What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-11 compared with 2021-02-12 · 543 added, 753 removed, 1176 unchanged (52% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets - December 31, 20 2 1 and 20 20

Consolidated Statements of Operations for the years ended December 31, 20 2 1 , 20 20 and 201 9

Consolidated Statements of Comprehensive ( Loss)/ Income for the years ended December 31, 20 20 , 201 9 and 201 8

Consolidated Statements of Comprehensive Income /(L oss) for the years ended December 31, 20 2 1 , 20 20 and 201 9

Consolidated Statements of Cash Flows for the years ended December 31, 20 2 1 , 20 20 and 201 9

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Note 1 - Summary of Significant Accounting Policies

Note 2 - Impact of the COVID-19 Pandemic

Note 2 - Revenue Recognition

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Note 4 - Investments

Note 6 - Derivatives and Risk Management

Note 5 - Goodwill and Intangible Assets

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Note 1 4 - Segments

Note 1 7 - (Loss)/ Earnings Per Share

Note 15 - Restructuring

Note 1 6 - Earnings /(Loss) Per Share

Delta Air Lines, Inc.

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We have audited the accompanying consolidated balance sheets of Delta Air Lines, Inc.

(the Company) as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive (loss)/income, cash flows, and stockholders' equity for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income/(loss), cash flows, and stockholders' equity for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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To test the fair value of plan assets measured at NAV, our audit procedures included, among others, evaluating the valuation methodologies used by the Company and comparing significant inputs and underlying data used in the Company's valuations to information available from third-party sources and market data.

Additionally, we performed sensitivity analyses to evaluate the changes to the Company’s net periodic benefit that would result from changes in the fair value measurement, and compared the Company’s asset performance results to applicable third-party benchmarks and assessed management’s historical accuracy of estimating fair value by performing retrospective review procedures comparing the Company’s estimates of fair value as of the prior year to the final fair value NAV in the investment’s audited financial statements made available during the current year.

Additionally, we performed sensitivity analyses to evaluate the changes to the Company’s net periodic benefit that would result from changes in the fair value measurement, and compared the Company’s asset performance results to applicable third-party benchmarks and assessed management’s historical accuracy of estimating fair value by performing retrospective review procedures comparing the Company’s estimates of fair value as of the prior year end to the final fair value NAV in the investment’s audited financial statements made available during the current year.

To test the expected long-term rate of return on plan assets, our audit procedures included, among others, evaluating the methodology used, testing the significant assumptions used in the determination of the expected return and testing the underlying data used by the Company.

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2021 Form 10-K 64

Fair Value of Fleet Assets

Description of the Matter For the year ended December 31, 2020, the Company recognized $4.4 billion of impairment-related charges for certain owned and leased fleet assets.

These impairment-related charges are classified within restructuring charges in the Company’s consolidated statement of operations.

As discussed in Note 2 to the consolidated financial statements, the Company retired or plans to early retire certain owned and leased fleet types from active service as part of capacity reductions in response to the negative effect on the Company’s business from the global COVID-19 pandemic.

To assess assets for impairment, the Company groups assets at the fleet type level or at the contract level for aircraft operated by third-party regional carriers.

The Company concluded that the management-initiated permanent retirements or planned early retirements of aircraft were impairment indicators which required the Company to test the recoverability of the related asset groups.

The Company concluded the book value of these asset groups were not recoverable due to changes to the estimated future cash flows based primarily on the significant reductions to the remaining operating lives.

As a result, the Company recognized $4.4 billion in impairment-related charges for the amount by which book value of each asset group exceeded its related fair value.

The impairment-related charges were estimated using fair value inputs based primarily upon recent market transactions and third-party bids and corroborated by published pricing guides and the Company’s assessment of existing market conditions based on industry knowledge.

Auditing the Company’s impairment analysis was highly subjective due to the significant estimation required in determining the fair value of the Company’s aircraft.

As a result of the COVID-19 pandemic, there is currently a very limited market for aircraft and limited data on how the COVID-19 pandemic has affected the fair value of aircraft.

For example, we tested controls over management’s review over determining the relevant measures of fair value of fleet assets.

To test the Company’s estimate of the fair value of the aircraft, our audit procedures included, among others, obtaining an understanding of market conditions through inquiries of the Company’s fleet management and comparing the aircraft fair value to recent market transactions, bids from third parties and published pricing guides.

We also performed procedures to independently identify contrary or confirmatory evidence of the fair values used in the Company’s analysis through review of other third-party sources of information.

Realizability of Deferred Tax Assets

Description of the Matter At December 31, 2020, the Company had gross deferred tax assets of $9.5 billion and a related valuation allowance of $460 million.

As discussed in Notes 1 and 13 to the consolidated financial statements, the Company records a valuation allowance based on the assessment of the realizability of the Company’s deferred tax assets.

Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, in management’s judgment it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

Auditing management’s assessment of recoverability of deferred tax assets involved subjective estimation and complex auditor judgment in weighing the positive and negative evidence to determine whether a valuation allowance for deferred tax assets is needed including the Company’s estimate of future taxable income that may be affected by market and economic conditions.

Loyalty Program - Mileage Breakage

Description of the Matter At December 31, 2021 the Company’s aggregate current and noncurrent loyalty program deferred revenue balance was $7.6 billion.

For the year ended December 31, 2021, the Company recognized $1.8 billion of revenue classified as loyalty travel awards within passenger revenue and $1.8 billion of revenue classified as loyalty program revenue within other revenue in the consolidated statement of operations.

As disclosed in Note 2 to the consolidated financial statements, the Company defers revenue for mileage credits earned and recognizes loyalty travel awards in passenger revenue as the miles are redeemed and services are provided.

In determining the value of mileage credits earned, the Company applies an estimate of mileage credits earned that are not expected to be redeemed (“mileage breakage”).

The Company recognizes mileage breakage proportionally during the period in which the remaining mileage credits are actually redeemed.

Under the Company’s loyalty program, mileage credits do not expire.

Therefore, the Company uses statistical models to estimate mileage breakage based on historical redemption patterns.

Auditing the Company’s accounting for its loyalty program required significant estimation in determining the mileage breakage estimate for mileage credits.

In particular, there is complexity and subjectivity in estimating mileage breakage based on expectations of future redemption patterns due to the absence of historical expirations as the Company’s mileage credits do not expire.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting for its loyalty program, including controls over management’s review of the estimation of the mileage breakage and the completeness and accuracy of the data underlying the mileage breakage estimate.

To test the estimate of breakage of mileage credits, our audit procedures included, among others, involving an actuarial specialist to assist in assessing the method used to develop the mileage breakage estimate and independently developing a range of mileage breakage estimates and comparing them to the Company's estimates.

Additionally, we tested the completeness and accuracy of the underlying mileage data used in the Company’s statistical models and performed sensitivity analyses to evaluate the changes to the Company’s deferred revenue that would result from changes in the mileage breakage estimate.

Delta Air Lines, Inc.

2021 Form 10-K 65

Realizability of Deferred Tax Assets

Description of the Matter At December 31, 2021, the Company had gross deferred tax assets of $9.4 billion with a related valuation allowance of $0.8 billion, and gross deferred tax liabilities of $7.3 billion.

As discussed in Notes 1 and 11 to the consolidated financial statements, the Company records a valuation allowance based on the assessment of the realizability of the Company’s deferred tax assets.

Deferred tax assets are reduced by a valuation allowance if, based on the weight of all available evidence, in management’s judgment it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

Auditing management’s assessment of recoverability of deferred tax assets involved subjective estimation and complex auditor judgment in weighing the positive and negative evidence to determine whether a valuation allowance for deferred tax assets is needed, including the Company’s estimate of future taxable income that may be affected by future market and economic conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls that address the risks of material misstatement relating to the realizability of deferred tax assets.

This included controls over management’s scheduling of the future reversal of existing taxable temporary differences, identification and use of available tax planning strategies and estimate of future taxable income.

To test the realizability of the Company’s deferred tax assets, our audit procedures included, among others, evaluating the assumptions to develop the scheduling of the future reversal of existing taxable temporary differences, evaluating tax planning strategies and evaluating the assumptions used by the Company to develop projections of future taxable income.

To test the realizability of the Company’s deferred tax assets, our audit procedures included, among others, evaluating the assumptions used to develop the scheduling of the future reversal of existing taxable temporary differences, evaluating tax planning strategies and evaluating the assumptions used by the Company to develop projections of future taxable income.

We compared the projections of future taxable income with the actual results of prior periods, as well as management’s consideration of current industry and economic trends.

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Short-term investments 3,386 5,789

Accounts receivable, net of an allowance for uncollectible accounts of $ 89 and $ 13 as of 2020 and 2019, respectively

Accounts receivable, net of an allowance for uncollectible accounts of $ 50 and $ 89

Fuel inventory 694 377

Expendable parts and supplies inventories, net of an allowance for obsolescence of $ 188 and $ 82 as of 2020 and 2019, respectively

Expendable parts and supplies inventories, net of an allowance for obsolescence of $ 176 and $ 188

Prepaid expenses and other 1,119 1,180

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Noncurrent Assets:

Property and equipment, net of accumulated depreciation and amortization of $ 17,511 and $ 17,027 as of 2020 and 2019, respectively

Property and equipment, net of accumulated depreciation and amortization of $ 18,671 and $ 17,511

28,749 26,529

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Goodwill 9,753 9,753

Identifiable intangibles, net of accumulated amortization of $ 883 and $ 873 as of 2020 and 2019, respectively

Identifiable intangibles, net of accumulated amortization of $ 893 and $ 883

Cash restricted for airport construction 473 1,556

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Noncurrent operating leases 7,056 5,713

Deferred income taxes, net — 1,456

Other noncurrent liabilities 4,398 4,862

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Common stock at $ 0.0001 par value;

1,500,000,000 shares authorized, 647,352,203 and 651,731,443 shares issued as of 2020 and 2019, respectively

1,500,000,000 shares authorized, 649,720,387 and 647,352,203 shares issued

Additional paid-in capital 11,447 11,259

Retained earnings/(deficit) ( 428 ) 12,454

Accumulated deficit ( 148 ) ( 428 )

Accumulated other comprehensive loss ( 7,130 ) ( 9,038 )

Treasury stock, at cost, 9,169,683 and 8,959,730 shares as of 2020 and 2019, respectively

Treasury stock, at cost, 9,752,872 and 9,169,683

( 282 ) ( 259 )

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Aircraft fuel and related taxes 5,633 3,176 8,519

Regional carriers expense, excluding fuel 2,479 3,584 3,438

Depreciation and amortization 2,312 2,581 2,329

Ancillary businesses and refinery 3,957 1,785 1,245

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Landing fees and other rents 2,019 1,833 2,176

Depreciation and amortization 1,998 2,312 2,581

Regional carrier expense 1,736 1,584 2,158

Aircraft maintenance materials and outside repairs 1,401 822 1,751

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Restructuring charges ( 19 ) 8,219 —

Government grant recognition ( 3,946 ) — —

Profit sharing 108 — 1,643

Government grant recognition ( 4,512 ) ( 3,946 ) —

Other 1,405 1,232 1,827

Total operating expense 28,013 29,564 40,389

Operating (Loss)/Income ( 12,469 ) 6,618 5,264

Operating Income/(Loss) 1,886 ( 12,469 ) 6,618

Non-Operating Expense:

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Gain/(loss) on investments, net 56 ( 105 ) 119

Loss on extinguishment of debt ( 319 ) ( 8 ) —

Pension and related benefit/(expense) 451 219 ( 65 )

Miscellaneous, net ( 60 ) 137 ( 111 )

Total non-operating expense, net ( 1,488 ) ( 3,118 ) ( 420 )

(Loss)/Income Before Income Taxes ( 15,587 ) 6,198 5,151

Income Tax Benefit/(Provision) 3,202 ( 1,431 ) ( 1,216 )

Net (Loss)/Income $ ( 12,385 ) $ 4,767 $ 3,935

Basic (Loss)/Earnings Per Share $ ( 19.49 ) $ 7.32 $ 5.69

Diluted (Loss)/Earnings Per Share $ ( 19.49 ) $ 7.30 $ 5.67

Income/(Loss) Before Income Taxes 398 ( 15,587 ) 6,198

Income Tax (Provision)/Benefit ( 118 ) 3,202 ( 1,431 )

Net Income/(Loss) $ 280 $ ( 12,385 ) $ 4,767

Basic Earnings/(Loss) Per Share $ 0.44 $ ( 19.49 ) $ 7.32

Diluted Earnings/(Loss) Per Share $ 0.44 $ ( 19.49 ) $ 7.30

Cash Dividends Declared Per Share $ — $ 0.40 $ 1.51

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DELTA AIR LINES, INC.

Consolidated Statements of Comprehensive (Loss)/Income

Consolidated Statements of Comprehensive Income/(Loss)

Year Ended December 31,

(in millions) 2021 2020 2019

Net (Loss)/Income $ ( 12,385 ) $ 4,767 $ 3,935

Other comprehensive (loss)/income:

Net Income/(Loss) $ 280 $ ( 12,385 ) $ 4,767

Other comprehensive income/(loss):

Net change in derivative contracts and other — ( 66 ) 6

Net change in pension and other benefits 1,908 ( 983 ) ( 170 )

Total Other Comprehensive (Loss)/Income ( 1,049 ) ( 164 ) ( 98 )

Comprehensive (Loss)/Income $ ( 13,434 ) $ 4,603 $ 3,837

Total Other Comprehensive Income/(Loss) 1,908 ( 1,049 ) ( 164 )

Comprehensive Income/(Loss) $ 2,188 $ ( 13,434 ) $ 4,603

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

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Cash Flows From Operating Activities:

Net (loss)/income $ ( 12,385 ) $ 4,767 $ 3,935

Net income/(loss) $ 280 $ ( 12,385 ) $ 4,767

Adjustments to reconcile net income to net cash provided by operating activities:

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Other, net 57 559 244

Net cash (used in)/provided by operating activities ( 3,793 ) 8,425 7,014

Net cash provided by/(used in) operating activities 3,264 ( 3,793 ) 8,425

Cash Flows From Investing Activities:

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Other, net 80 ( 202 ) ( 21 )

Net cash provided by/(used in) financing activities 19,356 ( 2,880 ) ( 1,726 )

Net Increase in Cash, Cash Equivalents and Restricted Cash 6,325 982 895

Net cash (used in)/provided by financing activities ( 3,852 ) 19,356 ( 2,880 )

Net (Decrease)/Increase in Cash, Cash Equivalents and Restricted Cash ( 1,486 ) 6,325 982

Cash, cash equivalents and restricted cash at beginning of period 10,055 3,730 2,748

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Flight and ground equipment acquired under finance leases 1,049 381 650

Other financings — 280 —

Operating leases converted to finance leases 42 — 190

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Paid-In Capital Retained

Earnings / (Deficit) Accumulated

Earnings / (Accumulated Deficit) Accumulated

Comprehensive Loss Treasury Stock

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Net income — — — 4,767 — — — 4,767

Change in accounting principle and other — — — ( 154 ) ( 106 ) — — ( 260 )

Dividends declared — — — ( 981 ) — — — ( 981 )

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2 — 114 — — 1 ( 38 ) 76

Stock options exercised 1 — 13 — — — — 13

Stock purchased and retired ( 38 ) — ( 656 ) ( 1,371 ) — — — ( 2,027 )

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— — — — ( 1,049 ) — — ( 1,049 )

Common stock issued for employee equity awards (1)

Common stock issued for employee equity awards and other (1)

1 — 120 — — — ( 23 ) 97

Stock purchased and retired ( 6 ) — ( 104 ) ( 240 ) — — — ( 344 )

Government grant warrant issuance — — 114 — — — — 114

Balance at December 31, 2020 647 — 11,259 ( 428 ) ( 9,038 ) 9 ( 259 ) 1,534

— — — 280 — — — 280

Dividends declared

— — — ( 257 ) — — — ( 257 )

Other comprehensive loss

Other comprehensive income

— — — — 1,908 — — 1,908

Common stock issued for employee equity awards and other (1)

Common stock issued for employee equity awards (1)

3 — 102 — — 1 ( 23 ) 79

Stock purchased and retired ( 6 ) — ( 104 ) ( 240 ) — — — ( 344 )

Government support warrant issuance — — 114 — — — — 114

Government grant warrant issuance — — 86 — — — — 86

Balance at December 31, 2021 650 $ — $ 11,447 $ ( 148 ) $ ( 7,130 ) 10 $ ( 282 ) $ 3,887

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Unless otherwise noted, all amounts disclosed are stated before consideration of income taxes.

Regional Carrier Expense

Until 2021, we allocated certain costs (such as landing fees and other rents, salaries and related costs and contracted services) to regional carrier expense in our income statement based on relevant statistics (such as passenger counts).

Beginning in 2021 we ceased performing this allocation and have reclassified the costs presented in prior periods to align with this presentation.

This reclassification better reflects the nature of, and how management views, these regional carrier related expenses.

This allocation was approximately $ 900 million in 2020 and $ 1.4 billion in 2019.

The amounts in regional carrier expense under the current presentation represent the accrual of payments to our regional carriers under capacity purchase agreements, maintenance costs related to our regional fleet and the expenses of our wholly owned regional subsidiary, Endeavor Air, Inc.

Use of Estimates

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Recent Accounting Standards

Credit Losses.

In 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2016-13, "Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments." Under this ASU, an entity is required to utilize an "expected credit loss model" on certain financial instruments, including trade and financing receivables.

This model requires consideration of a broader range of reasonable and supportable information and requires an entity to estimate expected credit losses over the lifetime of the asset.

We adopted this standard effective January 1, 2020 and due to the COVID-19 pandemic, we recorded reserves on certain receivables, which are discussed further in Note 5, "Investments."

Income Taxes.

In 2019, the FASB issued ASU No.

2019-12, "Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes." This standard simplifies the accounting and disclosure requirements for income taxes by clarifying existing guidance to improve consistency in application of ASC 740.

This standard also removed the requirement to calculate income tax expense for the stand-alone financial statements of wholly owned subsidiaries.

We adopted the new standard effective January 1, 2020 with no impact on our Consolidated Financial Statements.

Government Assistance .

In 2021, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No.

2021-10, "Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance." This ASU will require certain disclosures about the significant terms and conditions of material government assistance agreements in order to provide more consistent information to users of the financial statements.

This standard is effective for annual reporting periods beginning after December 15, 2021, and early adoption is permitted.

