What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-11 compared with 2024-02-12 · 181 added, 237 removed, 470 unchanged (47% of the section changed)

5 unchanged sentences

2024 Financial Overview

Our 2023 operating income was $5.5 billion, an improvement of $1.9 billion compared to 2022, while operating income, adjusted (a non-GAAP financial measure) which excludes one-time pilot agreement expenses and other items was $6.3 billion, an increase of $2.8 billion compared to 2022.

Operating income and operating income, adjusted increased primarily from increases in revenue as described below.

Compared to 2022, our 2023 operating revenue increased $7.5 billion, or 15%, primarily due to a 17% increase in capacity driven by an increase in demand for international travel and continuing strength in demand for domestic travel and premium products.

Our 2024 operating income was $6.0 billion, an improvement of $474 million compared to 2023, and operating income, adjusted (a non-GAAP financial measure) was $6.0 billion, a decrease of $318 million compared to 2023.

Operating income, adjusted in 2023 excluded one-time pilot agreement expenses and other items.

The changes in operating income and operating income, adjusted are primarily resulting from increases in both revenue and operating expenses as described below.

As a result of our strong performance in 2023 and 2024, we paid profit sharing of $1.4 billion in February 2024 to our employees and will pay another $1.4 billion in February 2025 in recognition of these achievements.

Compared to 2023, our 2024 operating revenue increased $3.6 billion, or 6%, primarily due to a 6% increase in capacity driven by continued strength in demand for domestic and international travel and premium products, as well as an increase in revenue related to refinery sales to third parties.

Total revenue, adjusted (a non-GAAP financial measure) increased in 2024 by $2.3 billion, or 4.3%, compared to 2023.

Adjustments were primarily to exclude revenue related to refinery sales to third parties.

Adjustments were to exclude revenue related to refinery sales to third parties.

In July 2024, our operations were significantly disrupted by the CrowdStrike-caused outage.

We estimate that this disruption led to a direct revenue impact of approximately $380 million related to approximately 7,000 flight cancellations over five days, which reduced our expected year-over-year capacity growth by approximately 0.4 percentage points during 2024.

Operating Expense.

Total operating expense increased $5.6 billion, or 12%, compared to 2022, primarily resulting from higher employee related costs from increased wages and profit sharing, pilot agreement and related expenses and higher volume-related expenses associated with the 17% increase in capacity, partially offset by lower expenses related to refinery sales to third parties, reflected in ancillary business and refinery expense.

Total operating expense increased $3.1 billion, or 6%, compared to 2023, primarily resulting from higher employee-related costs from increased wages and related expenses, higher volume-related expenses associated with the 6% increase in capacity and an increase in expenses related to refinery sales to third parties.

The CrowdStrike-caused outage and operational recovery resulted in approximately $170 million of additional operating expenses primarily due to customer expense reimbursements and crew-related costs.

Fuel expense was approximately $50 million lower than it would have been as a result of the flight cancellations.

Total operating expense, adjusted (a non-GAAP financial measure) increased $2.7 billion, or 5%, compared to 2023.

Adjustments were primarily to exclude expenses related to refinery sales to third parties and the pilot agreement and related expenses.

Our total operating cost per available seat mile ("CASM") decreased 4% compared to 2022 to 19.31 cents, primarily due to a 17% increase in capacity, as well as lower fuel expense and lower expenses related to refinery sales to third parties.

Non-fuel unit costs ("CASM-Ex", a non-GAAP financial measure), which excludes fuel, expenses related to refinery sales to third parties, and other items, increased 2.3% to 13.17 cents.

Current year adjustments were primarily to exclude expenses related to refinery sales to third parties, while prior year adjustments also excluded the pilot agreement and related expenses.

Our total operating cost per available seat mile ("CASM") of 19.30 cents was comparable to 2023, primarily due to lower fuel expense and a 6% increase in capacity offset by higher expenses associated with the increase in capacity and related to refinery sales to third parties.

Non-fuel unit costs ("CASM-Ex", a non-GAAP financial measure), which excludes fuel, expenses related to refinery sales to third parties and other items, increased 2.8% to 13.54 cents compared to 2023.

Non-Operating Results.

Total non-operating income was $87 million in 2023 compared to total non-operating expense of $1.7 billion in 2022 primarily due to mark-to-market gains on certain of our equity investments and lower interest expense as a result of our debt reduction initiatives, partially offset by increased pension related expenses.

During 2023, operating activities provided cash flows of $6.5 billion, primarily from ticket sales.

Total non-operating expense was $1.3 billion in 2024, compared to total non-operating income of $87 million in 2023, primarily due to mark-to-market gains on certain of our equity investments in 2023 partially offset by lower expenses in 2024 associated with our debt reduction initiatives.

During 2024, operating activities generated $8.0 billion, primarily from ticket sales and the sale of SkyMiles to our partners.

Total cash sales of SkyMiles to American Express were $7.4 billion during 2024, an increase of approximately 8% compared to 2023.

Investing activities resulted in net cash outflows of approximately $3.7 billion, primarily for $5.1 billion of capital expenditures, partially offset by $1.1 billion of net redemptions of short-term investments.

