Item 1A. Risk Factors
Item 1A. Risk Factors
The airline industry is subject to many forms of environmental regulation, including but not limited to increased regulation to reduce emissions and other risks associated with climate change. The cost of compliance with more stringent environmental regulations, failure to comply with existing or future regulations or failure to otherwise manage the risks of climate change effectively could have a material adverse effect on our business.
Many aspects of our operations are subject to evolving and increasingly stringent federal, state, local and international laws governing the protection of the environment. Compliance with existing and future environmental laws and regulations could require capital investment and increase operational costs, and violations can lead to significant fines and penalties and reputational harm.
For example, in 2022 the EPA proposed regulations to define certain per- and polyfluoroalkyl substances ("PFAS") as "hazardous substances" under CERCLA. Numerous states have adopted regulations governing these substances as well. PFAS are used in a wide variety of consumer and industrial products, including the firefighting foams used to extinguish fuel-based fires at airports and refineries. EPA's proposed rule, once finalized, could subject airports, airlines, and refineries, among others, to potential liability for cleanup of historical PFAS contamination associated with use of PFAS-containing firefighting foam. The ultimate impact and associated cost to Delta of this rulemaking cannot be predicted at this time.
Future regulatory action concerning climate change, aircraft emissions and noise emissions could have a significant effect on the airline industry. In order to address aircraft carbon dioxide emissions, the International Civil Aviation Organization, a United Nations specialized agency, formally adopted a global, market-based emission offset program known as CORSIA. This program establishes a goal for the aviation industry to achieve carbon-neutral growth in international aviation beginning in 2021 through the use of carbon offsets and/or lower carbon aviation fuel. The baseline for establishing airlines’ obligations under CORSIA was originally set as an average of 2019 and 2020 emissions. However, given the COVID-19 pandemic and resulting unprecedented reduction in international travel, in June 2020 ICAO removed 2020 from the baseline calculation for the first phase of CORSIA, from 2021 to 2023. In 2022, ICAO established a new, more stringent CORSIA baseline of 85% of 2019, which will apply starting in 2024 through 2035. Certain CORSIA program details remain to be developed and could potentially be affected by political developments in participating countries or the results of the pilot phase of the program, and thus the impact of CORSIA cannot be predicted at this time. However, CORSIA is expected to increase operating costs for airlines that operate internationally.
In addition to CORSIA, we may face a patchwork of regulation of aircraft emissions in the U.S. and abroad and could become subject to further taxes, charges or additional requirements to obtain permits or purchase allowances or emission credits for greenhouse gas emissions in various jurisdictions. For example, in 2021 the European Commission proposed legislation that would expand the reach of the EU ETS to include flights into and out of the European Economic Area beginning in 2027 under certain circumstances, increase the stringency of the program, and establish a sustainable aviation fuel blending mandate for aviation fuel suppliers, among other requirements. In 2022, the EU reached a deal on proposed legislation that would exclude extra-EU flights from the scope of EU ETS until 2027, however that deal has not yet been approved. The EU is expected to finalize a SAF mandate on fuel suppliers in 2023 and individual EU member states have been developing their own requirements, including for example, separate SAF mandates in France and Sweden in 2022. In the United States various exploratory discussions continue around approaches to address climate change, such as carbon pricing, without a clear legislative path forward. Additional regulation could result in taxation, regulatory or permitting requirements from multiple jurisdictions for the same operations and significant costs for the airline industry, including Delta. In addition to direct costs, such regulation could result in increased fuel costs passed through from fuel suppliers affected by any such regulations. While the specific nature of future actions is hard to predict, new laws or regulations related to environmental matters adopted in the U.S. or other countries could impose significant additional costs on or otherwise adversely affect our operations. Certain airports have also adopted, and others could in the future adopt, greenhouse gas emission or climate-related goals and requirements that could impact our operations or require us to make changes or investments in our infrastructure.