We determined that our material government assistance agreements are the payroll support program agreements under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") and the program extensions, and we adopted the new standard in 2021.

See Note 6, "Debt," where we reflect the requirements of this new standard as it relates to our payroll support program disclosures.

Delta Air Lines, Inc.

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Investments with maturities beyond one year when purchased may be classified as short-term investments if they are expected to be available to support our short-term liquidity needs.

Our short-term investments were classified as fair value investments and gains and losses were recorded in non-operating expense.

Our short-term investments are classified as fair value investments and gains and losses are recorded in non-operating expense .

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets ("balance sheets") that sum to the total of the same such amounts shown within the Consolidated Statements of Cash Flows ("cash flows statement").

Reconciliation of cash, cash equivalents and restricted cash

Year Ended December 31,

(in millions) 2021 2020 2019

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Total cash, cash equivalents and restricted cash $ 8,569 $ 10,055 $ 3,730

As part of our strategy to mitigate the cost of the refining margin reflected in the price of jet fuel, our wholly owned subsidiaries, Monroe Energy, LLC and MIPC, LLC (collectively, "Monroe"), operate the Trainer oil refinery.

Refined product, feedstock and blendstock inventories, all of which are finished goods, are carried at recoverable cost.

As part of our strategy to mitigate the cost of the refining margin reflected in the price of jet fuel, our wholly owned subsidiary, Monroe Energy, LLC ("Monroe"), operates the Trainer oil refinery.

Refined products (finished goods) and feedstock and blendstock inventories (work-in-process) are both carried at the lower of cost and net realizable value.

We use jet fuel in our airline operations that is produced by the refinery and procured through the exchange with third parties of gasoline, diesel and other refined products ("non-jet fuel products") the refinery produces.

Cost is determined using the first-in, first-out method.

Costs include the raw material consumed plus direct manufacturing costs (such as labor, utilities and supplies) incurred and an applicable portion of manufacturing overhead.

Costs include the raw material consumed plus direct manufacturing costs (such as labor, utilities and supplies) as incurred and an applicable portion of manufacturing overhead.

Expendables Parts and Supplies.

Inventories of expendable parts related to flight equipment, which cannot be economically repaired, reconditioned or reused after removal from the aircraft, are carried at moving average cost and charged to operations as consumed.

An allowance for obsolescence is provided over the remaining useful life of the related fleet.

We also provide allowances for parts identified as excess or obsolete to reduce the carrying costs to the lower of cost or net realizable value.

These parts are assumed to have an estimated residual value of 5 % of the original cost.

These parts are estimated to have residual value of 5 % of the original cost.

Accounting for Refinery Related Buy/Sell Agreements

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In an effort to manage our exposure to these risks, we may enter into derivative contracts and adjust our derivative portfolio as market conditions change.

We recognize derivative contracts at fair value on our balance sheets.

Our derivative contracts are recognized at fair value on our balance sheets and have net balances of $ 17 million and $ 1 million at December 31, 2021 and 2020, respectively.

Delta Air Lines, Inc.

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Notes to the Consolidated Financial Statements

The following table summarizes the risk hedged and the classification of related gains and losses in our income statement, by each type of derivative contract:

Derivative Type Hedged Risk Classification of Gains and Losses

Fuel hedge contracts Fluctuations in fuel prices Aircraft fuel and related taxes

Interest rate contracts Increases in interest rates Interest expense, net

Foreign currency exchange contracts Fluctuations in foreign currency exchange rates Non-operating expense

The following table summarizes the accounting treatment of our derivative contracts:

Accounting Designation Impact of Unrealized Gains and Losses

Not designated as hedges Change in fair value (1) of hedge is recorded in earnings

Designated as cash flow hedges Market adjustments are recorded in Accumulated Other Comprehensive Income ("AOCI")

Designated as fair value hedges Market adjustments are recorded in debt and finance leases

(1) Including settled gains and losses as well as mark-to-market adjustments ("MTM adjustments").

We perform, at least quarterly, an assessment of the effectiveness of our derivative contracts designated as hedges, including assessing the possibility of counterparty default.

If we determine that a derivative is no longer expected to be highly effective, we discontinue hedge accounting prospectively and recognize subsequent changes in the fair value of the hedge in earnings.

We believe our derivative contracts that continue to be designated as hedges, consisting of interest rate exchange contracts, will continue to be highly effective in offsetting changes in fair value attributable to the hedged risk.

Cash flows associated with purchasing and settling hedge contracts generally are classified as operating cash flows.

However, if a hedge contract includes a significant financing element at inception, cash flows associated with the hedge contract are recorded as financing cash flows.

Hedge Margin.

The hedge margin we receive from counterparties is recorded in cash, with the offsetting obligation in accounts payable.

The hedge margin we provide to counterparties is recorded in prepaid expenses and other.

We do not offset margin funded to counterparties or margin funded to us by counterparties against fair value amounts recorded for our hedge contracts.

Property and Equipment, net

Our flight equipment, which consists of aircraft and associated engines and parts, and other long-lived assets, which are classified as property and equipment, net on our balance sheet, have a recorded value of $ 26.5 billion at December 31, 2020.

Long-Lived Assets

Our long-lived lived assets, including flight equipment, which consists of aircraft and associated engines and parts, operating lease right-of-use ("ROU") assets and other long-lived assets, are recorded in property and equipment, net and operating lease right-of-use assets on our balance sheets.

See Note 7, "Leases," for further information regarding our leases.

The following table summarizes our property and equipment:

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(1) Includes accumulated amortization for flight and ground equipment under finance leases in the amount of $ 456 million and $ 793 million at December 31, 2021 and 2020, respectively.

Delta Air Lines, Inc.

2020 Form 10-K 69

Notes to the Consolidated Financial Statements

We record property and equipment at cost and depreciate or amortize these assets on a straight-line basis to their estimated residual values over their estimated useful lives.

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Included in the depreciation and amortization expense discussed above, we recorded $ 301 million, $ 304 million and $ 239 million for amortization of capitalized software for the years ended December 31, 2021, 2020 and 2019, respectively.

The net book value of these assets, which are included in information technology-related assets above, totaled $ 1.0 billion and $ 1.1 billion at December 31, 2020 and 2019, respectively.

The net book value of these assets, which are included in information technology-related assets above, totaled $ 876 million and $ 1.0 billion at December 31, 2021 and 2020, respectively.

Our tangible assets consist primarily of flight equipment, which is mobile across geographic markets.

Accordingly, assets are not allocated to specific geographic regions.

We review flight equipment and other long-lived assets used in operations for impairment losses when events and circumstances indicate the assets may be impaired.

We review flight equipment, ROU assets and other long-lived assets used in operations for impairment losses when events and circumstances indicate the assets may be impaired.

Factors which could be indicators of impairment include, but are not limited to (1) a decision to permanently remove flight equipment or other long-lived assets from operations, (2) significant changes in the estimated useful life, (3) significant changes in projected cash flows, (4) permanent and significant declines in fleet fair values and (5) changes to the regulatory environment.

For long-lived assets held for sale, we discontinue depreciation and record impairment losses when the carrying amount of these assets is greater than the fair value less the cost to sell.

See Note 2, "Impact of the COVID-19 Pandemic," for information on impairments and related charges recorded during 2020.

To determine whether impairments exist for active and temporarily parked aircraft, we group assets at the fleet type level or at the contract level for aircraft operated by third-party regional carriers (i.e., the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of capacity, passenger mile yield, fuel and labor costs and other relevant factors.

Given the substantial reduction in our active aircraft and diminished projections of future cash flows in the near term as a result of the COVID-19 pandemic, we evaluated our fleet during 2020 and determined that only the fleet types discussed in Note 2, "Impact of the COVID-19 Pandemic," were impaired, as the future cash flows from the operation of all other fleet types through the respective retirement dates exceeded the carrying value.

As we obtain greater clarity about the duration and extent of reduced demand and potentially execute further capacity adjustments, we will continue to evaluate our fleet compared to network requirements and may decide to retire additional aircraft.

Future decisions regarding the temporarily parked aircraft and the timing of any return to service will be dependent on the evolution of the demand environment.

To determine whether impairments exist for aircraft used in operations, we group assets at the fleet type level or at the contract level for aircraft operated by third-party regional carriers (i.e., the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of capacity, passenger mile yield, fuel and labor costs and other relevant factors.

If an asset group is impaired, the impairment loss recognized is the amount by which the asset group's carrying amount exceeds its estimated fair value.

We estimate aircraft fair values using published sources, appraisals and bids received from third parties, as available.

Due to the impacts of the COVID-19 pandemic, we evaluated our fleet during 2020 and determined that only the fleet types discussed in Note 15, "Restructuring," were impaired, as the future cash flows from the operation of other fleet types through the respective retirement dates exceeded the carrying value.

Due to the recovery in demand that we have experienced throughout 2021, we decided not to retire any additional aircraft and returned to service a majority of the aircraft that were temporarily parked in 2020.

We recorded no further impairments during 2021.

As we gained updated information during the year, we updated estimates to the 2020 fleet-related impairment charges and recorded adjustments of $ 19 million to certain of the restructuring charges during 2021.

Delta Air Lines, Inc.

2021 Form 10-K 74

Notes to the Consolidated Financial Statements

We account for deferred income taxes under the liability method.

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We periodically assess whether it is more likely than not that we will generate sufficient taxable income to realize our deferred income tax assets.

We establish valuation allowances if it is not likely we will realize our deferred income tax assets.

We establish valuation allowances if it is more likely than not that we will be unable to realize our deferred income tax assets.

In making this determination, we consider available positive and negative evidence and make certain assumptions.

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The card carried a maximum credit limit of $ 1.1 billion as of December 31, 2021 and must be paid monthly.

At December 31, 2020 and 2019, we had $ 1.1 billion and $ 736 million outstanding on this purchasing card, respectively, and the activity was classified as a financing activity in our cash flows statement.

Delta Air Lines, Inc.

2020 Form 10-K 70

Notes to the Consolidated Financial Statements

At both December 31, 2021 and 2020, we had $ 1.1 billion outstanding on this purchasing card and the activity was classified as a financing activity in our cash flows statement.

Retirement of Repurchased Shares

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Maintenance Costs

We record maintenance costs related to our fleet in aircraft maintenance materials and outside repairs.

We record maintenance costs related to our mainline and regional fleets in aircraft maintenance materials and outside repairs and regional carrier expense, respectively.

Maintenance costs are expensed as incurred, except for costs incurred under power-by-the-hour contracts, which are expensed based on actual hours flown.

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Commissions and Merchant Fees

Passenger sales commissions and merchant fees are recognized in operating expense when the related revenue is recognized.

IMPACT OF THE COVID-19 PANDEMIC

The unprecedented, widespread and persistent impact of COVID-19 and the related travel restrictions and social distancing measures implemented throughout the world have significantly reduced demand for air travel.

After initially impacting our service to China beginning in January 2020, the spread of the virus and the resulting global pandemic have significantly affected our entire network.

Beginning in March 2020, large public events were cancelled, governmental authorities began imposing restrictions on non-essential activities, businesses suspended travel and popular leisure destinations temporarily closed to visitors.

Certain countries that are key markets for our business have imposed bans on international travelers for specified periods or indefinitely.

As a result, demand for travel declined at a rapid pace in the March 2020 quarter and has remained depressed, which has had an unprecedented and materially adverse impact on our results of operations and financial position.

Although demand has improved at a slow pace since that time, it remains significantly below pre-pandemic levels.

The exact timing and pace of the recovery remain uncertain as certain markets have reopened, some of which have since experienced a resurgence of COVID-19 cases, while others, particularly international markets, remain closed or are enforcing extended quarantines for most U.S.

and numerous other countries are now also requiring airline passengers to provide negative COVID-19 test results prior to travel into their countries.

Additionally, some states have instituted travel restrictions, advisories or quarantines for travelers from other states within the U.S.

We expect the demand environment to remain depressed until effective vaccines become broadly available, vaccination becomes widespread globally and travel restrictions and advisories begin to ease.

Our forecasted expense and liquidity management initiatives may be modified as the demand environment evolves.

In response to these developments, we have implemented enhanced measures focusing on the safety of our customers and employees, while at the same time seeking to mitigate the impact on our financial position and operations and to position our business for recovery.

Delta Air Lines, Inc.

2020 Form 10-K 71

Notes to the Consolidated Financial Statements

Taking Care of our Customers and Employees.

The safety of our customers and employees is our primary focus.

As the COVID-19 pandemic has progressed, we have taken numerous steps to help promote the safety of our customers and employees on the ground and in the air in keeping with current health-expert recommendations, including:

• Adopting new cleaning procedures on all flights, including regular disinfectant electrostatic spraying on aircraft and sanitizing high-touch areas like tray tables, entertainment screens, armrests and seat-back pockets.

• Taking steps to help employees and customers practice social distancing and promote safety, including:

◦ Creating a Global Cleanliness Division to ensure a consistently safe and sanitized experience across our facilities and aircraft.

◦ Beginning in May 2020, requiring all customers and customer-facing employees to wear masks.

◦ Capping load factors throughout our aircraft and blocking middle seats through at least April 30, 2021.

◦ Modifying our boarding and deplaning processes, while providing limited food and beverage service that is designed to reduce physical touch points.

◦ Encouraging social distancing throughout all aspects of our operation.

◦ Implementing significant workforce social distancing and protection measures, including reconfiguring call center spaces to promote social distancing, increasing cleaning and disinfecting of our facilities and encouraging employees to work remotely when possible.

• Giving customers flexibility to plan and re-book travel, including extending expiration on certain tickets and travel credits through December 2022, eliminating change fees for domestic tickets and international tickets originating from North America, with the exception of Basic Economy tickets, and waiving change fees for all tickets purchased before March 30, 2021.

Additionally, we are extending 2020 Medallion Status an additional year, rolling Medallion Qualification Miles into 2021 and extending Delta SkyMiles American Express Card benefits and Delta Sky Club memberships.

• Offering pay protection to employees who have tested positive for COVID-19, who must quarantine due to exposure to COVID-19, who are considered being at high-risk for illness from COVID-19 according to the Centers for Disease Control and Prevention ("CDC") guidelines and do not have the ability to work remotely.

• Offering on-site rapid COVID-19 testing in most locations and making at-home testing available for all U.S.-based employees.

We have also added rapid testing in most U.S.

hubs for active flight crews.

Capacity Reductions.

Beginning in the second half of March 2020, we experienced a precipitous decrease in demand as COVID-19 spread throughout the world.

While we have increased capacity compared to the lowest levels in April 2020, system capacity remains significantly lower than prior to the COVID-19 pandemic.

During 2020, system capacity was reduced approximately 50 % compared to 2019, with international capacity reduced by approximately 65 % and domestic capacity reduced by approximately 45 %.

System capacity for the March 2020 through December 2020 period, excluding the pre-pandemic months of January and February, was reduced by approximately 60 %, with international capacity reduced by approximately 75 % and domestic capacity reduced by approximately 50 %.

For the March 2021 quarter, system capacity is expected to be down approximately 30 - 40 % compared to the March 2019 quarter.

As a result of reduced demand and lower capacity, we retired 227 aircraft in 2020 and have temporarily parked approximately 125 aircraft as of December 31, 2020.

Expense Management.

In response to the reduction in revenue, we have implemented, and will continue to implement, cost saving initiatives, including the following in 2020:

• Reducing capacity as described above to align with expected demand, which has resulted in removing from active service approximately 350 aircraft as of December 31, 2020, including certain fleets or aircraft that we have decided to early retire as described below.

• Consolidating our footprint at our airport facilities, including temporarily closing some Delta Sky Clubs.

• Avoiding furloughs for our U.S.

employees and reducing employee-related costs, through the following:

◦ Voluntary unpaid leaves of 30 days to 12 months offered to most employees.

Approximately 50,000 of our employees have taken or have elected to take voluntary leaves at various times during 2020 and, for those taking leaves up to 12 months, continuing through 2021.

◦ Offering employees early retirement and voluntary separation programs, with approximately 18,000 employees electing to participate.

See Note 11, "Employee Benefit Plans," for additional information.

◦ Reaching an agreement with ALPA that protects our pilots from furlough through April 2022.

◦ From April 1 through December 31, 2020, salary reductions of 100 % for our CEO, 50 % for our officers and a 25 % reduction in work hours for all other management and most front-line employee work groups.

• Delaying or eliminating nearly all other discretionary spending.

Delta Air Lines, Inc.

2020 Form 10-K 72

Notes to the Consolidated Financial Statements

Balance Sheet, Cash Flow and Liquidity.

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 December 31, 2020 was $ 16.7 billion as a result of the following actions to increase liquidity and strengthen our financial position during the year ended December 31, 2020:

• Completing financing transactions for an aggregate principal amount of approximately $ 25.9 billion.

• Receiving $ 5.6 billion as part of the CARES Act payroll support program as described in "Government Support Programs" below.

• Reducing planned capital expenditures by approximately $ 2.8 billion for the year to $ 1.9 billion, including restructuring our aircraft order books for future aircraft deliveries, delaying aircraft modifications and postponing certain information technology initiatives and ground equipment replacement.

See Note 12, "Commitments and Contingencies," for additional information about our aircraft purchase commitments.

• Amending our credit facilities to replace fixed charge coverage ratio covenants with liquidity-based covenants.

• Suspending share repurchases and dividends indefinitely and postponing voluntary pension funding.

In addition, in January 2021 we received $ 1.4 billion with respect to the payroll support program extension described below, with the remaining $ 1.5 billion expected in the March 2021 quarter.

In response to the impact that the demand environment has had on our financial condition, our credit rating was downgraded by Standard & Poor's to BB in March 2020 and by Fitch to BB+ in April 2020.

Our credit rating from Moody's remains Baa3.

See "Financial Condition and Liquidity - Sources and Uses of Liquidity" for additional information.

See Note 8, "Debt," and Note 9, "Leases," for more information on our financing activities during the year ended December 31, 2020.

Government Support Programs

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted into law.

The CARES Act is a support package intended to assist many aspects of the American economy, including providing the airline industry with up to $25 billion in grants and loans to be used for employee wages, salaries and benefits.

In April 2020, we entered into an agreement with the U.S.

Department of the Treasury to receive emergency support through the CARES Act payroll support program, which totaled $ 5.6 billion.

The support payments were conditioned on our agreement to comply with a variety of conditions, including to refrain from conducting involuntary employee layoffs or furloughs through September 30, 2020.