After adjusting for the pilot agreement payment and certain other activities, these results generated $2.0 billion of free cash flow (a non-GAAP financial measure) in 2023.

Also, during 2023 we had cash outflows of approximately $4.1 billion related to repayments of our debt and finance leases, including approximately $2.0 billion for early repayments and the remainder from scheduled maturities.

After adjusting for certain activities, these results generated $3.4 billion of free cash flow (a non-GAAP financial measure) in 2024.

Also, during 2024 we had cash outflows of approximately $4.0 billion primarily related to repayment of our debt and finance leases, including approximately $1.1 billion for early repayments and the remainder from scheduled maturities.

Our cash, cash equivalents, short-term investments and aggregate principal amount committed and available to be drawn under our revolving credit facilities ("liquidity") at December 31, 2024 was $6.1 billion.

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Operating Revenue

Year Ended December 31, Increase (Decrease) % Increase

Year Ended December 31,

Increase (Decrease) % Increase (Decrease)

(in millions) (1)

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Operating Revenue

Our operating revenue increased $7.5 billion, or 15%, compared to 2022 due primarily to a 17% increase in capacity driven by an increase in demand for international travel and continuing strength in demand for domestic travel, with growth in revenue from premium products outpacing main cabin.

This increase was partially offset by lower third-party refinery sales recorded in other revenue.

Total revenue per available seat mile ("TRASM") decreased 2% in large part as a result of the decline in third-party refinery sales.

Our operating revenue increased $3.6 billion, or 6%, compared to 2023 related to a 6% increase in capacity resulting from continued strength in demand for domestic and international travel, particularly for our premium products (including Delta One, First Class, Delta Premium Select and Delta Comfort+), as well as increased revenue related to refinery sales to third parties and loyalty travel awards.

Total revenue per available seat mile ("TRASM") remained flat as revenues increased at the same rate as capacity.

See "Refinery Segment" below for additional details on the refinery's operations, including third party refinery sales recorded in other revenue, during each period.

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ASMs (Capacity) Passenger Mile Yield PRASM Load Factor

Domestic $ 33,968 12 % 10 % 10 % 2 % 2 % 1 pt

Atlantic 9,057 49 % 34 % 30 % 11 % 15 % 3 pts

Domestic $ 35,226 4 % 5 % 5 % (1) % (1) % — pts

Atlantic 9,133 1 % 1 % — % — % 1 % 1 pt

Latin America 3,995 5 % 14 % 15 % (8) % (8) % — pts

Pacific 2,086 101 % 104 % 75 % (2) % 15 % 11 pts

Pacific 2,540 22 % 30 % 32 % (6) % (7) % (1) pt

Total passenger revenue $ 50,894 4 % 6 % 6 % (2) % (2) % — pts

Domestic passenger unit revenue ("PRASM") for 2023 increased 2% compared to 2022 due to a 12% increase in revenue on a 10% increase in capacity and a slight increase in load factor.

Domestic revenue in 2023 was above 2022 levels as we experienced strong revenue results across the domestic network, with coastal hub markets such as New York and Boston improving significantly compared to the prior year, domestic business travel revenue improving and a 10% increase in domestic capacity compared to 2022.

We believe spending patterns for services are returning to historical levels compared to spending on goods.

We also experienced higher growth in premium product revenue (including Delta One, First Class, Delta Premium Select and Delta Comfort+) compared to main cabin with the delivery of new aircraft that include more premium seat capacity and an increase in yield in premium products compared to main cabin, as we see more consumers choosing these premium offerings.

In 2024, we expect moderate capacity growth of single digits.

Domestic passenger unit revenue ("PRASM") for 2024 decreased 1% compared to 2023 due to a 4% increase in revenue on a 5% increase in capacity.

Domestic revenue in 2024 was above 2023 levels as we experienced strong demand across the domestic network.

We generated higher growth in premium products revenue compared to main cabin with the delivery of new aircraft that include more premium seat capacity and an increase in yield in premium products compared to main cabin, as we see more consumers choosing these premium offerings.

Delta Air Lines, Inc.

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International passenger revenue for 2024 increased 5% with capacity up 8% compared to 2023.

Passenger revenue increased in each geographic region with the Atlantic region experiencing the largest absolute improvement, as travel to many European destinations increased.

Consumers showed a strong desire for transatlantic travel, driving higher revenue and passenger unit revenue during 2023 on 30% capacity growth compared to 2022.

This has been led by demand for travel to leisure destinations in Europe and premium products.

Revenue in each international region increased in 2024, with the Pacific growing at the greatest rate as we continue to restore capacity in the region.

Demand for transatlantic travel remained at high levels throughout 2024 with revenue increasing slightly on flat capacity compared to 2023.

Revenue growth in the Atlantic was led by demand for travel to European leisure destinations and our premium product offerings.

Latin America region revenue increased during 2024 compared to 2023, due to strong demand for leisure destinations in South America and the Caribbean on a 15% increase in capacity.

