 billion from 2019. The increase came from approximately $25.9 billion of financing transactions, including $9.0 billion of SkyMiles-secured notes and term loans, $5.6 billion of CARES Act payroll support, and other secured debt and sale-leaseback transactions. The company also expects to receive $2.9 billion of additional payroll support payments under a January 2021 extension.
What does Delta expect for 2021?
Management expects demand to remain depressed in early 2021, with capacity for the March 2021 quarter expected to be down approximately 30% to 40% compared with the March 2019 quarter. It anticipates sustained demand improvement in the second half of 2021 as vaccination becomes widespread, and expects positive cash flows from operations for 2021 if the demand environment evolves as described. Capital expenditures are expected to be approximately $2.5 billion in 2021.
What restrictions were placed on Delta as a result of government support?
Under the CARES Act payroll support program and its January 2021 extension, Delta agreed to refrain from involuntary layoffs or furloughs through March 2021 and is prohibited from share repurchases and dividends through March 2022. Executive compensation is limited until October 2022, and the Department of Transportation may require maintenance of scheduled air service to points served before March 1, 2020, until March 1, 2022.
What fleet and cost changes did Delta make in 2020?
Delta retired 227 aircraft in 2020 and removed approximately 350 aircraft from active service, with plans to retire an additional 128 aircraft by 2025. Fleet retirement impairment charges totaled $4.4 billion. Salaries and related costs fell 22% to $8.8 billion, aided by voluntary unpaid leaves for approximately 50,000 employees and a 20% workforce reduction from the voluntary separation programs.
06—Continue