The support payments consisted of $ 4.0 billion in a grant and $ 1.6 billion in an unsecured 10 -year low interest loan.

The loan bears interest at an annual rate of 1.00 % for the first five years (through April 2025) and the Secured Overnight Financing Rate ("SOFR") plus 2.00 % in the final five years.

In return, we issued to the U.S.

Department of the Treasury warrants to acquire more than 6.7 million shares of Delta common stock, which represented approximately 1 % of our outstanding shares.

These warrants have an initial exercise price of $ 24.39 per share, subject to adjustment in certain cases, and a five-year term.

The relative fair value of the warrants issued in 2020 is recorded within stockholder's equity and as a discount reducing the carrying value of the loan which is being amortized as interest expense in our income statement over the term of the loan.

The proceeds of the 2020 CARES Act grant were recorded in cash and cash equivalents when received and were recognized as contra-expense in government grant recognition in our income statement over the periods that the funds were intended to compensate.

See Note 8 "Debt," for further discussion of the unsecured loan and warrants to acquire Delta shares issued under the CARES Act payroll support program.

Finally, the CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022.

This provided us with approximately $ 200 million of additional liquidity during 2020.

Delta Air Lines, Inc.

2020 Form 10-K 73

Notes to the Consolidated Financial Statements

On December 27, 2020, an additional COVID-19 support bill was enacted into law, which extends the payroll support program of the CARES Act and provides an additional $15 billion in grants and loans to be used for airline employee wages, salaries and benefits.

In January 2021, we entered into a payroll support program extension agreement with the U.S.

Department of the Treasury.

We expect to receive $ 2.9 billion in payroll support payments, which must be used exclusively for the payment of employee wages, salaries and benefits and are conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs from the date of the extension agreement through March 2021.

Other conditions include prohibitions on share repurchases and dividends through March 2022 and certain limitations on executive compensation until October 2022.

The Department of Transportation also has the authority until March 1, 2022 to require airlines that received payroll support program funds to maintain scheduled air service deemed necessary to any point served by the airline before March 1, 2020.

The expected support payments consist of approximately $ 2.0 billion in grants and $ 830 million in an unsecured 10 -year low interest loan.

We received the first installment of $ 1.4 billion under the agreement on January 15, 2021 and expect to receive the balance in the March 2021 quarter.

The loan bears interest at an annual rate of 1.00 % for the first five years (through January 15, 2026) and the applicable SOFR plus 2.00 % in the final five years.

Approximately 70 % of the payment received on January 15, 2021 was in the form of a grant, and approximately 30 % was in the form of an unsecured loan.

We issued a promissory note for approximately $ 400 million with respect to the term loan, which will increase to its full principal amount as the balance of payroll support payments is received.

In connection with receipt of these payments, we also expect to issue to the U.S.

Department of the Treasury warrants to acquire shares of Delta common stock, which we expect to be approximately 2.1 million shares representing less than 0.5 % of our outstanding shares.

Approximately one-half of the expected warrants were issued on January 15, 2021 and the remaining warrants will be issued as the balance of payroll support payments is received.

These warrants have an initial exercise price of $ 39.73 per share, subject to adjustment in certain cases, and a five-year term.

Delta Air Lines, Inc.

2020 Form 10-K 74

Notes to the Consolidated Financial Statements

Restructuring Charges

The restructuring charges incurred during 2020 as part of our response to the COVID-19 pandemic are summarized as follows:

Restructuring charges by category

(in millions) Year Ended

December 31, 2020

Fleet Retirements $ 4,409

Voluntary Programs and Other Employee Benefit Charges 3,409

Receivables and Other 401

Total Restructuring Charges $ 8,219

Fleet Retirements.

As a result of the COVID-19 pandemic and our response, we have removed certain aircraft from active service as of December 31, 2020, which includes owned and leased aircraft that are being retired early.

Fleet retirements by aircraft type

Fleet Type Number of Aircraft Estimated Final Retirement During the Quarter Ended Impairment-Related Charge (in millions)

777 18 December 2020 $ 1,440

767-300ER 56 December 2025 1,084

717 91 December 2025 950

MD-90 26 June 2020 335

125 December 2023 320

737-700 10 September 2020 223

A320 10 June 2020 57

47 June 2020 —

Total 383 $ 4,409

(1) Certain of the CRJ-200 aircraft scheduled to be retired by the December 2023 quarter are operated for us by SkyWest Airlines under a revenue proration agreement.

(2) During the March 2020 quarter, we recorded a $ 22 million charge related to accelerating the planned retirement of the MD-88 fleet from December 2020 to June 2020.

However, this amount was recorded in depreciation and amortization, rather than in restructuring charges, as it would have been incurred during 2020 prior to the onset of the COVID-19 pandemic.

These impairment and other related charges are recorded in restructuring charges in our income statement.

These charges were calculated using Level 3 fair value inputs based primarily upon recent market transactions and third-party bids, which were corroborated with published pricing guides and our assessment of existing market conditions based on industry knowledge.

Following the impairment charges, the remaining aggregate net book value of these aircraft as of December 31, 2020 is approximately $ 500 million.

Voluntary Programs and Other Employee Benefit Charges.

See Note 11, "Employee Benefit Plans," for further information on these charges.

Receivables and Other.

See Note 5, "Investments," for further information on certain of these charges.

Passenger sales commissions and merchant fees are recognized in passenger commissions and other selling expenses when the related revenue is recognized.

Delta Air Lines, Inc.

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Notes to the Consolidated Financial Statements

Carbon Offset Costs

We may purchase and retire carbon offsets and we expense the cost of carbon offsets upon retirement of the credits within aircraft fuel and related taxes on our income statement as these costs are related to our carbon emissions generated by our airline segment.

The purchase of carbon offsets is included in operating activities on our cash flows statement.

During 2021, we purchased and retired $ 95 million of carbon offsets, of which $ 30 million relates to 13 million metric tons of carbon emissions generated by our airline segment from March 1 to December 31, 2020 as well as $ 65 million which relates to a portion of 2021 carbon emissions generated by our airline segment.

REVENUE RECOGNITION

Passenger Revenue

Passenger revenue is primarily composed of passenger ticket sales, loyalty travel awards and travel-related services performed in conjunction with a passenger’s flight.

Passenger revenue by category Year Ended December 31,

Passenger revenue is composed of passenger ticket sales, loyalty travel awards and travel-related services performed in conjunction with a passenger’s flight.

Passenger revenue by category

Year Ended December 31,

(in millions) 2021 2020 2019

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We defer sales of passenger tickets to be flown by us or that we sell on behalf of other airlines in our air traffic liability.

Passenger revenue is recognized when we provide transportation or when ticket breakage occurs.

Passenger revenue is recognized when we provide transportation or when the ticket expires unused ("ticket breakage").

For tickets that we sell on behalf of other airlines, we reduce the air traffic liability when consideration is remitted to those airlines.

The air traffic liability primarily includes sales of passenger tickets to be flown in the future and credits which can be applied as payment toward the cost of a ticket ("travel credits").

The air traffic liability primarily includes sales of passenger tickets with scheduled departure dates in the future and credits which can be applied as payment toward the cost of a ticket ("travel credits").

Travel credits are typically issued as a result of ticket cancellations prior to their expiration dates.

We periodically evaluate the estimated air traffic liability and record any adjustments in our income statement.

We periodically evaluate the estimated air traffic liability and may record adjustments in our income statement.

These adjustments relate primarily to refunds, exchanges, ticket breakage, transactions with other airlines and other items for which final settlement occurs in periods subsequent to the sale of the related tickets at amounts other than the original sales price.

We recognized approximately $ 2.2 billion, $ 3.1 billion and $ 3.8 billion in passenger revenue during the years ended December 31, 2021, 2020 and 2019, respectively, that had been recorded in our air traffic liability balance at the beginning of those periods.

The air traffic liability typically increases during the winter and spring months as advanced ticket sales grow prior to the summer peak travel season and decreases during the summer and fall months.

However, the ongoing reduction in demand for air travel due to the COVID-19 pandemic has resulted in an unprecedented low level of advance bookings and the associated cash received, as well as significant ticket cancellations which led to issuance of cash refunds or travel credits to customers.

The total value of cash refunds, excluding taxes and related fees, issued to customers during 2020 was approximately $ 3.1 billion.

Travel credits represented approximately 65 % of the air traffic liability as of December 31, 2020.

Prior to April 2020, passenger tickets sold and credits issued were generally valid for one year from the date of original ticket issuance .

During 2020, we announced the extension of expiration on certain tickets and travel credits through December 2022.

The air traffic liability classified as noncurrent as of December 31, 2020 represents our current estimate of tickets and credits to be used or refunded beyond one year, while the balance classified as current represents our current estimate of tickets and credits to be used or refunded within one year.

However, the ongoing reduction in demand for air travel due to the COVID-19 pandemic has resulted in a lower level of advance bookings and the associated cash received, as well as significant ticket cancellations which led to issuance of cash refunds or travel credits to customers.

The total value of cash refunds, excluding taxes and related fees, issued to customers during the years ended December 31, 2021 and 2020 was approximately $ 1.1 billion and $ 3.1 billion, respectively.

Travel credits represented approximately 45 % and 65 % of the air traffic liability as of December 31, 2021 and 2020, respectively.

In the March 2021 quarter, we announced the extension of the validity of all passenger tickets and travel credits purchased or expiring in 2021 to December 31, 2022, which allowed for tickets to be rebooked through December 31, 2022 for travel through 2023.

The air traffic liability classified as noncurrent as of December 31, 2021 represents our current estimate of tickets and travel credits to be used or refunded beyond one year, while the balance classified as current represents our current estimate of tickets and travel credits to be used or refunded within one year.

We will continue to monitor our customers' travel behavior and may adjust our estimates in the future.

Approximately $ 3.1 billion, $ 3.8 billion and $ 3.5 billion of the prior year air traffic liability related to passenger ticket sales (which excludes those tickets sold on behalf of other airlines) was recognized in passenger revenue during the years ended December 31, 2020, 2019 and 2018, respectively.

In January 2022, we announced changes to expiration dates, as discussed below.

Delta Air Lines, Inc.

2021 Form 10-K 76

Notes to the Consolidated Financial Statements

Ticket Breakage.

We estimate the value of tickets that will expire unused and recognize revenue at the scheduled flight date.

We periodically evaluate our breakage estimates, which are based on historical experience, ticket contract terms and customers’ travel behavior, and may adjust our estimates in the future.

We estimate the value of ticket breakage and recognize 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 as discussed below, our estimates of revenue that will be recognized from the air traffic liability for unused tickets may vary in future periods.

Further Extension to Ticket Validity.

In January 2022, we announced 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.

This change is expected to shift a portion of our air traffic liability to noncurrent.

We will also consider this change in estimating the future ticket breakage rate.

Regional Carriers.

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Our contract carrier agreements are primarily structured as capacity purchase agreements where we purchase all or a portion of the contract carrier's capacity and are responsible for selling the seat inventory we purchase.

We record revenue related to our capacity purchase agreements in passenger revenue and the related expenses in regional carriers expense, excluding fuel.

Delta Air Lines, Inc.

2020 Form 10-K 76

Notes to the Consolidated Financial Statements

We record revenue related to our capacity purchase agreements in passenger revenue and the related expenses in regional carrier expense.

Loyalty Travel Awards

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Travel-Related Services

Travel-related services are primarily composed of services performed in conjunction with a passenger’s flight, including administrative fees (such as ticket change fees), baggage fees and on-board sales.

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

We recognize revenue for these services when the related transportation service is provided.

During 2020, we waived change fees for all tickets purchased through March 30, 2021 and eliminated change fees for domestic tickets and international tickets originating from North America, with the exception of Basic Economy tickets.

During 2020, with the exception of Basic Economy, we eliminated change fees for all tickets originating in North America and waived change fees for tickets originating outside of North America.

We also implemented a temporary waiver that allowed Basic Economy tickets with travel for 2021, which are normally non-changeable, to be changed without paying a fee regardless of origin or destination.

Starting January 1, 2022, Basic Economy tickets may be cancelled for a fee to receive a partial ticket credit.

Loyalty Program

Our SkyMiles loyalty program generates customer loyalty by rewarding customers with incentives to travel on Delta.

This program allows customers to earn mileage credits ("miles") by flying on Delta, Delta Connection and other airlines that participate in the loyalty program.

When traveling, customers earn miles based on the passenger's loyalty program status and ticket price.

This program allows customers to earn mileage credits ("miles") by flying on Delta, Delta Connection carriers and other airlines that participate in the loyalty program.

When traveling, customers earn miles primarily based on the passenger's loyalty program status, fare class and ticket price.

Customers can also earn miles through participating companies such as credit card companies, hotels, car rental agencies and ridesharing companies.

Miles are redeemable by customers in future periods for air travel on Delta and other participating airlines, membership in our Sky Club and other program awards.

Miles are redeemable by customers in future periods for air travel on Delta and other participating airlines, access to our Sky Club and other program awards.

To facilitate transactions with participating companies, we sell miles to non-airline businesses, customers and other airlines.

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To value the miles earned, we consider the quantitative value a passenger receives by redeeming miles for a ticket rather than paying cash, which is referred to as equivalent ticket value ("ETV").

Our estimate of ETV is adjusted for miles that are not likely to be redeemed ("breakage").

We use statistical models to estimate breakage based on historical redemption patterns.

Our estimate of ETV is adjusted for miles that are not likely to be redeemed ("mileage breakage").

We use statistical models to estimate mileage breakage based on historical redemption patterns.

A change in assumptions to the redemption activity for miles or the estimated fair value of miles expected to be redeemed could have a material impact on our revenue in the year in which the change occurs and in future years.

We recognize breakage proportionally during the period in which the remaining miles are actually redeemed.

We recognize mileage breakage proportionally during the period in which the remaining miles are actually redeemed.

Delta Air Lines, Inc.

2021 Form 10-K 77

Notes to the Consolidated Financial Statements

We defer revenue for the miles when earned and recognize loyalty travel awards in passenger revenue as the miles are redeemed and transportation is provided.

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Payments are typically due to us monthly based on the volume of miles sold during the period, and the initial terms of our marketing contracts are from three to eleven years .

During the years ended December 31, 2020, 2019 and 2018, total cash sales from marketing agreements were $ 2.8 billion, $ 4.2 billion and $ 3.5 billion, respectively, which are allocated to travel and other performance obligations, as discussed below.

Delta Air Lines, Inc.

2020 Form 10-K 77

Notes to the Consolidated Financial Statements

During the years ended December 31, 2021, 2020 and 2019, total cash sales from marketing agreements related to our loyalty program were $ 4.1 billion, $ 2.9 billion and $ 4.2 billion, respectively, which are allocated to travel and other performance obligations, as discussed below.

Our most significant contract to sell miles relates to our co-brand credit card relationship with American Express.

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We sell miles at agreed-upon rates to American Express which are then provided to their customers under the co-brand credit card program and the Membership Rewards program.

Effective January 1, 2019, we amended our co-brand and other agreements with American Express which increased the value we receive and extended the terms to 2029.

The products and services delivered are consistent with previous agreements.

We account for marketing agreements, including those with American Express, by allocating the consideration received to the individual products and services delivered.

We account for marketing agreements, including those with American Express, by allocating the consideration to the individual products and services delivered.

We allocate the value based on the relative selling prices of those products and services, which generally consist of award travel, priority boarding, baggage fee waivers, lounge access and the use of our brand.

We determine our best estimate of the selling prices by using a discounted cash flow analysis using multiple inputs and assumptions, including (1) the expected number of miles awarded and number of miles redeemed, (2) ETV for the award travel obligation adjusted for breakage, (3) published rates on our website for baggage fees, discounted access to Delta Sky Club lounges and other benefits while traveling on Delta, (4) brand value (using estimated royalties generated from the use of our brand) and (5) volume discounts provided to certain partners.

We determine our best estimate of the selling prices by using a discounted cash flow analysis using multiple inputs and assumptions, including (1) the expected number of miles awarded and number of miles redeemed, (2) ETV for the award travel obligation adjusted for mileage breakage, (3) published rates on our website for baggage fees, discounted access to Delta Sky Club lounges and other benefits while traveling on Delta, (4) brand value (using estimated royalties generated from the use of our brand) and (5) volume discounts provided to certain partners.

We defer the amount allocated to award travel as part of loyalty program deferred revenue and recognize loyalty travel awards in passenger revenue as the miles are redeemed and transportation is provided.

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Revenue allocated to the remaining performance obligations, primarily brand value, is recorded as loyalty program in other revenue as miles are delivered.

In September 2020, we raised $ 9.0 billion through the issuance of notes and entry into a term loan facility, each secured by certain assets related to our SkyMiles program.

See Note 8, "Debt," for further discussion of these transactions.

Current Activity of the Loyalty Program.

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Balance at December 31 $ 7,559 $ 7,182 $ 6,728

The timing of mile redemptions can vary widely;

however, the majority of new miles have historically been redeemed within two years .

The loyalty program deferred revenue classified as a current liability represents our current estimate of revenue expected to be recognized in the next twelve months based on projected redemptions, while the balance classified as a noncurrent liability represents our current estimate of revenue expected to be recognized beyond twelve months.

As a result of the COVID-19 pandemic, a larger portion of mile redemptions is projected to occur beyond twelve months and is therefore reflected as a noncurrent liability as of December 31, 2020.

We will continue to monitor redemptions as the situation evolves.

Delta Air Lines, Inc.

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Notes to the Consolidated Financial Statements

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's revenues typically consists of fuel sales to support the airline, which is eliminated in the 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 table:

Revenue by geographic region Passenger Revenue Operating Revenue

Year Ended December 31, Year Ended December 31,

(in millions) 2020 2019 2018 2020 2019 2018

Domestic $ 10,041 $ 30,465 $ 28,235 $ 13,339 $ 33,382 $ 31,309

Atlantic 1,171 6,326 6,135 1,649 7,308 7,012

Latin America 1,113 2,985 2,864 1,321 3,326 3,157

Pacific 558 2,501 2,521 786 2,991 2,960

Total $ 12,883 $ 42,277 $ 39,755 $ 17,095 $ 47,007 $ 44,438

The timing of mile redemptions can vary widely;

however, the majority of new miles have historically been redeemed within two years of being earned.

Compared to pre-pandemic levels, a larger portion of mile redemptions is projected to occur beyond twelve months and is therefore reflected as a noncurrent liability as of December 31, 2021.

We will continue to monitor redemptions as the situation evolves.