In addition, during the first year of our joint venture with LATAM, we have streamlined travel between North and South America while expanding connections in each of our key hub airports.

The Pacific region benefited from improved demand for travel to the region, particularly to Japan, on 75% increased capacity following the lifting of pandemic-related travel restrictions and the performance of our joint venture with Korean Air.

We continued to build on the strength of our joint venture with LATAM in South America through additional routes, greater network connectivity, and a more streamlined airport experience.

The Pacific region benefited from improved demand for travel to the region, particularly to South Korea and Japan, on 32% increased capacity.

Our performance in South Korea benefited from the strength of our joint venture partnership with Korean Air, which enables passengers to more seamlessly connect to over 80 destinations in Asia.

Revenue from flights to Japan increased due to higher demand for travel from the United States due in part to weakness in the Japanese Yen compared to the U.S.

Other Revenue

Year Ended December 31, Increase (Decrease) % Increase

Year Ended December 31,

Increase (Decrease) % Increase (Decrease)

(in millions) 2024 2023

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Total other revenue $ 9,927 $ 8,416 $ 1,511 18 %

This represents refinery sales to third parties.

These sales decreased $1.6 billion compared to 2022.

The decrease in third-party refinery sales resulted from lower pricing and a turnaround which was completed between September and November 2023.

This represents refinery sales of non-jet fuel products to third parties.

These sales increased $1.3 billion compared to 2023.

See "Refinery Segment" below for additional details on the refinery's operations, including third party refinery sales recorded in other revenue, during each period.

Loyalty Program.

This relates to revenues from brand usage by third parties and other performance obligations embedded in miles sold, as well as redemption of miles for non-travel awards.

This relates to revenues from brand usage by third parties and other performance obligations embedded in miles sold, as well as redemption of miles for non-air travel and other awards.

These revenues are mainly driven by customer spend on American Express cards and new cardholder acquisitions.

Revenues from our relationship with American Express increased compared to 2022 driven by co-brand card spend growth.

Revenues from our relationship with American Express increased compared to 2023 driven by co-brand card spend growth and card account acquisitions.

Ancillary Businesses.

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

This includes revenues from aircraft maintenance services we provide to third parties and our vacation package operations.

Miscellaneous.

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

The increase in miscellaneous is primarily due to increased revenue from Delta Sky Club access.

This is primarily composed of revenues related to lounge access, including access provided to certain American Express cardholders, codeshare agreements and certain other commercial relationships.

The increase in revenues was primarily driven by codeshare agreements and other commercial relationships.

Delta Air Lines, Inc.

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Operating Expense

Year Ended December 31, Increase (Decrease) % Increase (Decrease) (1)

Year Ended December 31,

Increase (Decrease) % Increase (Decrease) (1)

(in millions) 2024 2023

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Profit sharing 1,389 1,383 6 — %

Pilot agreement and related expenses 864 — 864 NM

Aircraft rent 548 532 16 3 %

Pilot agreement and related expenses — 864 (864) NM

Other 2,460 2,239 221 10 %

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Salaries and Related Costs.

Delta pilots ratified a new four-year Pilot Working Agreement effective January 1, 2023.

The agreement includes numerous work rule changes and pay rate increases during the four-year term, including an initial pay rate increase of 18%.

Additional effects of this agreement are described below under pilot agreement and related expenses.

We also implemented base pay increases for eligible non-pilot employees of 5% effective April 1, 2023.

Further, we have approximately 8,000 more employees as of December 31, 2023 than at December 31, 2022 principally in in-flight service, flight operations and aircraft maintenance, in order to support the growth in our operations.

Each of these actions contributed to the increase in salaries and related costs.

The increase in salaries and related costs primarily resulted from the implementation of base pay increases for eligible employees of 5% effective June 1, 2024 and for Delta pilots on January 1, 2024.

In June 2024 we also increased our minimum starting wage for domestic mainline employees to $19 per hour.

Salaries and related costs also increased due to additional crew-related costs resulting from the CrowdStrike-caused outage and costs to support increased traffic.

Employee benefits increased on higher healthcare expenses and from travel passes awarded to employees in recognition of their hard work through the summer.

See Note 9 of the Notes to the Consolidated Financial Statements for additional information on our employee benefit plans.

Aircraft Fuel and Related Taxes.

Fuel expense decreased $413 million compared to 2022 primarily due to an 18% decrease in the market price of jet fuel partially offset by a 15% increase in consumption on a 17% increase in capacity.

Fuel expense decreased $503 million compared to 2023 primarily due to a 12% decrease in the market price of jet fuel partially offset by a 5% increase in consumption on a 6% increase in capacity, resulting in a 1% improvement in fuel efficiency.

Fuel expense was also approximately $50 million lower than it would have been as a result of the 7,000 flight cancellations over the five-day period following the CrowdStrike-caused outage.

Fuel expense and average price per gallon

Average Price Per Gallon

Year Ended December 31, Increase

(Decrease) Year Ended December 31, Increase (Decrease)

Year Ended December 31,

Increase (Decrease) Year Ended December 31,

Increase (Decrease)

(in millions, except per gallon data) 2024 2023 2024 2023

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Ancillary Businesses and Refinery.

