01—Abstract
Summary
Summary of the 10-K filed February 10, 2023. Cited figures are marked; the original filing is the authoritative source.
Delta Air Lines, Inc. reported a return to profitability for 2022 as demand for air travel recovered from the COVID-19 pandemic.
Operating revenue rose 69% to $50.58 billiona from $29.90 billion in 2021, on a 20% increase in system capacity. Operating income was $3.66 billion, compared with $1.89 billion in 2021 (which included a $4.5 billion payroll support program grant benefit), and net income was $1.32 billion, versus $280 million in 2021. Operating income was still $3.0 billion below 2019.
Fuel expense rose sharply, with the average price per gallon increasing to $3.36b from $2.02, and fuel accounted for about 24% of total operating expense. Cash generation and balance sheet repair were central priorities. Operating activities provided $6.36 billion and free cash flow (a non-GAAP measure) was $244 million.
Delta repaid approximately $4.5 billionc of debt and finance lease obligations, including about $2.3 billion of early repayments, and ended the year with $9.4 billion of liquidity. Total debt and finance leases were $23.2 billion at year-end. Management stated it remains committed to regaining investment grade metrics and expects 2023 system capacity to fully recover to or exceed 2019 levels.
Key risks include fuel price volatility, a pending pilot collective bargaining ratification (vote scheduled to close March 1, 2023, with an approximately $700 milliond one-time payment not yet accrued), airport and air traffic control constraints, and evolving environmental regulation including SAF mandates and CORSIA. The company also disclosed a pending class action antitrust matter concerning capacity, which it says lacks merit.
02—Key points
Key Highlights
- Total operating revenue of $50.58 billion, up 69% from $29.90 billion in 2021, driven by travel demand recovery and higher third-party refinery sales.
- Operating income of $3.66 billion and net income of $1.32 billion, compared with $1.89 billion and $280 million in 2021; 2021 operating income included a $4.5 billion payroll support grant benefit.
- Operating cash flow of $6.36 billion and free cash flow of $244 million (non-GAAP) for 2022.
- Debt and finance lease repayments of about $4.5 billion in 2022; principal amount of debt and finance leases was $23.2 billion at year-end, and liquidity was $9.4 billion.
- Fuel expense rose to $11.48 billion, with average price per gallon of $3.36 versus $2.02 in 2021; fuel was about 24% of total operating expense.
- Pilot tentative agreement ratified by the MEC in January 2023, with an 18% pay rate increase in 2023 and a roughly $700 million one-time payment subject to pilot ratification.
- Aircraft purchase commitments of approximately $19.0 billion at year-end, including 100 Boeing 737-10 aircraft ordered in 2022.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 10, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $50.58B$29.90B | +69.2% |
| Operating Expenses | $46.92B$28.01B | +67.5% |
| Operating Income | $3.66B$1.89B | +94.1% |
| Net Income | $1.32B$280.00M | +370.7% |
| EPS (Basic) | $2.07$0.44 | +370.5% |
| EPS (Diluted) | $2.06$0.44 | +368.2% |
| Shares Outstanding (Basic) | 638.00M636.00M | +0.3% |
| Shares Outstanding (Diluted) | 641.00M641.00M | 0.0% |
05—Questions
Frequently Asked Questions
How did Delta's profitability change in 2022?
Operating income rose to $3.66 billion from $1.89 billion in 2021, and net income was $1.32 billion versus $280 million. The improvement reflected a 69% rise in operating revenue on 20% more capacity, although 2021 results included a $4.5 billion payroll support grant benefit and 2022 operating income remained $3.0 billion below 2019.
How much debt did Delta reduce, and what is its liquidity position?
Delta made about $4.5 billion of debt and finance lease payments in 2022, including about $2.3 billion of early repayments. Principal debt and finance leases were $23.2 billion at December 31, 2022, and liquidity, including cash, short-term investments and undrawn revolving credit, was $9.4 billion. The company says it remains committed to regaining investment grade metrics.
What are the main cost pressures Delta faces?
Fuel is the largest variable cost, with aircraft fuel and related taxes of $11.48 billion in 2022 (average $3.36 per gallon). Salaries and related costs rose to $11.90 billion after hiring about 25,000 employees and a 4% base pay increase, and the company announced a 5% base pay increase effective April 1, 2023. The pilot agreement adds an 18% pay rate increase in 2023 if ratified.
What is the outlook for 2023 according to the filing?
Delta expects 2023 system capacity to fully recover to or exceed 2019 levels, expects non-fuel unit costs to decrease compared with 2022 as the network is restored, and expects fuel consumption to rise as capacity returns. It anticipates capital spending of about $5.5 billion in 2023, excluding the LaGuardia project, and expects an effective tax rate of 23% to 26%.
What significant risks or pending matters are disclosed?
Key matters include the pilot contract vote closing March 1, 2023, with a roughly $700 million one-time payment not accrued at year-end; exposure to renewable identification number (RIN) prices at the Monroe refinery, with a $226 million net obligation; and a Multi-District Litigation capacity antitrust lawsuit in which Delta's summary judgment motion has been pending since May 2021. Delta also cites climate regulation, including SAF mandates and CORSIA, as potential cost increases.
06—Continue