Cargo Revenue

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(in millions) 2021 2020 2019

Ancillary businesses and refinery $ 1,798 $ 1,297 $ 1,801

Refinery $ 3,229 $ 1,150 $ 97

Loyalty program 1,770 1,458 1,962

Ancillary businesses 793 648 1,200

Miscellaneous 556 348 718

Total other revenue $ 6,348 $ 3,604 $ 3,977

Ancillary Businesses and Refinery.

Ancillary businesses and refinery includes refinery sales to third parties, aircraft maintenance provided to third parties and our vacation wholesale operations.

Third-party refinery production sales are at or near cost;

This represents refinery sales to third parties, which are at or near cost;

accordingly, the margin on these sales is de minimis .

See Note 14, "Segments," for more information on revenue recognition within our refinery segment.

In January 2020, we combined Delta Private Jets, our former wholly owned subsidiary which provided private jet operations, with Wheels Up.

Upon closing, we received an equity stake in Wheels Up, and Delta Private Jets is no longer reflected in ancillary businesses and refinery.

See Note 5, "Investments," for more information on this transaction.

Loyalty Program.

Loyalty program revenues relate primarily to brand usage by third parties and include the redemption of miles for non-travel awards.

Loyalty program revenues relate 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 included within the total cash sales from marketing agreements, discussed above.

Ancillary Businesses.

Ancillary businesses includes aircraft maintenance services we provide to third parties and our vacation wholesale operations.

In January 2020, we combined Delta Private Jets, our former wholly owned subsidiary which provided private jet operations, with Wheels Up.

Upon closing, we received an equity stake in Wheels Up, and Delta Private Jets is no longer reflected in ancillary businesses.

Miscellaneous.

Miscellaneous revenue is primarily composed of lounge access and codeshare revenues.

Accounts Receivable

Accounts receivable primarily consist of amounts due from credit card companies from the sale of passenger tickets, ancillary businesses and refinery sales and other companies for the purchase of miles under the loyalty program.

We provide an allowance for uncollectible accounts using an expected credit loss model which represents our estimate of expected credit losses over the lifetime of the asset.

In 2020, due to the COVID-19 pandemic, we recorded reserves on certain receivables, which are discussed further in Note 5, "Investments."

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

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's revenues typically consists of fuel sales to support the airline, which is eliminated in the 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 table:

Revenue by geographic region

Passenger Revenue Operating Revenue

Year Ended December 31, Year Ended December 31,

(in millions) 2021 2020 2019 2021 2020 2019

Domestic $ 18,468 $ 10,041 $ 30,465 $ 24,320 $ 13,339 $ 33,382

Atlantic 1,777 1,171 6,326 2,537 1,649 7,308

Latin America 1,873 1,113 2,985 2,284 1,321 3,326

Pacific 401 558 2,501 758 786 2,991

Total $ 22,519 $ 12,883 $ 42,277 $ 29,899 $ 17,095 $ 47,007

Delta Air Lines, Inc.

1 unchanged sentence

Notes to the Consolidated Financial Statements

Accounts Receivable

Accounts receivable primarily consist of amounts due from credit card companies from the sale of passenger tickets, ancillary businesses, refinery sales and other companies for the purchase of miles under the loyalty program.

We provide an allowance for uncollectible accounts using an expected credit loss model which represents our estimate of expected credit losses over the lifetime of the asset.

In 2020, due to the COVID-19 pandemic, we recorded reserves on certain receivables, which are discussed further in Note 15, "Restructuring".

Passenger Taxes and Fees

7 unchanged sentences

Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

Each fair value measurement is classified into one of the following levels based on the information used in the valuation:

Observable inputs such as quoted prices in active markets.

17 unchanged sentences

Fuel hedge contracts ( 18 ) — ( 18 ) — (a)(b)

Interest rate contracts 23 — 23 — (a)

Foreign currency exchange contracts 1 — 1 — (a)

Delta Air Lines, Inc.

2021 Form 10-K 80

Notes to the Consolidated Financial Statements

December 31, 2020 Valuation

2 unchanged sentences

Restricted cash equivalents 1,747 1,747 — — (a)

Short-term investments

Government securities 5,789 3,919 1,870 — (a)

Long-term investments 1,417 948 38 431 (a)(b)

4 unchanged sentences

(1) See Note 9, "Employee Benefit Plans," for fair value of benefit plan assets.

Delta Air Lines, Inc.

2020 Form 10-K 80

Notes to the Consolidated Financial Statements

Cash Equivalents and Restricted Cash Equivalents.

Cash equivalents generally consist of money market funds.

Restricted cash equivalents are recorded in prepaid expenses and other and cash restricted for airport construction on our balance sheet and 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 cash restricted for airport construction on our balance sheets and 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.

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.

The fair values of our short-term 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 or other observable information.

As of December 31, 2021, the estimated fair value of our short-term investments was $ 3.4 billion.

Of these investments, $ 2.8 billion are expected to mature in one year or less, with the remainder maturing by the second half of 2023.

Long-Term Investments.

Our long-term investments that are 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.

In addition, our equity investments in private companies (such as the interests we received in Wheels Up during 2020), 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.

Our equity investments in LATAM and Grupo Aeroméxico, which have no remaining value following impairment charges recorded in 2020 due to their entry into bankruptcy proceedings, became classified as Level 3 fair value investments during 2020.

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.

During 2021, both Wheels Up Experience Inc.

("Wheels Up") and Clear Secure, Inc.

("CLEAR") became publicly traded and as of December 31, 2021, our investment in both of these are classified as Level 1 .

In addition, 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.

2 unchanged sentences

Hedge Derivatives.

A portion of our derivative contracts are negotiated over-the-counter with counterparties without going through a public exchange.

A portion of our derivative contracts may be negotiated over-the-counter with counterparties without going through a public exchange.

Accordingly, our fair value assessments give consideration to the risk of counterparty default (as well as our own credit risk).

Such contracts are classified as Level 2 within the fair value hierarchy.

Such contracts would be classified as Level 2 within the fair value hierarchy.

The remainder of our hedge contracts are comprised of futures contracts, which are traded on a public exchange.

1 unchanged sentence

• Fuel Hedge Contracts.

Our fuel hedge portfolio consists of options, swaps and futures.

Our derivative contracts to hedge the financial risk from changing fuel prices are primarily related to Monroe’s inventory.

Our fuel hedge portfolio may consist of a combination of options, swaps or futures.

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 $ 146 million, gains of $ 85 million and losses of $ 41 million on our fuel hedge contracts for the years ended December 31, 2021, 2020 and 2019, respectively.

• Interest Rate Contracts.

Our interest rate derivatives are swap contracts, which are valued based on data readily observable in public markets.

Our interest rate derivatives were swap contracts, which were valued based on data readily observable in public markets.

We unwound our final interest rate contract in January 2021 and have no contracts open as of December 31, 2021.

Delta Air Lines, Inc.

2021 Form 10-K 81

Notes to the Consolidated Financial Statements

• Foreign Currency Exchange Contracts.

Our foreign currency derivatives consist of forward contracts and are valued based on data readily observable in public markets.

Short-Term Investments

At December 31, 2020, the estimated fair value of our short-term investments was $ 5.8 billion, which approximates cost.

Of these investments, $ 4.9 billion are expected to mature in one year or less, with the remainder maturing during 2022.

Investments with maturities beyond one year when purchased may be classified as short-term investments if they are expected to be available to support our short-term liquidity needs.

Long-Term 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.

Delta Air Lines, Inc.

2020 Form 10-K 81

Notes to the Consolidated Financial Statements

In January 2020, we acquired 20 % of the shares of LATAM for $ 1.9 billion, or $ 16 per share, through a tender offer as part of our plan to create a strategic alliance with LATAM.

In addition, to support the establishment of the strategic alliance, we agreed to make transition payments to LATAM totaling $ 350 million, of which $ 75 million remains to be paid by the end of 2021.

As part of our planned strategic alliance with LATAM, we also agreed to acquire four A350 aircraft from LATAM (which agreement has subsequently been terminated, as discussed below) and assumed 10 of LATAM's A350 purchase commitments with Airbus for deliveries through 2025.

The total consideration of $ 2.3 billion, including the tender offer and the transition payments, was allocated in the March 2020 quarter to the shares ($ 1.1 billion) and to the alliance-related indefinite-lived intangible asset ($ 1.2 billion) based on their relative fair values.

We expect to record the 10 aircraft at cost upon delivery.

In May 2020, LATAM filed for bankruptcy under Chapter 11 of the United States bankruptcy code as the result of the impact of the pandemic on its business and, as part of LATAM's reorganization, we terminated the purchase agreement for the four A350 aircraft from LATAM for a fee of $ 62 million, which was recorded in restructuring charges in our income statement.

While our ownership interest remains at 20 %, we no longer have significant influence with LATAM during their bankruptcy proceedings and discontinued accounting for the investment under the equity method in the June 2020 quarter and began accounting for the investment at fair value.

During the June 2020 quarter, we eliminated the carrying value of our investment in LATAM and recorded expense of $ 1.1 billion in impairments and equity method losses within non-operating expense in our income statement.

This charge reflected the recognition of both our 20 % share of LATAM's March 2020 quarter losses (due to the timing of information available from LATAM) and the decline in our expected realizable value for LATAM's shares following its bankruptcy filing.

The impairment charge for our investment in LATAM was calculated using Level 3 fair value inputs.

During the September 2020 quarter, LATAM’s debtor-in-possession financing was approved by the bankruptcy court to provide LATAM with near-term liquidity and the ability to continue progressing toward a plan of reorganization.

We expect that no more than an immaterial amount will be distributed to current equity holders following the settlement of unsecured claims upon LATAM's emergence from bankruptcy.

The carrying value of our investment in LATAM remains zero at December 31, 2020.

In May 2020, we signed a trans-American joint venture agreement with LATAM that, subject to regulatory approvals, will combine our highly complementary route networks between North and South America, with the goal of providing customers with a seamless travel experience and industry-leading connectivity.

In addition, the bankruptcy court has approved the assumption of our strategic partnership agreement, which contributes to supporting the value of our $ 1.2 billion alliance-related indefinite-lived intangible asset.

We believe this alliance will generate growth opportunities, building upon Delta's and LATAM's global footprint and joint ventures.

See Note 7, "Goodwill and Intangible Assets," for further discussion of our quantitative impairment assessment of indefinite-lived intangible assets.

Grupo Aeroméxico.

In June 2020, Grupo Aeroméxico filed for bankruptcy under Chapter 11 of the United States bankruptcy code as the result of the impact of the pandemic on its business.

We have a non-controlling 51 % ownership interest in Grupo Aeroméxico, however Grupo Aeroméxico's corporate bylaws (as authorized by the Mexican Foreign Investment Commission) limit our voting interest to a maximum of 49 %.

Therefore, we accounted for our investment under the equity method prior to Grupo Aeroméxico's bankruptcy filing.

As a result of Grupo Aeroméxico's bankruptcy filing, while our ownership interest has not changed, we no longer have significant influence with Grupo Aeroméxico during their bankruptcy proceedings and discontinued accounting for the investment under the equity method in the June 2020 quarter and began accounting for the investment at fair value.

During the June 2020 quarter, we eliminated the carrying value of our investment in Grupo Aeroméxico and recorded expense of $ 770 million in impairments and equity method losses within non-operating expense in our income statement.

This charge reflected the recognition of both our 51 % share of Grupo Aeroméxico's June 2020 quarter losses and the decline in our expected realizable value for Grupo Aeroméxico's shares following its bankruptcy filing.

The impairment charge for our investment in Grupo Aeroméxico was calculated using Level 3 fair value inputs.

During the December 2020 quarter, Grupo Aeroméxico's debtor-in-possession financing was approved by the bankruptcy court to provide Grupo Aeroméxico with near-term liquidity and the ability to continue progressing toward a plan of reorganization.

We expect that no more than an immaterial amount will be distributed to current equity holders following the settlement of unsecured claims upon Grupo Aeroméxico's emergence from bankruptcy.

The carrying value of our investment in Grupo Aeroméxico remains zero at December 31, 2020.

Delta Air Lines, Inc.

2020 Form 10-K 82

Notes to the Consolidated Financial Statements

In addition, we believe Grupo Aeroméxico intends to request the bankruptcy court's approval to assume our joint cooperation agreement.

As a result of the significantly decreased demand for air travel caused by the COVID-19 pandemic, LATAM and Grupo Aeroméxico are undergoing in-court restructurings.

In order to support our relationships with these carriers, we have provided them with strategic and operational assistance through their restructurings.

We recorded notes payable of $ 165 million, which are recorded in current maturities of debt and finance leases, and receivables from those partners within other noncurrent assets as of December 31, 2020.

In 2019, we sold our ownership stake of GOL Linhas Aéreas Inteligentes, the parent company of GOL Linhas Aéreas (operating as GOL), and have ended our commercial agreements.

During 2015, in conjunction with our investment in GOL we agreed to guarantee GOL’s $ 300 million five -year term loan facility with third parties that matured in August 2020.

During the September 2020 quarter, we loaned GOL $ 250 million, to be used exclusively to repay the 2015 term loan.

The $ 250 million loan to GOL reduced our financial exposure and provides us with additional collateral while providing GOL more time to address its obligations during the pandemic.

Our loan to GOL is secured by GOL’s ownership interest in Smiles, GOL’s publicly traded loyalty program, as well as other collateral.

As of December 31, 2020, the outstanding principal balance of the loan, which was prepaid in part during 2020 and is now scheduled to be repaid in monthly installments through June 2021, was $ 93 million.

Fair Value Investments

Our investments accounted for at fair value are summarized in the following table:

Fair value investments ownership interest and carrying value

Ownership Interest Carrying Value

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, other valuation techniques for investments in companies without publicly-traded shares and foreign currency fluctuations.

Our share of Unifi Aviation's financial results is recorded in contracted services in our income statement as this entity is integral to the operations of our business by providing services at our airport locations, while our share of other equity method investees' financial results is recorded in impairments and equity method losses in our income statement under non-operating expense.

If an investment accounted for under the equity method experiences a loss in value that is determined to be other than temporary, we will reduce our carrying value of the investment to fair value and record the loss in impairments and equity method losses in our income statement.

Equity investments ownership interest and carrying value

Accounting Treatment Ownership Interest Carrying Value

(in millions) December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Hanjin-KAL 13 % 10 % $ 512 $ 205

Air France-KLM 9 % 9 % 235 418

China Eastern 3 % 3 % 201 258

Wheels Up Fair Value 21 % 24 % $ 241 $ 210

Hanjin-KAL Fair Value 13 % 13 % 455 512

Air France-KLM Fair Value 6 % 9 % 165 235

China Eastern Fair Value 2 % 3 % 177 201

CLEAR Fair Value 6 % 6 % 260 120

Unifi Aviation Equity Method 49 % 49 % 159 154

Other investments Various 255 233

Equity investments $ 1,712 $ 1,665

In the September 2021 quarter, Wheels Up became a publicly-traded company through a merger with Aspirational Consumer Lifestyle Corp ("Aspirational").

Aspirational subsequently changed its name to Wheels Up Experience Inc.

and its common stock trades on the New York Stock Exchange under the symbol UP.

We account for our investment under the fair value option and use the stock price to recognize fair value adjustments.

In the June 2021 quarter, Clear Secure, Inc.

completed an initial public offering of Class A common stock, which trades on the New York Stock Exchange under the symbol YOU.

We own shares of Alclear Holdings, LLC, which are convertible on a one-to-one basis for the Class A common stock of Clear.

Our 6 % ownership interest in Clear is determined on a fully exchanged and converted basis.

We account for our investment under the fair value method and use the stock price to recognize fair value adjustments.

Other Investments.

Total fair value investments $ 1,417 $ 1,099

During the year ended December 31, 2020, we recorded net losses on these equity investments of $ 105 million compared to net gains of $ 119 million, including a gain from the sale of our ownership stake in GOL, during the year ended December 31, 2019 and $ 38 million during the year ended December 31, 2018.

These results were recorded in gain/(loss) on investments in our income statement within non-operating expense and were driven by changes in stock prices, foreign currency fluctuations and other valuation techniques for investments in companies without publicly-traded shares.

In January 2020, we combined Delta Private Jets, our wholly owned subsidiary which provided private jet operations, with Wheels Up.

This transaction resulted in a gain of $ 240 million which was recorded within miscellaneous, net in our income statement in the March 2020 quarter.

Upon closing, we received interests, which represented a 24 % equity stake in Wheels Up as of December 31, 2020, included in other investments above.

We elected to record our investment using the fair value option as this is expected to better reflect the economics of our ownership interest.

In February 2021, Wheels Up entered into a definitive agreement to become publicly-traded via a merger with Aspirational Consumer Lifestyle Corp.

The transaction is expected to close in the June 2021 quarter.

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.

Included therein are our investments in Grupo Aeroméxico, LATAM Airlines Group S.A.

("LATAM") and Virgin Atlantic, all of which are undergoing in-court or out-of-court restructurings, and the carrying values of these investments have been reduced to and remain zero as of December 31, 2021.

In order to support our relationships with these carriers, we have provided them with strategic and operational assistance through their restructurings.

Delta Air Lines, Inc.

1 unchanged sentence

Notes to the Consolidated Financial Statements

Equity Method Investments

We account for the investments listed below and certain other immaterial investments under the equity method of accounting.

Equity method investments ownership interest and carrying value

Ownership Interest Carrying Value

(in millions) December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019

Virgin Atlantic (1)

49 % 49 % $ — $ 375

Unifi Aviation 49 % 49 % 154 142

(1) We have a non-controlling equity stake in Virgin Atlantic Limited, the parent company of Virgin Atlantic Airways, and similar non-controlling interests in certain affiliated Virgin Atlantic companies.

Our equity method investments are recorded in equity investments on our balance sheet.

If an equity method investment experiences a loss in fair value that is determined to be other than temporary, we will reduce our carrying value of the investment to fair value and record the loss in impairments and equity method losses in our income statement .

Virgin Atlantic.

As a result of the COVID-19 pandemic and the resulting travel restrictions and quarantines, Virgin Atlantic has incurred significant losses during 2020.

In recording our 49 % share in Virgin Atlantic's results and based on our review of Virgin Atlantic's financial projections, in the June 2020 quarter we reduced the carrying value of our investment to zero .

During the September 2020 quarter, Virgin Atlantic undertook a voluntary recapitalization process in the U.K., which was subsequently approved by its creditors, and instituted ancillary proceedings in support of that process in the U.S.