Ancillary businesses and refinery includes expenses associated with refinery sales to third parties, aircraft maintenance services we provide to third parties and our vacation wholesale operations.

The decline in these expenses was primarily related to lower refinery sales to third parties, which decreased $1.6 billion compared to 2022.

The decrease in third-party refinery sales resulted from lower pricing and the turnaround, which was completed between September and November 2023.

Contracted Services.

Contracted services expenses increased compared to 2022 due to higher-volume related expenses associated with increased capacity, in addition to inflationary pressures.

Ancillary businesses and refinery includes expenses associated with refinery sales to third parties, aircraft maintenance services we provide to third parties and our vacation package operations.

The increase in these expenses was primarily related to higher refinery sales to third parties, which increased $1.3 billion compared to 2023.

See "Refinery Segment" below for additional details on the refinery's operations, including third party refinery sales.

Landing Fees and Other Rents.

The increase in landing fees and other rents resulted from higher rates charged by airports following extensive redevelopment projects at numerous facilities and more flights compared to 2023.

Delta Air Lines, Inc.

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MD&A - Results of Operations

Landing Fees and Other Rents.

The increase in landing fees and other rents resulted from higher rates charged by airports following extensive redevelopment projects at numerous facilities and more flights compared to 2022 that contributed to our increased capacity.

Aircraft Maintenance Materials and Outside Repairs.

Aircraft maintenance materials and outside repairs increased as we continued to invest in the operational reliability of our fleet, in particular related to engine overhauls on our B-757 aircraft, in addition to higher material costs.

Passenger Commissions and Other Selling Expenses.

The increase in passenger revenue in 2023, compared to 2022, directly led to increased passenger commissions and selling expenses.

Passenger Service.

Passenger service expenses increased compared to 2022 due to higher volume-related expenses associated with increased traffic.

Profit Sharing.

Profit sharing increased by $820 million during 2023 due to higher profit during the year.

Our profit sharing program pays 10% to all eligible employees for the first $2.5 billion of annual profit, as defined by the terms of the program, and 20% of annual profit above $2.5 billion.

Pilot agreement and related expenses.

In addition to the actions in salaries and related costs described above, the ratified pilot agreement also includes a provision for a one-time payment made upon ratification during 2023 of $735 million.

In the March 2023 quarter, Delta pilots ratified a new four-year Pilot Working Agreement effective January 1, 2023.

The agreement includes numerous work rule changes and pay rate increases during the four-year term, including an initial pay rate increase of 18%.

The agreement also includes a provision for a one-time payment made upon ratification in the March 2023 quarter of $735 million.

Additionally, we recorded adjustments to other benefit-related items of approximately $130 million.

The increase in other is primarily due to higher volume-related expenses associated with increased capacity, such as flight crew and other employee travel and incidental costs and the impact of service recovery costs including customer expense reimbursements from the CrowdStrike-caused outage.

Non-Operating Results

Year Ended December 31, Favorable (Unfavorable)

Year Ended December 31,

Favorable (Unfavorable)

(in millions) 2024 2023

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Loss on extinguishment of debt (39) (63) 24

Pension and related (expense)/benefit (244) 292 (536)

Miscellaneous, net (232) (279) 47

Total non-operating income/(expense), net $ 87 $ (1,747) $ 1,834

Total non-operating (expense)/income, net $ (1,337) $ 87 $ (1,424)

Interest expense, net.

Interest expense, net includes interest expense and interest income.

This decreased as compared to 2022 as a result of our reduced interest expense resulting from our debt reduction initiatives and increased interest income.

This decreased compared to 2023 primarily on reduced interest expense resulting from our debt reduction initiatives, which was partially offset by lower interest income.

We are reducing the total amount of interest expense by pre-paying our debt in addition to periodic amortization payments and scheduled maturities.

During 2023, we made $4.1 billion of payments on debt and finance lease obligations, including early repayment activities of $1.4 billion in principal for the early repurchase of various secured and unsecured notes and the SkyMiles Term Loan on the open market and $585 million in early principal repayments on various notes secured by aircraft.

We will continue to seek opportunities to pre-pay our debt, in addition to periodic amortization payments and scheduled maturities, during 2024 and beyond.

Interest income increased as a result of higher interest rates and higher short-term investment balances throughout most of 2023.

During 2024, we made $4.0 billion of payments on debt and finance lease obligations, including approximately $1.1 billion of early repayments.

This included early extinguishment of $844 million in principal related to a portion of the SkyMiles Term Loan and various secured and unsecured notes, and approximately $280 million for finance leased aircraft that were purchased.

We continue to seek opportunities to pre-pay our debt, in addition to periodic amortization payments and scheduled maturities, during 2025 and beyond.

Interest rates on the Payroll Support Program loans are 1.00% for the first five years and the applicable SOFR plus 2.00% in the final five years.

The applicable interest rates will begin to adjust for each loan in April 2025, January 2026 and April 2026.

Interest income decreased due to lower cash, cash equivalents and short-term investment balances throughout most of 2024.