In addition to risks from potential changes to environmental regulation and policy, the transition to lower-carbon technologies, such as SAF, or changes in consumer preferences resulting from a negative perception of the environmental impact of air travel could materially adversely affect our business and financial results. For example, lower-carbon technologies such as SAF and direct air capture technologies are currently not available at scale and may take decades to develop, and the cost to transition to them could be prohibitively expensive without appropriate government policies and incentives in place. As more businesses have publicly announced environmental sustainability goals, the cost of carbon offsets has also increased significantly and will likely continue to do so.
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Item 1A. Risk Factors
Because of the global nature of our business, unfavorable economic or political conditions in the markets in which we operate or volatility in currency exchange rates could have a material adverse effect on our business, financial condition and results of operations.
As a result of the discretionary nature of air travel, the airline industry has been cyclical and particularly sensitive to changes in economic conditions. Because we operate globally, our business is subject to economic and political conditions throughout the world. During periods of unfavorable or volatile economic conditions in the economy in the U.S. or abroad, including as a result of the COVID-19 pandemic and the worldwide response to it, demand for air travel can be significantly impacted as business and leisure travelers choose not to travel, seek alternative forms of transportation for short trips or conduct business using technological alternatives. If unfavorable economic conditions occur, particularly for an extended period, our business, financial condition and results of operations may be adversely affected. In addition, significant or volatile changes in exchange rates between the U.S. dollar and other currencies, and the imposition of exchange controls or other currency restrictions, may have a material adverse effect on our liquidity, financial conditions and results of operations.
Our international operations are an important part of our route network. Political disruptions and instability around the world can negatively impact the demand and network availability for air travel. Additionally, any deterioration in global trade relations, such as increased tariffs or other trade barriers, could result in a decrease in the demand for international air travel.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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Item 2. Properties
ITEM 2. PROPERTIES
Flight Equipment
Our operating aircraft fleet, purchase commitments and options at December 31, 2022 are summarized in the following table.
Mainline aircraft information by fleet type
Current Fleet (1)
Commitments
Fleet Type Owned Finance Lease Operating Lease Total Average Age (Years) Purchase Options
A220-100 41 4 — 45 3.0 — —
A220-300 14 — — 14 1.5 60 26
A319-100 57 — — 57 20.9 — —
A320-200 61 — — 61 27.3 — —
A321-200 69 22 36 127 4.0 — —
A321-200neo 21 — — 21 0.3 134 70
A330-200 11 — — 11 17.8 — —
A330-300 28 — 3 31 14.0 — —
A330-900neo 12 3 5 20 1.6 18 —
A350-900 17 — 11 28 4.1 16 —
B-717-200 10 51 4 65 21.5 — —
B-737-800 73 4 — 77 21.3 — —
B-737-900ER 112 2 49 163 7.0 — —
B-737-10 — — — — — 100 30
B-757-200 100 — — 100 25.4 — —
B-757-300 16 — — 16 19.9 — —
B-767-300ER 45 — — 45 26.8 — —
B-767-400ER 21 — — 21 22.0 — —
Total 708 86 108 902 14.4 328 126
(1) Includes both active and temporarily parked aircraft. Excludes certain aircraft we own or lease that are operated by regional carriers on our behalf shown in the table below.
The following table summarizes the aircraft operated by regional carriers on our behalf at December 31, 2022.
Regional aircraft information by fleet type and carrier
Fleet Type (1)
Carrier CRJ-200 CRJ-700 CRJ-900 Embraer 170 Embraer 175 Total
Endeavor Air, Inc. (2)
26 18 123 — — 167
SkyWest Airlines, Inc. — 6 38 — 84 128
Republic Airways, Inc. — — — 11 46 57
Total 26 24 161 11 130 352
(1) Includes both active and temporarily parked aircraft. We own 231 and have operating leases for three of these regional aircraft. The remainder are owned or leased by SkyWest Airlines, Inc. or Republic Airways, Inc.
(2) Endeavor Air, Inc. is a wholly owned subsidiary of Delta.
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