Under related agreements, we recognized a note payable of $ 115 million, which is recorded in current maturities of debt and finance leases, and a corresponding receivable within other noncurrent assets.

During the year ended December 31, 2020, we recorded $ 510 million in impairments and equity method losses within non-operating expense in our income statement.

Under the equity method of accounting, we will track our share of Virgin Atlantic's future losses, but we will not reflect our share of their results in our financial statements until such time that our share of their earnings eliminates the losses beyond our carrying value of the investment.

We continue to monitor and support Virgin Atlantic's ongoing restructuring efforts.

Effective January 2020, we combined our separate transatlantic joint venture agreements with Air France-KLM and Virgin Atlantic into a single three -party transatlantic joint venture.

Under the new agreement, certain measurement thresholds were reset from the previous joint venture with Virgin Atlantic, reducing the value we would have received over the original term.

In consideration for this reduced value, we entered into a transition agreement with Virgin Atlantic, which would have resulted in payments to us in future periods.

However, as of December 31, 2020, based on our assessment of collectability, we do not have any assets or liabilities recorded on our balance sheet related to this transition agreement.

Unifi Aviation.

We have a 49 % ownership interest in AirCo Aviation Services, LLC, which together with its subsidiaries is operating as Unifi Aviation.

Our share of Unifi Aviation's financial results is recorded in contracted services in our income statement as this entity is integral to the operations of our business and the services provided by Unifi Aviation are also recorded in contracted services in our income statement.

Based on discussions with Unifi Aviation's management and review of their liquidity and financial projections, we do not believe our investment is other than temporarily impaired as we have the intent and ability to retain this investment for a period of time sufficient to allow for anticipated recovery in value.

However, we will continue to monitor the continuing effects of the pandemic and self-help measures Unifi Aviation executes.

In the December 2021 quarter, we purchased approximately $ 525 million in obligations from certain lenders under LATAM, Grupo Aeroméxico and Virgin Atlantic’s restructuring processes, which reduced current maturities of debt and finance leases on the balance sheet.

These purchases are reflected as financing outflows on the cash flows statement.

As a result of these purchases, we have assumed a pro-rata portion of each lender’s rights under the financing arrangements with each respective partner, which are recorded within other noncurrent assets as of December 31, 2021.

The receivables from Grupo Aeroméxico and LATAM are subject to certain reserves based on our assessment of collectability, the amounts of which are not material.

In addition to the loans we purchased from a third party lender in Virgin Atlantic’s restructuring process, in the December 2021 quarter, we also loaned $ 275 million to Virgin Atlantic which is reflected as an investing outflow on the cash flows statement.

After the carrying amount of our investment in Virgin Atlantic was reduced to zero during 2020, we have continued to track our 49 % share of their losses under the equity method of accounting.

These previously unrecognized losses are only recorded to the extent we make additional investments in Virgin Atlantic (i.e., additional shareholder support).

The loans we have extended to Virgin Atlantic are treated as additional shareholder support and during 2021 resulted in our recognition of $ 340 million of previously unrecognized losses in impairments and equity method losses within non-operating expense in our income statement.

As of December 31, 2021, we have an additional $ 130 million of unrecognized equity method losses related to our 49 % interest in Virgin Atlantic.

Upon completion of their respective processes, we expect to receive an approximately 20 % equity stake in Grupo Aeroméxico and an approximately 10 % equity stake in LATAM, while maintaining our 49 % equity stake in Virgin Atlantic.

Our total investments to be made in these carriers, inclusive of the transactions described above, will be approximately $ 1.2 billion.

We also have an investment in JFK IAT Member LLC which is accounted for under the equity method and is discussed further in Note 8, "Airport Redevelopment."

Delta Air Lines, Inc.

2020 Form 10-K 84

Notes to the Consolidated Financial Statements

Receivables from Investees and Other Airlines

Based on our assessment of collectability, during the year ended December 31, 2020, we recorded approximately $ 100 million of reserves against outstanding receivables from LATAM, Grupo Aeroméxico, GOL, Virgin Atlantic, Virgin Australia and others.

These reserves reflect our expected recoveries given the impact of the COVID-19 pandemic on our investees and other airlines, and their restructuring efforts or recent bankruptcy filings.

In determining the appropriate amount to reserve, we also considered the valuation of and our ability to realize the value of any collateral associated with each receivable.

The reserves are recorded within accounts receivable, net or prepaid expenses and other on our balance sheet and within restructuring charges in our income statement.

DERIVATIVES AND RISK MANAGEMENT

Changes in fuel prices, interest rates and foreign currency exchange rates impact our results of operations.

In an effort to manage our exposure to these risks, we may enter into derivative contracts and adjust our derivative portfolio as market conditions change.

We recognize derivative contracts at fair value on our balance sheets.

Cash flows associated with purchasing and settling hedge contracts generally are classified as operating cash flows.

Fuel Price Risk

Our derivative contracts to hedge the financial risk from changing fuel prices are primarily related to Monroe’s inventory.

During the years ended December 31, 2020, 2019 and 2018, fuel hedges did not have a significant impact in our income statement.

Interest Rate Risk

Our exposure to market risk from adverse changes in interest rates is primarily associated with our debt obligations.

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.

In an effort to manage our exposure to the risk associated with our variable rate debt, we periodically enter into interest rate swaps.

We designate interest rate contracts used to convert the interest rate exposure on a portion of our debt portfolio from a floating rate to a fixed rate as cash flow hedges, while those contracts converting our interest rate exposure from a fixed rate to a floating rate are designated as fair value hedges.

We also have exposure to market risk from adverse changes in interest rates associated with our cash and cash equivalents and benefit plan obligations.

Market risk associated with our cash and cash equivalents relates to the potential decline in interest income from a decrease in interest rates.

Pension, postretirement, postemployment and worker's compensation obligation risk relates to the potential increase in our future obligations and expenses from a decrease in interest rates used to discount these obligations.

In the March 2020 quarter, we unwound a majority of our interest rate swap contracts.

The unwind of these contracts generated approximately $ 100 million of cash in the March 2020 quarter.

Additionally, in January 2021 we unwound our remaining interest rate swap contract.

The unwind of this contract generated approximately $ 20 million of cash in January 2021.

These gains are being reflected in our income statement over the remaining term of the related debt agreements.

Foreign Currency Exchange Rate Risk

We are subject to foreign currency exchange rate risk because we have revenue, expense and equity investments denominated in foreign currencies.

To manage exchange rate risk, we execute both our international revenue and expense transactions in the same foreign currency to the extent practicable.

From time to time, we may also enter into foreign currency option and forward contracts.

In November 2019, we entered into a three and a half-year U.S.

dollar-South Korean won ("KRW") cross currency swap with a notional value of 177 billion KRW.

This swap is intended to mitigate foreign currency volatility resulting from our KRW-denominated investment in Hanjin-KAL.

During the year ended December 31, 2020, we recorded an unrealized loss on this swap of $ 10 million, which is reflected in gain/(loss) on investments, net within non-operating expense.

Delta Air Lines, Inc.

2020 Form 10-K 85

Notes to the Consolidated Financial Statements

Hedge Position as of December 31, 2020

(in millions) Volume Final Maturity Date Prepaid Expenses and Other Other Noncurrent Assets Other Accrued Liabilities Other Noncurrent Liabilities Hedge Derivatives, net

Designated as hedges

Interest rate contract (fair value hedges) 150 U.S.

dollars April 2028 $ 3 $ 20 $ — $ — $ 23

Not designated as hedges

Foreign currency exchange contract 177,045 South Korean won April 2023 — — — ( 13 ) ( 13 )

Fuel hedge contracts 157 gallons - crude oil and refined products April 2021 — — ( 9 ) — ( 9 )

Total derivative contracts $ 3 $ 20 $ ( 9 ) $ ( 13 ) $ 1

Hedge Position as of December 31, 2019

(in millions) Volume Final Maturity Date Prepaid Expenses and Other Other Noncurrent Assets Other Accrued Liabilities Other Noncurrent Liabilities Hedge Derivatives, net

Designated as hedges

Interest rate contracts (fair value hedges) 1,872 U.S.

dollars April 2028 $ 12 $ 53 $ ( 4 ) $ — $ 61

Not designated as hedges

Foreign currency exchange contract 397 Euros December 2020 9 — — — 9

Foreign currency exchange contract 177,045 South Korean won April 2023 1 — — ( 4 ) ( 3 )

Fuel hedge contracts 243 gallons - crude oil and refined products July 2020 16 — ( 15 ) — 1

Total derivative contracts $ 38 $ 53 $ ( 19 ) $ ( 4 ) $ 68

Balance sheet location of hedged item in fair value hedges

Carrying Amount of Hedge Instruments Cumulative Amount of Fair Value Hedge Adjustments (1)

(in millions) December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019

Current maturities of debt and finance leases $ 21 $ ( 19 ) $ 21 $ 8

Debt and finance leases ( 72 ) ( 1,783 ) 77 53

(1) As of December 31, 2020, these amounts include the cumulative amount of fair value hedging adjustments remaining for which hedge accounting has been discontinued of approximately $ 76 million.

Delta Air Lines, Inc.

2020 Form 10-K 86

Notes to the Consolidated Financial Statements

Offsetting Assets and Liabilities

We have master netting arrangements with our counterparties giving us the right to offset hedge assets and liabilities.

However, we have elected not to offset the fair value positions recorded on our balance sheets.

The following table shows the net fair value of our counterparty positions had we elected to offset.

Derivative contracts offsetting assets and liabilities

(in millions) Prepaid Expenses and Other Other Noncurrent Assets Other Accrued Liabilities Other Noncurrent Liabilities Hedge Derivatives, Net

December 31, 2020

Net derivative contracts $ 3 $ 20 $ ( 9 ) $ ( 13 ) $ 1

December 31, 2019

Net derivative contracts $ 24 $ 53 $ ( 5 ) $ ( 4 ) $ 68

Not Designated Hedge Gains (Losses)

Gains (losses) related to our foreign currency exchange and fuel contracts are as follows:

Not designated hedge gains/(losses) by category

Location of Gain (Loss) Recognized in Income Gain (Loss) Recognized in Income

Year Ended December 31,

(in millions) 2020 2019 2018

Foreign currency exchange contracts Gain/(loss) on investments, net $ ( 31 ) $ 10 $ ( 4 )

Fuel hedge contracts Aircraft fuel and related taxes 85 ( 41 ) 52

Total $ 54 $ ( 31 ) $ 48

To manage credit risk associated with our fuel price, interest rate and foreign currency hedging programs, we evaluate counterparties based on several criteria including their credit ratings and limit our exposure to any one counterparty.

Our hedge contracts often contain margin funding requirements.

The margin funding requirements may cause us to post margin to counterparties or may cause counterparties to post margin to us as market prices in the underlying hedged items change.

Due to the fair value position of our hedge contracts, we held or posted no margin as of December 31, 2020 and posted margin of $ 34 million as of December 31, 2019.

The credit risk associated with these receivables is minimal.

See Note 5, "Investments," for further information on our receivables from our investees and other airlines.

Self-Insurance Risk

We self-insure a portion of our losses from claims related to workers' compensation, environmental issues, property damage, medical insurance for employees, healthcare for retirees, disability and general liability.

Losses are accrued based on an estimate of the aggregate liability for claims incurred, using independent actuarial reviews based on standard industry practices and our historical experience.

Delta Air Lines, Inc.

2020 Form 10-K 87

Notes to the Consolidated Financial Statements

During 2020, we loaned GOL Linhas Aéreas Inteligentes, the parent company of GOL Linhas Aéreas (operating as GOL), $ 250 million to be used exclusively to repay the term loan we had previously guaranteed.

As of December 31, 2020, GOL had repaid approximately $ 160 million of this loan and during 2021 GOL repaid the remaining balance.

GOODWILL AND INTANGIBLE ASSETS

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We value goodwill and indefinite-lived intangible assets primarily using market and income approach valuation techniques.

These measurements include the following key assumptions (1) forecasted revenues, expenses and cash flows, including the duration and extent of impact to our business and our alliance partners from the COVID-19 pandemic, (2) current discount rates, (3) observable market transactions and (4) anticipated changes to the regulatory environment (e.g., diminished slot access, additional Open Skies agreements or changes to antitrust approvals).

These measurements include the following key assumptions (1) forecasted revenues, expenses and cash flows, including the duration and extent of impact to our business and our alliance partners from the COVID-19 pandemic, (2) current discount rates, (3) observable market transactions and (4) anticipated changes to the regulatory environment (e.g., changes in slot access and/or availability, additional Open Skies agreements or changes to antitrust approvals).

These assumptions are consistent with those that hypothetical market participants would use.

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We recognize an impairment charge if the asset's carrying value exceeds its estimated fair value.

Delta Air Lines, Inc.

2021 Form 10-K 83

Notes to the Consolidated Financial Statements

Changes in certain events and circumstances could result in impairment or a change from indefinite-lived to definite-lived.

Factors which could cause impairment include, but are not limited to (1) negative trends in our market capitalization, (2) reduced profitability resulting from lower passenger mile yields or higher input costs (primarily related to fuel and employees), (3) lower passenger demand as a result of weakened U.S.

and global economies, global pandemics or other factors, (4) interruption to our operations due to a prolonged employee strike, terrorist attack or other reasons, (5) changes to the regulatory environment (e.g., diminished slot access, additional Open Skies agreements or changes to antitrust approvals), (6) competitive changes by other airlines and (7) strategic changes to our operations leading to diminished utilization of the intangible assets.

and global economies, global pandemics or other factors, (4) interruption to our operations due to a prolonged employee strike, terrorist attack or other reasons, (5) changes to the regulatory environment (e.g., changes in slot access and/or availability, additional Open Skies agreements or changes to antitrust approvals), (6) competitive changes by other airlines and (7) strategic changes to our operations leading to diminished utilization of the intangible assets.

Identifiable Intangible Assets.

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Costs incurred to renew or extend the term of an intangible asset are expensed as incurred.

As a result of the significant impact the COVID-19 pandemic has had on our market capitalization, profitability and overall travel demand, we performed a quantitative valuation of our goodwill and indefinite-lived intangible assets during 2020.

Our December 2020 quarter quantitative impairment tests of goodwill and intangibles concluded that there was no indication of impairment as the fair value exceeded our carrying value:

As a result of the significant impact the COVID-19 pandemic had on our market capitalization, profitability and overall travel demand, we performed a quantitative valuation of our goodwill and indefinite-lived intangible assets during the December 2020 quarter.

These quantitative impairment tests of goodwill and intangibles concluded that there was no indication of impairment as the fair value exceeded our carrying value.

In the December 2021 quarter we performed qualitative assessments of goodwill and indefinite-lived intangible assets, including applicable factors noted above, and determined that there was no indication that the assets were impaired.

Our qualitative assessments include analyses and weighting of all relevant factors that impact the fair value of our goodwill and indefinite-lived intangible assets.

Goodwill and indefinite-lived intangible assets by category

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(in millions) December 31, 2021 December 31, 2020

$ 9,753 $ 9,781 > 100 %

Goodwill $ 9,753 $ 9,753 > 100 %

International routes and slots 2,583 2,583 10 % to 30 %

Airline alliances (2)

1,863 1,005 20 % to > 100 %

Airline alliances 1,863 1,863 20 % to > 100 %

Delta tradename 850 850 > 100 %

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Total $ 15,671 $ 15,671

(1) The reduction in goodwill relates to the combination of Delta Private Jets with Wheels Up in the March 2020 quart er.

See Note 5, "Investments," for more information on this transaction.

(2) As part of our strategic alliance with and investment in LATAM, we have recorded an alliance-related indefinite-lived intangible asset of $ 1.2 billion, which was not reflected in the December 31, 2019 balance.

Delta Air Lines, Inc.

2020 Form 10-K 88

Notes to the Consolidated Financial Statements

International Routes and Slots.

Our international routes and slots primarily relate to Pacific route authorities and slots at capacity-constrained airports in Asia, and slots at London-Heathrow airport.

This primarily relates to Pacific route authorities and slots at capacity-constrained airports in Asia, and slots at London-Heathrow airport.

Airline Alliances.

Our airline alliances intangible assets primarily relate to our commercial agreements with LATAM and our SkyTeam partners.

This primarily relates to our commercial agreements with LATAM and our SkyTeam partners.

Domestic Slots.

Our domestic slots primarily relate to our slots at New York-LaGuardia and Washington-Reagan National airports.

Based on our impairment assessment as of our annual testing date of October 1, we determined that our goodwill and indefinite-lived intangible assets were not impaired.

However, there are a number of uncertainties including how long conditions related to the pandemic will persist, when effective vaccines will be broadly available, when vaccination will be widespread globally, when travel advisories and restrictions will be lifted, what additional measures may be introduced by governments or private parties or what effect any such additional measures may have on air travel and our business.

Any measure that requires or encourages potential travelers to stay in their homes, engage in social distancing or avoid larger gatherings of people is highly likely to be harmful to the air travel industry in general, and consequently our business, as these measures could delay the widespread return of demand for air travel.

This primarily relates to our slots at New York-LaGuardia and Washington-Reagan National airports.

Definite-Lived Intangible Assets

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December 31, 2021 December 31, 2020

(in millions) Gross

Amortization Gross

(in millions) Gross Carrying Value

Amortization Gross Carrying Value

Marketing agreements $ 730 $ ( 700 ) $ 730 $ ( 696 )

Contracts 193 ( 134 ) 193 ( 128 )

Maintenance contracts 193 ( 140 ) 193 ( 134 )

Other 53 ( 53 ) 53 ( 53 )

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Unsecured notes 2022 to 2029 2.90 % to 7.38 % $ 4,354 $ 5,350

Unsecured CARES Act Payroll Support Program Loan (1)

2030 1.00 % 1,648 —

Unsecured Payroll Support Program Loans 2030 to 2031 1.00 % 3,496 1,648

Financing arrangements secured by SkyMiles assets:

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2020 Senior Secured Notes 2025 7.00 % 2,589 3,500

2020 Term Loan (2)(3)

2021 to 2023 5.75 % 1,493 —

2020 Term Loan n/a n/a — 1,493

2018 Revolving Credit Facility (2)

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Total long-term debt $ 23,582 $ 26,531

(1) See Note 2, "Impact of the COVID-19 Pandemic," for further discussion of the terms, including the applicable interest rate.

(1) Due in installments.

(3) Certain aircraft and other financings are comprised of variable rate debt.