Gain/(loss) on investments, net.

See Note 4 of the Notes to the Consolidated Financial Statements for additional information on our equity investments measured at fair value on a recurring basis.

The increase compared to 2022 is due to net unrealized gains on our equity investments during 2023, primarily Wheels Up, Hanjin-KAL and LATAM.

During 2023, we recorded a $786 million mark-to-market gain on our investment in Wheels Up based on the closing price of its shares as traded on the New York Stock Exchange.

As of December 31, 2023, Wheels Up's public float was under 5% of the total outstanding shares which contributed to significant volatility in the value of our Wheels Up equity investment since the announcement of Wheels Up's credit facility in September 2023.

Net unrealized losses on our equity investments during 2022 were primarily related to LATAM, Hanjin-KAL and Wheels Up.

Delta Air Lines, Inc.

| 2023 Form 10-K 38

MD&A - Non-Operating Results

Net unrealized gains on our equity method investments during 2023 were primarily related to Wheels Up, Hanjin-KAL and LATAM.

Loss on extinguishment of debt.

Loss on extinguishment of debt reflects the losses incurred in the early repayment of debt referenced above.

Pension and related (expense)/benefit.

Pension and related (expense)/benefit reflects the net periodic (cost)/benefit of our pension and other postretirement and postemployment benefit plans.

See Note 9 of the Notes to the Consolidated Financial Statements for additional information on our employee benefit plans.

This reflects the losses incurred in the early repayment of debt referenced above.

Miscellaneous, net.

Miscellaneous, net primarily includes our share of net results from our equity method investments, charitable contributions and foreign exchange gains/(losses).

Miscellaneous, net primarily includes employee benefit plans net periodic cost, charitable contributions, our share of our equity method investments' results and foreign exchange gains/(losses).

See Note 4 of the Notes to the Consolidated Financial Statements for additional information on our equity investments.

Our effective tax rate for 2023 was 18%.

Our effective tax rate in 2023 was impacted by mark-to-market adjustments on our equity investments which are considered capital assets for tax purposes.

Our effective tax rate was 26% and 18% for 2024 and 2023, respectively.

Our effective tax rate is impacted by net pre-tax income or loss recognized on our equity investments, which are considered capital assets for tax purposes, because realized capital losses can only be deducted against realized capital gains.

As of December 31, 2024, we had approximately $2.7 billion of U.S.

federal pre-tax net operating loss carryforwards which we are expecting to utilize by the end of 2025.

Approximately $800 million of these net operating loss carryforwards were generated prior to 2018 and will not begin to expire until 2029, while the remaining net operating loss carryforwards do not expire.

federal pre-tax net operating loss carryforwards which we are expecting to utilize during 2025.

These net operating loss carryforwards were primarily generated in 2020 and do not expire.

We expect our annual effective tax rate to be between 23% and 25% for 2025.

In certain interim periods, we may have adjustments to our net deferred tax assets as a result of changes in prior year estimates, mark-to-market adjustments on our equity investments and tax laws enacted during the period, which will impact the effective tax rate for that period.

In certain periods, we may have adjustments to our net deferred tax liabilities as a result of changes in prior year estimates, mark-to-market adjustments on our equity investments and tax laws enacted during the period, which will impact the effective tax rate for that period.

For more information about our income taxes, see Note 11 of the Notes to the Consolidated Financial Statements.

Delta Air Lines, Inc.

| 2024 Form 10-K

MD&A - Refinery Segment

Refinery Segment

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The jet fuel produced and procured through exchanging gasoline and diesel fuel produced by the refinery typically provides approximately 200,000 barrels per day, or approximately 75% of our consumption, for use in our airline operations.

Between mid-September 2023 and mid-November 2023, the refinery completed a turnaround and did not produce any refined products during this time.

The turnaround was in accordance with the long-term maintenance plan for the facility to allow for the safe completion of major repairs and upgrades.

The refinery regularly optimizes its sales and exchange activities of non-jet fuel products based on market conditions and the availability of counterparties for exchanges.

Refinery revenues increased in 2024, primarily driven by the increase in third party refinery sales on reduced exchanges of non-jet fuel products due to the availability of exchange counterparties, and reduced production in 2023 related to the planned maintenance turnaround.

The refinery operating income decreased in 2024 compared to 2023 mainly due to lower industry refining margins.

Refinery segment financial information

Year Ended December 31, % Increase (Decrease)

Year Ended December 31,

% Increase (Decrease)

(in millions, except per gallon data) 2024 2023

Exchange products $ 2,354 $ 3,475 (32) %

Exchanged products $ 1,473 $ 2,354 (37) %

Sales of refined products 231 304 (24) %

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Refinery segment impact on average price per fuel gallon $ (0.01) $ (0.10) (90) %

Refinery revenues decreased in 2023, primarily driven by the decrease in exchange products and third-party refinery sales.

These decreases resulted from lower pricing and the turnaround, which was completed between September and November 2023.

The refinery operating income decreased in 2023 mainly due to lower pricing and the turnaround.

Delta Air Lines, Inc.

| 2023 Form 10-K 39

MD&A - Refinery Segment

A refinery is subject to annual EPA requirements to blend renewable fuels into the gasoline and on-road diesel fuel it produces.

A refinery may meet its obligation by blending the necessary volumes of renewable fuels, by purchasing RINs in the open market or through a combination of blending and purchasing RINs.

A refinery may meet its obligation by blending the necessary volumes of renewable fuels, by purchasing Renewable Identification Numbers ("RINs") in the open market or through a combination of blending and purchasing RINs.

Because Monroe is able to blend only a small amount of renewable fuels, it must purchase the majority of its RINs requirement in the secondary market.

Monroe incurred $203 million in RINs compliance costs during 2024, compared to $323 million incurred in 2023.

Observable RINs prices declined during 2023 and we acquired RINs assets to satisfy substantially all of our 2023 RINs obligation.

During 2023, we retired approximately $700 million of our 2021 and 2022 RINs assets to settle our 2021 and 2022 obligations prior to the compliance deadlines.

For more information regarding the refinery's results, see Note 14 of the Notes to the Consolidated Financial Statements.

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As of December 31, 2024, we had $6.1 billion in cash, cash equivalents, short-term investments and aggregate principal amount committed and available to be drawn under our revolving credit facilities ("liquidity").

We expect to meet our liquidity needs for the next twelve months with cash and cash equivalents, short-term investments, restricted cash equivalents and cash flows from operations.

We expect to meet our liquidity needs for the next twelve months with cash and cash equivalents, restricted cash equivalents and cash flows from operations.

We expect to meet our long-term liquidity needs with cash flows from operations and financing arrangements.

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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.

Sale of Miles to Participating Companies.

Customers earn miles based on their spending with participating companies such as credit card, retail, ridesharing, car rental and hotel companies with which we have marketing agreements to sell miles.

Payments are typically due to us monthly based on the volume of miles sold during the period.

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

Total cash sales to American Express were $7.4 billion during 2024, an increase of 8% compared to the prior year.

See Note 2 of the Notes to the Consolidated Financial Statements for further information regarding the cash sales from marketing agreements.

Fuel expense represented approximately 19% of our total operating expense during 2024.

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The average fuel price per gallon decreased in 2024.

We expect elevated jet fuel prices in comparison to historical levels to continue during the beginning of 2024 due to current market conditions, further exacerbated by geopolitical events.

As capacity increased throughout the year, fuel consumption was higher in 2023 than 2022 as well.

We expect continued higher market price volatility compared to historical levels due to geopolitical events.

As capacity increased throughout the year, fuel consumption was higher in 2024 than 2023.

We expect fuel consumption to increase in 2025 aligned with capacity, partially offset by improvements in the fuel efficiency of our fleet.

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Employee Benefit Obligations.

We sponsor defined benefit pension plans for eligible employees and retirees.

These plans are generally closed to new entrants and are frozen for future benefit accruals.

Our funding obligations for these plans are governed by the Employee Retirement Income Security Act ("ERISA") and any applicable legislation.

We had no minimum funding requirements in 2023, and have no such requirements in 2024.

At the current level of funding, plan assets and investment returns are expected to satisfy a majority of future benefit payments.

Estimates of future funding requirements are based on various assumptions and could vary materially from actual funding requirements.

Assumptions include, among other things, the actual and projected market performance of assets, statutory requirements and demographic data for participants.

We sponsor defined benefit and defined contribution pension plans for eligible employees and retirees.

Our funding obligations for defined benefit plans are governed by the Employee Retirement Income Security Act ("ERISA") and any additional applicable legislation.

We had no minimum funding requirements in 2024, and estimate that there will be approximately $80 million of minimum funding requirements under these plans in 2025.

Payments to defined contribution plans were approximately $1.3 billion during the year ended December 31, 2024.

In addition, we have employee benefit obligations relating primarily to projected future benefit payments from our unfunded postretirement and postemployment plans.

Benefit payments for these obligations are expected to be approximately $500 million on an annual basis over the next five years.

See Note 9 of the Notes to the Consolidated Financial Statements for more information on our employee benefit obligations.

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We pay profit sharing annually in February.

We paid $563 million in 2023 to our employees in recognition of their contributions toward meeting our financial goals.

We paid $1.4 billion in 2024 to our employees in recognition of their contributions toward meeting our financial goals.

During the year ended December 31, 2024, we recorded $1.4 billion in profit sharing expense based on 2024 pre-tax profit, which we will pay to employees in February 2025.

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These minimum amounts are based on the required minimum levels of flying by the regional carriers under the respective agreements and assumptions regarding the costs associated with such minimum levels of flying.

As of December 31, 2023 the total of these minimum amounts was $8.8 billion and range from approximately $1.3 billion to $1.6 billion on an annual basis over the next five years.

As of December 31, 2024 the total of these minimum amounts was $7.7 billion and range from approximately $700 million to $1.8 billion on an annual basis over the next five years.

See Note 10 of the Notes to the Consolidated Financial Statements for more information on our contract carrier obligations.