All variable rates are equal to LIBOR (generally subject to a floor) or another index rate, in each case plus a specified margin.

2020 Unsecured Notes

In the June 2020 quarter, we issued $ 1.3 billion in aggregate principal amount of 7.375 % unsecured notes due 2026.

The unsecured notes are equal in right of payment with our other unsubordinated indebtedness and senior in right of payment to future subordinated debt.

The unsecured notes also contain event of default provisions consistent with those in our other recent unsecured debt offerings.

Unsecured CARES Act Payroll Support Program Loan

During 2020, we entered into a promissory note for the $ 1.6 billion CARES Act payroll support program loan and issued warrants to acquire more than 6.7 million shares of Delta common stock under the program in connection with the promissory note.

We have recorded the value of the promissory note and warrants on a relative fair value basis as $ 1.5 billion of noncurrent debt, net of discount, and $ 114 million in additional paid in capital, respectively.

See Note 2, "Impact of the COVID-19 Pandemic," for further discussion of the terms of the payroll support program loan.

In January 2021, we issued a promissory note for approximately $ 400 million with respect to the term loan portion of the initial funds received from the payroll support program extension and issued warrants to acquire approximately 1 million shares of Delta common stock under the program as discussed in Note 2, "Impact of the COVID-19 Pandemic." The balance of the promissory note is expected to increase to approximately $ 830 million and the remaining warrants issued during the March 2021 quarter when we receive the remaining $ 1.5 billion in expected funding under the payroll support program extension.

(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.

Unsecured Payroll Support Program Extension Loans

A summary of the amounts received and warrants issued under the initial payroll support program under the CARES Act and the payroll support program extensions is set forth in the following table:

Summary of payroll support program activity

(in millions) Total Grant Loan Number of Warrants Percentage of Outstanding Shares at December 31, 2021

Payroll Support Program (PSP1) $ 5,594 $ 3,946 $ 1,648 6.8 1.1 %

Payroll Support Program Extension (PSP2) 3,290 2,333 957 2.4 0.4 %

Payroll Support Program 3 (PSP3) 3,069 2,178 891 1.9 0.3 %

Total $ 11,953 $ 8,457 $ 3,496 11.1 1.8 %

Grants received were recognized in government grant recognition in our income statement over the periods that the funds were intended to compensate.

The PSP1 grant was recognized during 2020 and grants received from PSP2 and PSP3 were fully recognized during 2021.

Delta Air Lines, Inc.

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Notes to the Consolidated Financial Statements

2020 SkyMiles Financing

In the September 2020 quarter, Delta and SkyMiles IP Ltd.

("SMIP"), an exempted company incorporated with limited liability under the laws of the Cayman Islands and an indirect wholly owned subsidiary of Delta, issued $ 2.5 billion in principal amount of 4.500 % senior secured notes due 2025 and $ 3.5 billion in principal amount of 4.750 % senior secured notes due 2028 (collectively, the “SkyMiles Notes”).

Concurrently with the issuance of the SkyMiles Notes, Delta and SMIP entered into a term loan credit agreement and borrowed $ 3.0 billion (the “SkyMiles Term Loan” and together with the SkyMiles Notes, the “SkyMiles Debt”).

The SkyMiles Term Loan matures in October 2027 and bears interest at a variable rate equal to LIBOR (but not less than 1.0 % per annum), plus a margin of 3.75 % per year.

The SkyMiles Debt is guaranteed by three other Delta subsidiaries that are also exempted companies incorporated with limited liability under the laws of the Cayman Islands, including SkyMiles IP Finance Ltd.

The SkyMiles Debt is secured by a first-priority security interest in certain of our co-branding, partnering or similar agreements relating to the SkyMiles program (including all payments thereunder), rights under certain intercompany agreements relating to the SkyMiles program, certain rights under our SkyMiles program, certain deposit accounts that receive revenue under our SkyMiles agreements, the equity of SMIP and substantially all other assets of SMIP and SMIF.

The assets and credit of SMIP and the Cayman entity guarantors are not available to satisfy obligations, including indebtedness, of Delta or our subsidiaries other than with respect to the SkyMiles Debt and any permissible priority lien or junior lien debt subsequently incurred.

2020 Senior Secured Notes and Term Loan

In the June 2020 quarter, we issued $ 3.5 billion of senior secured notes and entered into a $ 1.5 billion term loan secured by certain slots, gates and routes.

The senior secured notes bear interest at an annual rate of 7.00 % and mature in May 2025.

The term loan bears interest at a variable rate equal to LIBOR plus a specified margin and is subject to principal payments of 1 % per year, payable quarterly beginning in September 2020, with the balance due in April 2023.

2018 Revolving Credit Facility

In the June 2020 quarter, we amended the 2018 revolving credit facility agreement to be secured by our Pacific route authorities and certain related assets.

Additionally, the revolving credit facility was amended to extend the maturities of $ 1.3 billion of the revolver previously due in April 2021 to April 2022 and to include a minimum liquidity covenant, as discussed further below.

In October 2020, we repaid the borrowings under the revolving credit facility.

2020 Secured Term Loan Facility

In the March 2020 quarter, we entered into a $ 2.7 billion 364 -day secured term loan facility, and we increased the borrowings thereunder to $ 3.0 billion in April 2020.

Borrowings under this facility were secured by certain aircraft.

In October 2020, we repaid all borrowings under, and terminated, this facility.

We completed a $ 1.0 billion offering of Class AA and A Pass Through Certificates, Series 2020-1 ("2020-1 EETC") utilizing a pass through trust during the March 2020 quarter.

The proceeds of this issuance were used to repay unsecured notes that matured in the March 2020 quarter.

In the June 2020 quarter, we issued an additional $ 135 million of Class B certificates.

The details of the 2020-1 EETC, which is secured by 33 aircraft, are shown in the table below:

2020-1 EETC issuance by class

(in millions) Total Principal Fixed Interest Rate Issuance Date Final Maturity Date

2020-1 Class AA Certificates $ 796 2.00 % March 2020 June 2028

2020-1 Class A Certificates 204 2.50 % March 2020 June 2028

2020-1 Class B Certificates 135 8.00 % April 2020 June 2027

Total $ 1,135

Payroll Support Program Extension (PSP2).

The Consolidated Appropriations Act, 2021 was enacted on December 27, 2020, and included an extension of the payroll support program created under the CARES Act providing an additional $15 billion in grants and loans to the airline industry.

In January 2021, we entered into a payroll support program extension agreement with the U.S.

Department of the Treasury.

During the six months ended June 30, 2021, we received a total of $ 3.3 billion in payroll support payments under this extension agreement, which we were required to use exclusively for the payment of employee wages, salaries and benefits and were conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs from the date of the extension agreement through March 2021.

Other conditions include prohibitions on share repurchases and dividends through March 2022 and certain limitations on executive compensation until October 2022.

These support payments consisted of $ 2.3 billion in a grant and $ 957 million in an unsecured 10 -year low interest loan.

In return, we entered into a promissory note for the loan and issued warrants to the U.S.

Department of the Treasury to acquire approximately 2.4 million shares of Delta common stock.

The loan bears interest at an annual rate of 1.00 % for the first five years and the applicable Secured Overnight Financing Rate ("SOFR") plus 2.00 % in the final five years.

The warrants have an initial exercise price of $ 39.73 per share, subject to adjustment in certain cases, and a five-year term.

We have recorded the value of the promissory note and warrants on a relative fair value basis as $ 905 million of noncurrent debt, net of discount, and $ 52 million in additional paid in capital, respectively.

Payroll Support Program 3 (PSP3).

The American Rescue Plan Act of 2021 was enacted on March 11, 2021, and included a further extension of the payroll support program providing an additional $14 billion in grants and loans to the airline industry.

In April 2021, we entered into a Payroll Support Program 3 Agreement with the U.S.

Department of the Treasury.

During the June 2021 quarter, we received a total of $ 3.1 billion in payroll support payments under this agreement, which we were required to use exclusively for the payment of employee wages, salaries and benefits and was conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs from the date of the agreement through September 30, 2021 or the date on which we have expended all of the payroll support, whichever is later.

We expended all of the payroll support during 2021.

Other conditions include prohibitions on share repurchases and dividends through September 30, 2022 and certain limitations on executive compensation until April 1, 2023.

These support payments consisted of $ 2.2 billion in a grant and $ 891 million in an unsecured 10 -year low interest loan.

In return, we entered into a promissory note for the loan and issued warrants to the U.S.

Department of the Treasury to acquire approximately 1.9 million shares of Delta common stock.

The loan bears interest at an annual rate of 1.00 % for the first five years and the applicable SOFR plus 2.00 % in the final five years.

The warrants have an initial exercise price of $ 47.80 per share, subject to adjustment in certain cases, and a five-year term.

We have recorded the value of the promissory note and warrants on a relative fair value basis as $ 857 million of noncurrent debt, net of discount, and $ 34 million in additional paid in capital, respectively.

2020 Term Loan

In 2020 we entered into a $ 1.5 billion term loan secured by certain slots, gates and routes.

In the March 2021 quarter, we repaid in full the term loan, which was scheduled to mature in April 2023, and incurred a $ 56 million loss on extinguishment of debt, which is recorded in loss on extinguishment of debt in non-operating expense in our income statement.

Enhanced Equipment Trust Certificates ("EETCs") Prepayments

In the June 2021 quarter, we repaid in full approximately $ 450 million of various EETCs which were scheduled to mature between 2022 and 2023, and incurred a $ 26 million loss on extinguishment of debt, which is recorded in loss on extinguishment of debt in non-operating expense in our income statement.

Delta Air Lines, Inc.

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Notes to the Consolidated Financial Statements

In the June 2020 quarter, we issued an additional $ 108 million of certificates under the 2019-1 EETC offering initially completed in March 2019.

The additional certificates were issued as 2019-1 Class B Certificates with a fixed interest rate of 8.00 % and mature in April 2023.

New York Transportation Development Corporation ("NYTDC") Special Facilities Revenue Bonds, Series 2020

In the September 2020 quarter, the NYTDC issued Special Facilities Revenue Bonds, Series 2020 (the "Series 2020 Bonds") in the aggregate principal amount of $ 1.5 billion.

We entered into loan agreements with the NYTDC to use the proceeds from the Series 2020 Bonds to finance a portion of the costs of the construction project that is currently in process at LaGuardia Airport, consisting of the demolition of existing Terminals C and D, the design and construction of new terminal facilities, the payment of capitalized interest on the Series 2020 Bonds and on a portion of the Special Facilities Revenue Bonds, Series 2018, and the payment of costs related to issuance of the Series 2020 Bonds.

The proceeds from the Series 2020 Bonds are recorded in cash restricted for airport construction on our balance sheet, along with the remaining proceeds of the Series 2018 Bonds.

See Note 10, "Airport Redevelopment," for further information on our LaGuardia Airport project.

We are required to pay debt service on the Series 2020 Bonds through payments under loan agreements with NYTDC, and we have guaranteed the Series 2020 Bonds.

Early Settlement of Outstanding Notes

In July 2021, we completed a cash tender offer for an aggregate purchase price of $ 1.0 billion, excluding accrued and unpaid interest, of our outstanding 7.0 % Senior Secured Notes due 2025 (the "2025 Notes"), 7.375 % Notes due 2026 (the "2026 Notes") and 4.5 % Senior Secured Notes due 2025 (the "2025 SkyMiles Notes").

As a result of the tender offer, we purchased 2025 Notes, included as 2020 Senior Secured Notes in the table above, with principal amount of $ 677 million for approximately $ 800 million and 2026 Notes, included in Unsecured Notes in the table above, with principal amount of $ 169 million for approximately $ 200 million.

We did not purchase any of the 2025 SkyMiles Notes under the tender offer.

In addition to the early settlement of the principal amount of the purchased notes, we recorded a loss of $ 166 million on extinguishment of debt in non-operating expense in our income statement.

During the second half of 2021, we also repurchased $ 647 million of various secured certificates, unsecured notes and a portion of the SkyMiles Term Loan on the open market.

These payments resulted in a $ 71 million loss on extinguishment of debt.

In January 2022, we irrevocably committed to the early redemption of $ 1.0 billion of our 3.625 % unsecured notes that had an original maturity during March 2022.

We will repay these notes plus accrued interest during February 2022.

Availability Under Revolving Facilities

As of December 31, 2021, we had approximately $ 2.9 billion undrawn and available under our revolving credit facilities.

In addition, we had outstanding letters of credit as of December 31, 2020, including approximately $ 300 million that reduced the availability under our revolvers and approximately $ 300 million that did not affect the availability under our revolvers.

In addition, we had $ 300 million outstanding letters of credit as of December 31, 2021 that did not affect the availability under our revolvers.

Fair Value of Debt

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Our aircraft leases had remaining lease terms of one month to 14 years.

In addition, we have regional aircraft leases that are embedded within our capacity purchase agreements and included in the operating right-of-use ("ROU") asset and lease liability.

In addition, we have regional aircraft leases that are embedded within our capacity purchase agreements and included in the ROU asset and lease liability.

We allocated the consideration in each capacity purchase agreement to the lease and nonlease components based on their relative standalone value.

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Some airport facilities have fixed payment schedules, the most significant of which are New York-LaGuardia and New York-JFK.

For those airport leases, we have recorded a ROU asset and lease liability representing the fixed component of the lease payment.

For those airport leases, we have recorded a ROU asset and lease liability representing the fixed component of the lease payments.

See Note 8, "Airport Redevelopment," for more information on our significant airport redevelopment projects.

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We lease certain IT assets (including servers, mainframes, etc.), ground support equipment (including tugs, tractors, fuel trucks and de-icers), and various other equipment.

The remaining lease terms range from one month to nine years .

The remaining lease terms range from one month to eight years .

Certain leased assets are embedded within various ground and IT service agreements.

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These liabilities are classified within other accrued or other noncurrent liabilities on our balance sheet.

The cash proceeds are treated as financing inflows on the cash flows statement.

The cash proceeds were treated as financing inflows on the cash flows statement.

The other 11 transactions qualified as sales, generating an immaterial loss, and the associated assets were removed from our balance sheet within property and equipment, net and recorded within ROU assets.

The liabilities are recorded within current maturities of operating leases and noncurrent operating leases on our balance sheet.

The cash proceeds are treated as investing cash inflows on the cash flows statement.

The cash proceeds were treated as investing cash inflows on the cash flows statement.

Delta Air Lines, Inc.

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Total lease cost $ 2,893 $ 2,852 $ 3,108

(1) Expenses are classified within aircraft rent, landing fees and other rents and regional carriers expense, excluding fuel on the income statement.

For the year ended December 31, 2020, $ 187 million and $ 50 million of the operating and variable lease costs, respectively, for the year ended December 31, 2019, $ 174 million and $ 64 million of the operating and variable lease costs, respectively, and for the year ended December 31, 2018, $ 150 million, $ 18 million and $ 48 million of the operating, short-term and variable lease costs, respectively, are attributable to our regional carriers.

(1) Expenses are classified within aircraft rent, landing fees and other rents and regional carrier expense on the income statement.

For the years ended December 31, 2021, 2020 and 2019, operating lease costs of $ 111 million, $ 187 million and $ 174 million, respectively, are attributed to our regional carriers.

For the years ended December 31, 2021, 2020 and 2019, variable lease costs of $ 29 million, $ 50 million and $ 64 million, respectively, are attributable to our regional carriers.

Delta Air Lines, Inc.

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We have recognized a ROU asset and lease liability representing the fixed component of the lease payments for this facility.

Delta Air Lines, Inc.

2020 Form 10-K 96

Notes to the Consolidated Financial Statements

During 2021, we signed an amendment to the Sublease for additional gates at JFK, increasing our lease obligation by $ 1.2 billion.

We have an equity method investment in JFK IAT Member LLC, which owns IAT, our sublessor at Terminal 4.

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Accordingly, we do not consolidate this entity in our Consolidated Financial Statements.

We continue to plan for further expansion of Terminal 4, however changes in the JFK market due to the COVID-19 pandemic have caused us to reevaluate our original plan to expand the terminal by 16 gates.

We are working with the Port Authority and IAT to evaluate our options and determine the optimal size, scope and phasing of the expansion.

Delta Air Lines, Inc.

2021 Form 10-K 91

Notes to the Consolidated Financial Statements

We continue to plan for further expansion of Terminal 4 and during 2021, the Port Authority approved modified project plans to renovate Terminal 4 and add 10 new gates enabling us to move out of Terminal 2 and consolidate our operations at Terminal 4.

The project is estimated to cost approximately $ 1.5 billion and we expect to amend the Sublease in the March 2022 quarter.

Construction started in late 2021 with the project estimated to be complete by the end of 2023.

We have not completed our assessment of the project accounting, but we expect that we will not control the underlying assets being constructed, and therefore, do not expect to have the project asset or related obligation recorded on our balance sheet.

Los Angeles International Airport ("LAX")

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Construction is underway, which includes a new centralized ticketing and arrival hall, a new security checkpoint, core infrastructure to support the City's planned airport people mover, ramp improvements and a post-security connector to the north side of the Tom Bradley International Terminal.

Given reduced passenger volumes resulting from the COVID-19 pandemic, we have accelerated the construction schedule for this project.

Additionally, in 2020, we enhanced the project’s scope to include a more customer-friendly design of Terminal 3, a Delta One lounge and expanded Delta Sky Club, and baggage system upgrades designed to increase the terminals’ operational efficiency going forward.

Construction is expected to be completed by 2023.

Given reduced passenger volumes resulting from the COVID-19 pandemic, we accelerated the construction schedule for this project in 2020.

Additionally, in 2020, we enhanced the project’s scope to include a more customer-friendly design of Terminal 3, an expanded Delta Sky Club and baggage system upgrades designed to increase the terminals’ operational efficiency going forward.

Construction is expected to be completed in 2023.

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 an $ 800 million revolving credit facility provided by a group of lenders.

The credit facility was executed during 2017 and amended in 2020, and we have guaranteed the obligations of the RAIC under the credit facility.

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 amended in 2020, and we have guaranteed the obligations of the RAIC under the credit facility.

The revolving credit facility agreement was amended again 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.

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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 consisting of 37 gates across four concourses connected to a central headhouse.

The terminal will feature a new, larger Delta Sky Club, wider concourses, more gate seating and 75 percent more concessions space than the existing terminals.

The terminal will feature a new, larger Delta Sky Club, wider concourses, more gate seating and nearly double the amount of concessions space than the existing terminals.