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These minimum lease payments range from approximately $600 million to $1.0 billion on an annual basis over the next five years.

New York-JFK Airport Expansion.

We are enhancing and expanding our facilities at Terminal 4 of JFK to strengthen our competitive position and offer a premium travel experience for customers in New York City.

Terminal 4 is operated by JFK International Air Terminal LLC ("IAT"), a private party, under its lease with the Port Authority of New York and New Jersey ("Port Authority").

We have a long-term agreement with IAT to sublease space in Terminal 4 through 2043.

In 2021, the Port Authority approved plans to renovate and expand Terminal 4 in order to facilitate Delta's relocation from Terminal 2 and consolidation of its operations into Terminal 4.

The project is adding 10 new gates and other complementary facilities, including an additional Delta Sky Club and a new Delta premium lounge.

The project is estimated to cost approximately $1.6 billion and will be funded primarily with bonds issued in 2022 by the New York Transportation Development Corporation ("NYTDC") for which our landlord, IAT, is the obligor.

The majority of project costs are being used to expand or modify Delta's leased premises.

Construction started in late 2021 and in 2023 we substantially completed a majority of Delta's portion of the project and consolidated all operations to Terminal 4.

Other Obligations.

We have certain purchase obligations under which we are required to make minimum payments for goods and services, including, but not limited to, aviation-related, maintenance, insurance, marketing, technology, sponsorships and other third-party services and products.

We have certain purchase obligations under which we are required to make minimum payments for goods and services, including, but not limited to, aviation-related, maintenance, technology, sponsorships, marketing, insurance and other third-party services and products.

As of December 31, 2024, we had approximately $9.3 billion of such obligations, which range from approximately $400 million to $1.3 billion on an annual basis over the next five years.

Income Taxes.

We expect to utilize our remaining net operating loss carryforwards during 2025.

Once these are exhausted, under current tax laws, we expect to be a partial cash taxpayer during 2025.

Investing Activities

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In 2024, we redeemed a net of $1.1 billion in short-term investments.

During 2024 our investment strategy shifted to no longer include short-term investments and accordingly as of December 31, 2024 we have no short-term investments and do not expect any further activity in the foreseeable future.

See Note 1 and Note 3 of the Notes to the Consolidated Financial Statements for further information on these investments.

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Our capital expenditures (i.e., property and equipment additions in our Consolidated Statements of Cash Flows ("cash flows statement")) were $5.1 billion and $5.3 billion in 2024 and 2023, respectively.

Our capital expenditures are primarily related to the purchases of aircraft, airport construction projects, fleet modifications and technology enhancements.

Our capital expenditures are primarily related to the purchases of aircraft, airport construction projects (discussed below), fleet modifications and technology enhancements.

We have committed to future aircraft purchases and have obtained, but are under no obligation to use, long-term financing commitments for a substantial portion of the purchase price of the aircraft.

Excluding the New York-LaGuardia airport project discussed below, our expected 2024 capital spend of approximately $5 billion, which may vary depending on financing decisions, will be primarily for aircraft, including deliveries and advance deposit payments, as well as fleet modifications and technology enhancements.

Our expected 2025 capital spend of approximately $5.0 billion, which may vary depending on financing decisions, will be primarily for aircraft, including deliveries and advance deposit payments, as well as fleet modifications and technology enhancements.

As described in Part I, Item 1.

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New York-LaGuardia Redevelopment.

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 completed terminal redevelopment features a new, larger Delta Sky Club, wider concourses, more gate seating and nearly double the amount of concessions space than the prior terminals.

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

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

We have opened Concourse E, Concourse G, the headhouse (including the Delta Sky Club), the terminal roadways and portions of Concourse D and Concourse F.

Due to an acceleration effort that commenced in 2020, substantial completion is expected by the end of 2024.

Delta Air Lines, Inc.

| 2023 Form 10-K 42

MD&A - Financial Condition and Liquidity

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

The project is expected to cost $4.3 billion and the total amount spent to date is approximately $3.7 billion.

We currently expect our net project cost to be approximately $3.8 billion and we bear the risks of project construction, including any potential cost over-runs.

In 2024, we substantially completed all construction for the replacement of Terminals C and D of the New York-LaGuardia Airport with a new state-of-the-art terminal facility.

The project cost approximately $4.2 billion and was funded through debt issuance, existing cash and a Port Authority contribution of approximately $500 million.

We entered into loan agreements to fund a portion of the construction, which are recorded on our Consolidated Balance Sheets ("balance sheets") as debt with the proceeds reflected as restricted cash.

Using funding primarily provided by these arrangements, we spent approximately $300 million, $500 million and $650 million during 2024, 2023 and 2022, respectively.

We expect to spend approximately $500 million during 2024.

See Note 6 of the Notes to the Consolidated Financial Statements for additional information on the debt related to the redevelopment project, including the $878 million of NYTDC Special Facilities Revenue Bonds, Series 2023 issued during 2023.

We expect only a small amount of spend in 2025 as the project is finalized.

See Note 6 of the Notes to the Consolidated Financial Statements for additional information on the debt related to the redevelopment project.