The facility will also offer direct access between the parking garage and terminal and improved roadways and drop-off/pick-up areas.

The design of the new terminal will integrate sustainable technologies and improvements in energy efficiency.

Construction will be phased to limit passenger inconvenience and is expected to be completed by 2026.

Construction is underway and is being phased to limit passenger inconvenience.

Due to an acceleration effort that commenced in 2020, completion is expected by 2025.

Delta Air Lines, Inc.

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In connection with the redevelopment, during 2017, we entered into an amended and restated terminal lease with the Port Authority with a term through 2050.

Pursuant to the lease agreement, as amended to date, we will (1) fund (through debt issuance and existing cash) and undertake the design, management and construction of the terminal and certain off-premises supporting facilities, (2) receive a Port Authority contribution of $ 481 million to facilitate construction of the terminal and other supporting infrastructure, (3) be responsible for all operations and maintenance during the term of the lease and (4) have preferential rights to all gates in the terminal subject to Port Authority requirements with respect to accommodation of designated carriers.

Pursuant to the lease agreement, as amended to date, we will (1) fund (through debt issuance and existing cash) and undertake the design, management and construction of the terminal and certain off-premises supporting facilities, (2) receive a Port Authority contribution of approximately $ 500 million to facilitate construction of the terminal and other supporting infrastructure, (3) be responsible for all operations and maintenance during the term of the lease and (4) have preferential rights to all gates in the terminal subject to Port Authority requirements with respect to accommodation of designated carriers.

We currently expect our net project cost 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 spent approximately $ 600 million during 2020, bringing the total amount spent on the project to date to approximately $ 1.5 billion.

Using funding primarily provided by existing financing arrangements, we spent approximately $ 950 million, which is primarily reflected in investing activities in our cash flows statement, during 2021, bringing the total amount spent on the project to date to approximately $ 2.5 billion.

See Note 6, "Debt," for additional information on the debt related to this redevelopment project, NYTDC Special Facilities Revenue Bonds, Series 2018 and NYTDC Special Facilities Revenue Bonds, Series 2020.

In 2019, we opened Concourse G, the first of the four new concourses housing seven of the 37 new gates.

Not only did it deliver the first direct impact to the Delta passenger experience, it also represented the first major phasing milestone.

The next major milestone will be the opening of the headhouse and Concourse E, which is scheduled for 2022.

As we are funding the majority of the LaGuardia redevelopment project, we account for the related assets as leasehold improvements.

In 2019, we opened Concourse G, the first of four new concourses, housing seven of the 37 new gates.

Not only did the new Concourse G provide the first direct impact to the Delta passenger experience, it also represented the first major phasing milestone.

The next major milestone will be the opening of the headhouse and Concourse E, which is scheduled for the second quarter of 2022.

Based on our assessment of the project, we concluded that we do not control the underlying assets being constructed.

Costs incurred by Delta are accounted for as leasehold improvements.

We entered into loan agreements to fund a portion of the construction, which are recorded on our balance sheet as debt with the proceeds reflected as restricted cash.

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These plans are closed to new entrants and frozen for future benefit accruals.

The Pension Protection Act of 2006 allows commercial airlines to elect alternative funding rules ("Alternative Funding Rules") for defined benefit plans that are frozen.

We elected the Alternative Funding Rules under which the unfunded liability for a frozen defined benefit plan may be amortized over a fixed 17-year period and is calculated using an 8.85 % discount rate until the 17-year period expires for all frozen defined benefit plans by the end of 2024.

We have no minimum funding requirements in 2021, but we plan to voluntarily contribute at least $ 500 million to these plans during 2021.

Our funding obligations for qualified defined benefit plans are governed by the Employee Retirement Income Security Act and any applicable legislation.

Under the Pension Protection Act of 2006, we elected alternative funding rules so that the unfunded liability for a frozen defined benefit plan may be amortized over a fixed 17-year period and is calculated using an 8.85 % discount rate until the 17-year period expires for all frozen defined benefit plans by the end of 2024.

Upon expiration, under recent legislation passed in 2021, any required funding would be amortized over a rolling 15-year period and calculated using a discount rate of no less than 4.75% through 2030.

We have no minimum funding requirements for these plans in 2022 and do no t plan to make voluntary contributions during 2022.

Defined Contribution Pension Plans.

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These plans generally cover different employee groups and employer contributions vary by plan.

The costs associated with our defined contribution pension plans were approximately $ 805 million, $ 1.0 billion and $ 925 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The costs associated with our defined contribution pension plans were approximately $ 875 million, $ 805 million and $ 1.0 billion for the years ended December 31, 2021, 2020 and 2019, respectively.

Postretirement Healthcare Plans.

We sponsor healthcare plans that provide benefits to eligible retirees and their dependents who are under age 65 .

We have generally eliminated company-paid post age 65 healthcare coverage, except for (1) subsidies available to a limited group of retirees and their dependents, (2) a group of retirees who retired prior to 1987 and (3) retiree medical accounts which provide a fixed dollar amount to eligible employees who retired in 2012 or in 2020.

Benefits under these plans are funded from current assets and employee contributions.

During the September 2020 quarter, we remeasured our postretirement healthcare obligation to account for the retiree medical accounts provided to eligible participants in our voluntary early retirement and separation programs ("voluntary programs").

During 2020, we remeasured our postretirement healthcare obligation to account for the retiree medical accounts provided to eligible participants in our voluntary programs.

As a result, we recorded a $ 1.3 billion special termination benefit charge and increased our postretirement healthcare obligation by $ 1.3 billion.

12 unchanged sentences

Interest cost 582 700 117 120

Actuarial loss 2,051 1,678 247 226

Actuarial (gain)/loss ( 851 ) 2,051 23 247

Benefits paid, including lump sums and annuities ( 1,279 ) ( 1,233 ) ( 405 ) ( 356 )

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(1) At the end of each year presented, our accumulated benefit obligations for our pension plans are equal to the benefit obligations shown above.

During 2020 and 2019, net actuarial losses increased our benefit obligation primarily due to the decrease in discount rates .

During 2021, actuarial gains decreased our benefit obligation due to the increase in discount rate, while in 2020 our obligation increased due to the actuarial losses from a decrease in discount rates.

These gains and losses are recorded in AOCI and reflected in the table below.

Amounts are generally amortized from AOCI over the expected future lifetime of plan participants.

Balance Sheet Position

22 unchanged sentences

Special termination benefits — — — — 1,260 —

Curtailment — — — — — ( 53 )

Net periodic (benefit) cost

1 unchanged sentence

Service cost is recorded in salaries and related costs in the income statement.

Special termination benefits are recorded in restructuring charges, while all other components are recorded within miscellaneous, net under non-operating expense.

Special termination benefits are recorded in restructuring charges, while all other components are recorded within pension and related benefit/(expense) under non-operating expense.

We used the following actuarial assumptions to determine our benefit obligations and our net periodic benefit cost for the periods presented:

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Our weighted average expected long-term rate of return on assets for net periodic benefit cost for the year ended December 31, 2021 was 8.98 %.

Delta Air Lines, Inc.

2020 Form 10-K 100

Notes to the Consolidated Financial Statements

Life Expectancy .

4 unchanged sentences

Each year we consider updates by the SOA in setting our mortality assumptions for purposes of measuring pension and other postretirement and postemployment benefit obligations.

Delta Air Lines, Inc.

2021 Form 10-K 95

Notes to the Consolidated Financial Statements

Benefit Payments

18 unchanged sentences

Risk diversifying assets include hedged mandates implementing long-short, market neutral and relative value strategies that invest primarily in publicly-traded equity, fixed income, foreign currency and commodity securities and are used to improve the impact of active management on the plans.

Delta Air Lines, Inc.

2020 Form 10-K 101

Notes to the Consolidated Financial Statements

Benefit Plan Assets Measured at Fair Value on a Recurring Basis

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(in millions) Level 1 Level 2 Total Level 1 Level 2 Total

Equities and equity-related instruments $ 1,061 $ 59 $ 1,120 $ 840 $ 49 $ 889 (a)

Delta common stock 507 — 507 737 — 737 (a)

Cash equivalents $ 2,390 $ 2,097 $ 4,487 $ 305 $ 3,359 $ 3,664 (a)

Equities and equity-related instruments 1,034 161 1,195 1,061 59 1,120 (a)

Fixed income and fixed income-related instruments 69 979 1,048 — 882 882 (a)(b)

Delta common stock 407 — 407 507 — 507 (a)

Real assets — 256 256 — — — (a)

Benefit plan assets $ 3,900 $ 3,493 $ 7,393 $ 1,873 $ 4,300 $ 6,173

Investments measured at net asset value ("NAV") (1)

12,653 10,427

Total benefit plan assets $ 20,046 $ 16,600

(1) Investments that were measured at NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy.

Delta Air Lines, Inc.

2021 Form 10-K 96

Notes to the Consolidated Financial Statements

Cash Equivalents.

These investments primarily consist of high-quality, short-term obligations that are a part of institutional money market mutual funds that are valued using current market quotations or an appropriate substitute that reflects current market conditions.

Equities and Equity-Related Instruments.

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Over-the-counter securities are valued at the bid prices or the average of the bid and ask prices on the last business day of the year from published sources or, if not available, from other sources considered reliable, generally broker quotes.

Delta Common Stock.

The Delta common stock investment is managed by an independent fiduciary.

Cash Equivalents.

Fixed Income and Fixed Income-Related Instruments.

3 unchanged sentences

Delta Air Lines, Inc.

2020 Form 10-K 102

Notes to the Consolidated Financial Statements

Delta Common Stock.

The Delta common stock investment is managed by an independent fiduciary.

These investments include precious metals and precious metals-related instruments, some of which are valued at the closing price reported on the active market on which the individual instruments are traded, while others are priced based on pricing models, quoted prices of securities with similar characteristics or broker quotes.

The following table summarizes investments measured at fair value based on NAV per share as a practical expedient:

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Includes funds with weekly, semi-monthly, monthly, quarterly and custom redemption frequencies as well as funds with a redemption window following the anniversary of the initial investment.

(4) Unfunded commitments were $ 916 million for commingled funds, private equity and private equity-related instruments, $ 264 million for fixed income and fixed income-related instruments and $ 181 million for real assets at December 31, 2020.

(4) Unfunded commitments were $ 1.0 billion for commingled funds, private equity and private equity-related instruments, $ 259 million for fixed income and fixed income-related instruments and $ 386 million for real assets at December 31, 2021.

Hedge Funds and Hedge Fund-Related Strategies.

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Private equity and private equity-related strategies are typically valued quarterly by the fund managers using valuation models where one or more of the significant inputs into the model cannot be observed and which require the development of assumptions.

Delta Air Lines, Inc.

2021 Form 10-K 97

Notes to the Consolidated Financial Statements

Fixed Income and Fixed Income-Related Instruments.

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These plans did not have a material impact on our Consolidated Financial Statements in any period presented.

Delta Air Lines, Inc.

2020 Form 10-K 103

Notes to the Consolidated Financial Statements

Voluntary Programs

During the June 2020 quarter in response to the COVID-19 pandemic, we announced the voluntary programs, which primarily applied to eligible U.S.

During 2020, in response to the COVID-19 pandemic, we announced the voluntary programs, which primarily applied to eligible U.S.

merit, ground and flight attendant and pilot employees.

The employees electing to participate in the voluntary programs were eligible for separation payments, continued healthcare benefits and certain participants will receive retiree medical accounts.

The election and revocation windows for these programs closed during the September 2020 quarter with approximately 18,000 employees electing to participate.

Those employees who elected to participate in the voluntary programs were eligible for separation payments, continued healthcare benefits and certain participants received retiree medical accounts.

The election and revocation windows for these programs closed during 2020 with approximately 18,000 employees electing to participate.

We recorded $ 3.4 billion in restructuring charges in our income statement associated with these programs and other employee benefit charges during 2020, including $ 1.3 billion of special termination benefits (discussed above).

The remainder of the restructuring charge primarily relates to separation payments and healthcare benefits.

Approximately $ 720 million was disbursed in cash payments to participants in the voluntary programs during 2020.

Approximately $ 720 million was disbursed in cash payments to participants in the voluntary programs during 2020 and approximately $ 575 million in 2021.

An additional approximately $ 250 million of cash payments were disbursed during 2020 related to unused vacation and other benefits, which were accrued prior to the voluntary programs charge.

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In determining the amount of profit sharing, the program defines profit as pre-tax profit adjusted for profit sharing and certain other items.

For the year ended December 31, 2020 we recorded no expense and for the years ended December 31, 2019 and 2018, we recorded expenses of $ 1.6 billion and $ 1.3 billion under the profit sharing program, respectively.

To recognize the extraordinary efforts of our employees through the pandemic, we will make a special profit-sharing payment to eligible employees in February 2022, based on the adjusted pre-tax profit earned during the second half of 2021.

For the years ended December 31, 2021 and 2019 we recorded profit sharing expense of $ 108 million and $ 1.6 billion, respectively.

For the year ended December 31, 2020 we recorded no profit sharing expense.

Delta Air Lines, Inc.

2021 Form 10-K 98

Notes to the Consolidated Financial Statements

COMMITMENTS AND CONTINGENCIES

Aircraft Purchase Commitments

In 2020, we restructured our aircraft order books with Airbus and MHI RJ Aviation Group (manufacturer of CRJ aircraft) in an effort to better match the timing of aircraft deliveries with our network and financial needs over the next several years.

The restructuring reduced our aircraft purchase commitments by more than $ 2 billion in 2020 and by more than $ 5 billion through 2022.

The shift in delivery timing is intended to allow us to continue simplifying and modernizing our fleet while maintaining our Airbus order book.

Our future aircraft purchase commitments totaled approximately $ 16.2 billion at December 31, 2021:

3 unchanged sentences

Total $ 16,170

Delta Air Lines, Inc.

2020 Form 10-K 104

Notes to the Consolidated Financial Statements

Our future aircraft purchase commitments included the following aircraft at December 31, 2021:

3 unchanged sentences

A330-900neo 26

(1) Includes one A330-900neo lease commitment in 2021 incremental to our order book with Airbus.

LATAM A350 Commitments

We have assumed 10 of LATAM's A350 purchase commitments from Airbus, with deliveries through 2025, which are included as purchase commitments in the above table.

We had agreed to acquire four A350 aircraft from LATAM, but terminated the purchase agreement for a fee of $ 62 million during the June 2020 quarter.

See Note 5, "Investments," for further information on our strategic alliance with LATAM.

B-737-900ER 19

Aircraft Orders

During 2021, we agreed with Airbus to add incremental aircraft to our order book by converting options for 55 A321neo aircraft into firm orders and replenishing 25 of our options.

We expect to take delivery of our first A321neo in the first half of 2022, with deliveries of these aircraft continuing through 2027.

Additionally, we agreed to move up two A350-900 deliveries and one A330-900neo delivery to occur in the second half of 2022.

During 2021, we agreed to acquire 29 B-737-900 aircraft and enter into leases for nine A350-900 aircraft.

We began taking delivery of these preowned aircraft in 2021 and deliveries are expected to continue through the first quarter of 2022.

Phased entry into service is expected through the summer of 2023.

Contract Carrier Agreements

We have contract carrier agreements with regional carriers expiring from 2022 to 2031.

These agreements are structured as either capacity purchase or revenue proration agreements.

Capacity Purchase Agreements .

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We pay those airlines an amount, as defined in the applicable agreement, which is based on a determination of their cost of operating those flights and other factors intended to approximate market rates for those services.

Delta Air Lines, Inc.

2021 Form 10-K 99

Notes to the Consolidated Financial Statements

The following table shows our minimum obligations under our existing capacity purchase agreements with third-party regional carriers.

5 unchanged sentences

Total $ 11,732

(1) These amounts exclude contract carrier payments accounted for as operating leases of aircraft, which are described in Note 9, "Leases."

(1) These amounts exclude contract carrier payments accounted for as leases of aircraft, which are described in Note 7, "Leases."

Revenue Proration Agreement .

2 unchanged sentences

This revenue proration agreement establishes a fixed dollar or percentage division of revenues for tickets sold to passengers traveling on connecting flight itineraries.

Delta Air Lines, Inc.

2020 Form 10-K 105

Notes to the Consolidated Financial Statements

Legal Contingencies

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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.

Delta Air Lines, Inc.

2021 Form 10-K 100

Notes to the Consolidated Financial Statements

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.

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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.

Delta Air Lines, Inc.

2020 Form 10-K 106

Notes to the Consolidated Financial Statements

Employees Under Collective Bargaining Agreements

As of December 31, 2021, we had approximately 83,000 full-time equivalent employees, 20 % of whom were represented by unions.

The following table shows our domestic airline employee groups that are represented by unions.

Domestic airline employees represented by collective bargaining agreements by group

Employee Group Approximate Number of Active Employees Represented Union Date on which Collective Bargaining Agreement Becomes Amendable

Employee Group Approximate Number of Employees Represented Union Date on which Collective Bargaining Agreement Becomes Amendable

Delta Pilots 13,180 ALPA December 31, 2019

4 unchanged sentences

1,480 AFA March 31, 2025

We are in mediated discussions with the representative of the Delta pilots regarding terms of their amendable collective bargaining agreement under the auspices of the National Mediation Board ("NMB").

In addition to the domestic airline employee groups discussed above, approximately 190 refinery employees of Monroe are represented by the United Steel Workers under an agreement that expires on February 28, 2022.

In addition to the domestic airline employee groups discussed above, approximately 180 refinery employees of our wholly owned subsidiary Monroe are represented by the United Steel Workers under an agreement that expires on February 28, 2022.

This agreement is governed by the National Labor Relations Act, which generally allows either party to engage in self-help upon the expiration of the agreement.

3 unchanged sentences

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.

Delta Air Lines, Inc.

2021 Form 10-K 101

Notes to the Consolidated Financial Statements

Income Tax Provision

Our income tax provision consisted of the following:

Components of income tax benefit (provision)

Components of income tax (provision) benefit

Year Ended December 31,

(in millions) 2021 2020 2019

Current tax benefit (provision):

Current tax (provision) benefit:

Federal $ — $ 94 $ 94

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International ( 3 ) ( 5 ) ( 13 )

Deferred tax benefit (provision):

Deferred tax (provision) benefit:

Federal ( 130 ) 2,766 ( 1,343 )

State and local 16 344 ( 130 )

Income tax benefit (provision) $ 3,202 $ ( 1,431 ) $ ( 1,216 )

Delta Air Lines, Inc.

2020 Form 10-K 107

Notes to the Consolidated Financial Statements

Income tax (provision) benefit $ ( 118 ) $ 3,202 $ ( 1,431 )

The following table presents the principal reasons for the difference between the effective tax rate and the U.S.

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State taxes, net of federal benefit ( 4.4 ) 1.9 2.3

Permanent differences 4.9 ( 0.6 ) ( 0.3 )

Valuation allowance 9.1 ( 2.6 ) 0.7

1 unchanged sentence

Effective income tax rate 29.8 % 20.5 % 23.1 %

Delta Air Lines, Inc.

2021 Form 10-K 102

Notes to the Consolidated Financial Statements

Deferred Taxes

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes.

The following table shows significant components of our deferred tax assets and liabilities:

Significant components of deferred income tax assets and liabilities

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Pension, postretirement and other benefits 2,089 2,956

Investments 314 —

Deferred revenue 2,288 1,929

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Total deferred tax liabilities $ 7,291 $ 7,079

Net deferred tax assets (liabilities) (1)

Net deferred tax assets

$ 1,294 $ 1,988

(1) At December 31, 2020, the net deferred tax assets of $ 2.0 billion are recorded in deferred income taxes, net within noncurrent assets.

At December 31, 2019, the net deferred tax liabilities of $ 1.3 billion included $ 120 million of net state deferred tax assets, which are recorded in deferred income taxes, net within noncurrent assets, and $ 1.5 billion of net federal deferred tax liabilities, which are recorded in deferred income taxes, net within noncurrent liabilities.

As of December 31, 2020, w e had $ 5.7 billion of federal pre-tax net operating loss carryforwards, which will not begin to expire until 2027.

As of December 31, 2021, w e had approximately $ 4.8 billion of U.S.

federal pre-tax net operating loss carryforwards, of which $ 1.1 billion was generated prior to 2018 and will not begin to expire until 2029.

Under current tax law, the remaining amount has no expiration.

Valuation Allowance

We periodically assess whether it is more likely than not that we will generate sufficient taxable income to realize our deferred income tax assets.

We establish valuation allowances if it is not likely we will realize our deferred income tax assets.

We establish valuation allowances if it is more likely than not that we will be unable to realize our deferred income tax assets.

In making this determination, we consider available positive and negative evidence and make certain assumptions.

We consider, among other things, projected future taxable income, scheduled reversals of deferred tax liabilities, the overall business environment, our historical financial results and tax planning strategies.

At December 31, 2021 our net deferred tax asset balance was $ 1.3 billion, including an $ 833 million valuation allowance primarily related to capital loss carryforwards and certain state net operating losses.

Although we have recent cumulative losses, we have a history of significant earnings prior to the onset of the COVID-19 pandemic.

While we expect to return to sustained profitability as the effects of the pandemic subside and to generate sufficient taxable income to utilize our federal net operating loss carryforwards before any expire, the generation of future taxable income is dependent on many factors, including those which are out of our control, such as the demand for air travel and overall health of the economy.

As such, there are no guarantees that a valuation allowance will not be required against some or all of our deferred tax assets in future periods.

Our federal net operating loss carryforwards generated before 2018 do not begin to expire until 2029.

Under current tax law, federal net operating losses generated after 2017 do not expire.

Therefore, we have not recorded a valuation allowance on our deferred tax assets other than the capital loss carryforwards and certain state net operating losses that have short expiration periods.

Delta Air Lines, Inc.

1 unchanged sentence

Notes to the Consolidated Financial Statements

At December 31, 2020 our net deferred tax asset balance was $ 2.0 billion, including a $ 460 million valuation allowance primarily related to capital loss carryforwards and state net operating losses.

Although we are in a three year cumulative loss position as of December 31, 2020, we have a recent history of significant earnings prior to the onset of the COVID-19 pandemic.

We expect to return to profitability as the effects of the pandemic subside and to generate sufficient taxable income to utilize our federal net operating loss carryforwards before any expire.

Our federal net operating loss carryforwards generated before 2018 do not begin to expire until 2027.

Under current tax law, federal net operating losses generated in 2020 do not expire.

Therefore, we have not recorded a valuation allowance on our deferred tax assets other than the capital loss carryforwards and state net operating losses that have short expiration periods.

Income Tax Allocation

We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to continuing operations ("Income Tax Allocation").

The 2017 tax reform reduced the statutory tax rate in the U.S.

from 35% to 21%.

GAAP requires that the tax expense related to tax law changes be recognized in current earnings, even when a portion of the related deferred tax asset originated through amounts recognized in AOCI.

As a result, approximately $ 750 million of income tax expense remains in AOCI, primarily related to pension obligations, and will not be recognized in net income until the pension obligations are fully extinguished.

The following table presents the balance of our valuation allowance on our deferred income tax assets and the associated activity:

Valuation allowance activity

(in millions) 2021 2020

Balance at January 1 $ 460 $ 58

Tax provision 26 402

Equity investment activity 347 —

Balance at December 31 $ 833 $ 460

The amount of, and changes to, our uncertain tax positions were not material in any of the years presented.

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The weighted average cost per share held in treasury was $ 28.87 and $ 28.23 as of December 31, 2021 and 2020, respectively.

See Note 2, "Impact of the COVID-19 Pandemic," for further discussion of the warrants issued during 2020 in connection with the payroll support program of the CARES Act to acquire more than 6.7 million of Delta common stock.

See Note 6, "Debt," for further discussion of the warrants issued during 2020 and 2021 in connection with the CARES Act payroll support program and extensions to acquire more than 11.1 million shares of Delta common stock.

Equity Compensation

4 unchanged sentences

As of December 31, 2021, there were 19 million shares available for future grants.

Delta Air Lines, Inc.

2020 Form 10-K 109

Notes to the Consolidated Financial Statements

We make long-term incentive awards annually to eligible employees under the Plan.

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We expect substantially all unvested awards to vest and recognize forfeitures as they occur.

Delta Air Lines, Inc.

2021 Form 10-K 104

Notes to the Consolidated Financial Statements

Restricted Stock .

2 unchanged sentences

As of December 31, 2021, there were 2.9 million unvested restricted stock awards.

Restricted stock activity under the plan for the years ended December 31, 2021, 2020 and 2019 is as follows:

Restricted Stock Award Activity

2021 2020 2019

Restricted Stock Awards Weighted-Average Grant Price Restricted Stock Awards Weighted-Average Grant Price Restricted Stock Awards Weighted-Average Grant Price

(in millions, except wtd avg grant price)

Outstanding at January 1 2.2 $ 54.06 2.6 $ 51.28 2.4 $ 49.24

Granted 2.3 39.93 1.4 56.84 1.8 51.75

Vested ( 1.4 ) 51.15 ( 1.6 ) 51.95 ( 1.5 ) 48.65

Forfeited ( 0.2 ) 44.01 ( 0.2 ) 56.11 ( 0.1 ) 50.78

Outstanding at December 31 2.9 $ 45.66 2.2 $ 54.06 2.6 $ 51.28

Stock Options.

2 unchanged sentences

As of December 31, 2021, there were 6.2 million outstanding stock option awards with a weighted average exercise price of $ 50.41 of which 3.3 million were exercisable.

Stock option activity under the plan for the years ended December 31, 2021, 2020 and 2019 is as follows:

Stock Option Activity

2021 2020 2019

Stock Options Weighted-Average Exercise Price Stock Options Weighted-Average Exercise Price Stock Options Weighted-Average Exercise Price

(in millions, except wtd avg grant price)

Outstanding at January 1 5.4 $ 52.37 3.9 $ 49.57 2.5 $ 48.99

Granted 1.0 39.78 1.6 58.89 1.4 50.52

Exercised — — ( 0.1 ) 44.05 — —

Forfeited ( 0.2 ) 49.61 — — — —

Outstanding at December 31 6.2 $ 50.41 5.4 $ 52.37 3.9 $ 49.57

Performance Awards.

Performance awards are long-term incentive opportunities, which are payable in common stock or cash, and are generally contingent upon our achieving certain financial goals.

During each of 2020 and 2019, we recognized an immaterial amount of excess tax benefits in our income tax provision.

Performance awards are dollar-denominated long-term incentive opportunities which, for grants prior to 2021, are payable in Delta stock to executive officers on the payment date and in cash to all other participants.

Beginning with the 2021 grants, performance awards are payable in cash to all participants.

Potential performance award payments range from 0 %- 200 % of a target level and are contingent upon our achieving certain financial and operational goals over a three-year performance period.

Based on the closing stock price at each respective year end and contingent on achieving the specified performance conditions, the maximum shares that could be issued were 1.5 million, 2.2 million and 1.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Delta Air Lines, Inc.

2021 Form 10-K 105

Notes to the Consolidated Financial Statements

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table shows the components of accumulated other comprehensive loss:

Components of accumulated other comprehensive loss

(in millions) Pension and Other Benefits Liabilities (2)

Available-for-Sale Investment s (4)

Balance at January 1, 2019 (net of tax effect of $ 1,492 )

2 unchanged sentences

( 422 ) 7 ( 415 )

Reclassifications into retained earnings (net of tax effect of $ 61 )

— — ( 106 ) ( 106 )

Reclassifications into earnings (net of tax effect of $ 76 ) (1)

252 ( 1 ) 251

Balance at December 31, 2019 (net of tax effect of $ 1,549 )

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Reclassifications into earnings (net of tax effect of $ 96 ) (1)

286 ( 83 ) — 203

Balance at December 31, 2021 (net of tax effect of $ 1,184 )

$ ( 7,170 ) $ 40 $ ( 7,130 )

(1) Amounts reclassified from AOCI for pension and other benefits liabilities are recorded in miscellaneous, net in non-operating expense in the income statement.

(2) Includes approximately $ 750 million of deferred income tax expense primarily related to pension and other benefit obligations that will not be recognized in net income until these obligations are fully extinguished.

We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to results from operations.

(3) In the June 2020 quarter, all remaining foreign currency hedges expired, and we recognized an $ 83 million tax benefit which was released from AOCI.

(4) The 2018 reclassification into retained earnings related to our investments in GOL, China Eastern and other previously designated available-for-sale investments, and the related conversion to accounting for changes in fair value of these investments from AOCI to the income statement.

(1) Amounts reclassified from AOCI for pension and other benefits liabilities are recorded in pension and related benefit/(expense) in non-operating expense in the income statement.

(2) Includes approximately $ 760 million of deferred income tax expense as a result of tax law changes and prior valuation allowance releases through continuing operations, that will not be recognized in net income until pension and other benefit obligations are fully extinguished.

(3) In 2020, all remaining foreign currency hedges expired, and we recognized an $ 83 million tax benefit which was released from AOCI.

Delta Air Lines, Inc.

13 unchanged sentences

Refinery Segment

Our wholly owned subsidiaries, Monroe Energy, LLC, and MIPC, LLC (collectively, "Monroe"), operate the Trainer oil refinery and related assets located near Philadelphia, Pennsylvania, as part of our strategy to mitigate the cost of the refining margin reflected in the price of jet fuel.

Our Monroe subsidiary operates the Trainer oil refinery and related assets located near Philadelphia, Pennsylvania, as part of our strategy to mitigate the cost of the refining margin reflected in the price of jet fuel.

Monroe's operations include pipelines and terminal assets that allow the refinery to supply jet fuel to our airline operations throughout the Northeastern U.S., including our New York hubs at LaGuardia and JFK.

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The gross fair value of the products exchanged under these agreements during the years ended December 31, 2021, 2020 and 2019 was $ 2.3 billion, $ 1.5 billion and $ 4.0 billion, respectively.

The decline in exchange transactions was primarily driven by the decrease in demand for jet fuel from our airline operations as a result of the economic conditions caused by the COVID-19 pandemic.

Delta Air Lines, Inc.

2020 Form 10-K 111

Notes to the Consolidated Financial Statements

The decline in exchange transactions compared to the year ended December 31, 2019 is primarily due to the decrease in demand for jet fuel from our airline operations as a result of the economic conditions caused by the COVID-19 pandemic.

Segment Reporting

1 unchanged sentence

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.

Delta Air Lines, Inc.

2021 Form 10-K 107

Notes to the Consolidated Financial Statements

Financial information by segment

6 unchanged sentences

Sales of refined products ( 40 ) (3)

Operating loss (4)

Operating income (loss) (4)

1,888 ( 2 ) 1,886

3 unchanged sentences

Total assets, end of period 70,360 2,099 72,459

Net fair value obligations, end of period (5)

— ( 497 ) ( 497 )

Capital expenditures 3,188 59 3,247

5 unchanged sentences

Sales of refined products ( 307 ) (3)

Operating income (4)

Operating loss (4)

( 12,253 ) ( 216 ) ( 12,469 )

Interest expense (income), net 327 ( 26 ) 301

Interest expense, net 928 1 929

Depreciation and amortization 2,312 99 ( 99 ) (4)

Restructuring charges 8,219 — 8,219

Total assets, end of period 70,548 1,448 71,996

Net fair value obligations, end of period (5)

— ( 156 ) ( 156 )

Capital expenditures 1,879 20 1,899

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Total assets, end of period 62,793 1,739 64,532

Net fair value obligations, end of period (5)

— ( 4 ) ( 4 )

Capital expenditures 4,880 56 4,936

5 unchanged sentences

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

(5) The fair values of these obligations, which are related to renewable fuel compliance costs, are based on quoted market prices and other observable information and are classified as Level 2 in the fair value hierarchy.

At December 31, 2021 we had a gross fair value obligation of $ 593 million recorded in current liabilities on the balance sheet and related assets of $ 96 million.

Our obligation as of December 31, 2021 was calculated using the EPA's proposed Renewable Fuel Standard ("RFS") volume requirements for 2020 and 2021, which were issued in December 2021.

The EPA has not finalized the compliance deadlines to retire our obligations for 2020 and 2021, but we expect those deadlines to be within one year of the effective date of the new RFS volume requirements.

At December 31, 2020 we had a gross fair value obligation of $ 172 million and related assets of $ 16 million.

At December 31, 2019 we had a gross fair value obligation of $ 58 million and related assets of $ 54 million.

We expect to use the assets in settling a portion of our obligations.

Delta Air Lines, Inc.

1 unchanged sentence

Notes to the Consolidated Financial Statements

(LOSS)/EARNINGS PER SHARE

We calculate basic (loss)/earnings per share and diluted (loss) per share by dividing net (loss)/income 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 awards, including stock options and restricted stock awards.

Antidilutive common stock equivalents excluded from the diluted (loss)/earnings per share calculation are not material.

The following table shows our computation of basic and diluted (loss)/earnings per share:

Basic and diluted (loss)/earnings per share

RESTRUCTURING

As a result of the unprecedented, widespread and persistent impact of the COVID-19 pandemic, demand for travel declined at a rapid pace in the March 2020 quarter and remained depressed throughout 2020, which had an unprecedented and materially adverse impact on our results of operations and financial position.

Although demand improved throughout 2021, system-wide demand remained below pre-pandemic levels.

During 2020, we implemented enhanced measures focusing on the safety of our customers and employees, while at the same time seeking to mitigate the impact on our financial position and operations and to position our business for recovery through actions including fleet retirements, offering voluntary retirement and separation programs and other decisions.

These actions resulted in significant restructuring charges during 2020 which are summarized as follows:

Restructuring charges by category

(in millions) December 31, 2020

Fleet Retirements $ 4,409

Voluntary Programs and Other Employee Benefit Charges 3,409

Receivables and Other 401

Total Restructuring Charges $ 8,219

During 2021, we recorded $ 19 million of net adjustments to decrease certain of these restructuring charges, representing changes in our estimates.

Fleet Retirements.

As a result of the COVID-19 pandemic and our response, we made decisions to remove certain aircraft from active service and to early retire certain fleets.

The table below summarizes the number of leased and owned aircraft being retired early, though we remain flexible and may decide to fly certain aircraft beyond their planned retirement date, to the extent supported by demand.

Fleet retirement by aircraft type

Fleet Type Number of Aircraft Planned Retirement During the Quarter Ended Impairment-Related Charge (in millions)

777 18 December 2020 $ 1,440

767-300ER 56 December 2025 1,084

717 91 December 2025 950

MD-90 26 June 2020 335

125 December 2023 320

737-700 10 September 2020 223

A320 10 June 2020 57

47 June 2020 —

Total 383 $ 4,409

(1) Certain of the CRJ-200 aircraft scheduled to be retired by the December 2023 quarter are operated for us by SkyWest Airlines under a revenue proration agreement.

(2) During the March 2020 quarter, we recorded a $ 22 million charge related to accelerating the planned retirement of the MD-88 fleet from December 2020 to June 2020.

However, this amount was recorded in depreciation and amortization, rather than in restructuring charges, as it would have been incurred during 2020 prior to the onset of the COVID-19 pandemic.

These impairment and other related charges were recorded in restructuring charges in our income statement.

Following the impairment charges, the aggregate net book value of these aircraft as of December 31, 2021 and December 31, 2020 was approximately $ 340 million and $ 500 million, respectively, with the reduction in 2021 primarily due to aircraft sales.

Delta Air Lines, Inc.

2021 Form 10-K 109

Notes to the Consolidated Financial Statements

Voluntary Programs and Other Employee Benefit Charges.

During 2020, in response to the COVID-19 pandemic, we announced the voluntary programs, which primarily applied to eligible U.S.

merit, ground and flight attendant and pilot employees.

See Note 9, "Employee Benefit Plans," for more information on these voluntary programs.

Receivables and Other.

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.

Antidilutive common stock equivalents excluded from the diluted earnings/(loss) per share calculation are not material.

The following table shows our computation:

Basic and diluted earnings/(loss) per share

Year Ended December 31,

(in millions, except per share data) 2021 2020 2019

Net (loss)/income $ ( 12,385 ) $ 4,767 $ 3,935

Net income/(loss) $ 280 $ ( 12,385 ) $ 4,767

Basic weighted average shares outstanding 636 636 651

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Diluted weighted average shares outstanding 641 636 653

Basic (loss)/earnings per share $ ( 19.49 ) $ 7.32 $ 5.69

Diluted (loss)/earnings per share $ ( 19.49 ) $ 7.30 $ 5.67

Basic earnings/(loss) per share $ 0.44 $ ( 19.49 ) $ 7.32

Diluted earnings/(loss) per share $ 0.44 $ ( 19.49 ) $ 7.30

Delta Air Lines, Inc.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data