Los Angeles International Airport ("LAX") Construction.

As part of the terminal redevelopment project at LAX, we are modernizing, upgrading, and providing post-security connection to Terminals 2 and 3.

We announced this project and executed a modified lease agreement during 2016 with the City of Los Angeles (the "City"), which owns and operates LAX.

This project 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.

The project is expected to cost approximately $2.4 billion.

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.

In 2023, we substantially completed all construction for the LAX upgrade and modernization project that consolidates Terminals 2 and 3, as well as connects these terminals to the Tom Bradley International Terminal.

The project cost approximately $2.5 billion.

Delta Air Lines, Inc.

| 2024 Form 10-K

MD&A - Financial Condition and Liquidity

A substantial majority of the project costs were 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 we have guaranteed the obligations of the RAIC under the credit facility.

During 2023, the revolving credit facility agreement was amended and the revolver capacity was reduced to $626 million.

Loans made under the credit facility are being repaid with the proceeds from the City’s purchase of completed project assets.

Under the lease agreement and subsequent project component approvals by the City's Board of Airport Commissioners, the City has appropriated to date approximately $1.8 billion to purchase completed project assets, representing the maximum allowable reimbursement by the City.

Costs incurred in excess of the $1.8 billion maximum will not be reimbursed by the City.

We currently expect our net project costs to be approximately $600 million, of which approximately $350 million has been reflected as investing activities and approximately $200 million as operating activities in our cash flows statement since the project started in 2017.

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.

In 2023, we substantially completed all construction for this project.

We announced an expanded strategic partnership with Wheels Up, which included an agreement for a new credit facility to Wheels Up.

This new credit facility is comprised of a $390 million term loan, of which we contributed $150 million and several other lenders contributed the remaining $240 million, and a $100 million liquidity facility that we made available to Wheels Up in the event the company's liquidity falls below $100 million.

Our $150 million cash contribution was reflected as an investing outflow in our cash flows statement.

Loans made under the credit facility are being repaid with the proceeds from the City of Los Angeles' (the "City") purchase of completed project assets.

Under the lease agreement and subsequent project component approvals by the City's Board of Airport Commissioners, the City appropriated approximately $1.8 billion to purchase completed project assets, representing the maximum allowable reimbursement by the City.

Costs incurred in excess of the $1.8 billion maximum were not reimbursed by the City.

Our net project costs were approximately $700 million, of which approximately $350 million has been reflected as investing activities and approximately $350 million as operating activities in our cash flows statement since the project started in 2017.

We expect only a small amount of spend in 2025 as the project is finalized.

Financing Activities

Debt and Finance Leases.

In 2023, we had cash outflows of approximately $4.1 billion related to repayments of our debt and finance leases, including early repayment activities of $1.4 billion in principal for the repurchase of various secured and unsecured notes and the SkyMiles Term Loan through repurchases on the open market and $585 million in early principal repayments on various notes secured by aircraft.

We will continue to seek opportunities to pre-pay our debt, in addition to periodic amortization payments and scheduled maturities, during 2024 and beyond.

In the March 2023 quarter, both Fitch and S&P credit rating agencies upgraded our debt rating outlooks to stable and positive, respectively.

In the September 2023 quarter, S&P upgraded our credit rating to BB+.

In 2024, we had cash outflows of approximately $4.0 billion related to repayments of our debt and finance leases, including approximately $1.1 billion of early repayments.

We continue to seek opportunities to pre-pay our debt, in addition to periodic amortization payments and scheduled maturities, during 2025 and beyond.

During 2024, Fitch and S&P Global upgraded their credit ratings of Delta to BBB-, an investment grade rating.

When combined with Moody's, which affirmed our credit rating (Baa3) and upgraded its outlook for Delta to positive in 2024, we have now achieved investment-grade ratings across the major credit rating agencies.

See Note 6 of the Notes to the Consolidated Financial Statements for further information on the effect of these ratings changes on our debt agreements.

The principal amount of our debt and finance leases was $16.2 billion at December 31, 2024.

Delta Air Lines, Inc.

| 2023 Form 10-K 43

MD&A - Financial Condition and Liquidity

Future Debt Obligations.

As described further in Note 6 of the Notes to the Consolidated Financial Statements, as of December 31, 2023, scheduled maturities of our debt in 2024 and 2025 were $2.6 billion and $2.0 billion, respectively, with maturities from 2026 through 2028 ranging between $1.9 billion and $2.6 billion annually.

As described further in Note 6 of the Notes to the Consolidated Financial Statements, as of December 31, 2024, scheduled maturities of our debt in 2025 are $1.8 billion, with maturities from 2026 through 2029 ranging between $600 million and $2.3 billion annually.

As of December 31, 2024, scheduled maturities after 2029 aggregate to $6.6 billion.

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Based on applicable interest rates and scheduled debt maturities as of December 31, 2024, these interest obligations total approximately $3.0 billion and range from approximately $200 million to $600 million on an annual basis over the next five years.

We will continue to seek opportunities to pre-pay our debt, in addition to periodic amortization payments and scheduled maturities, during 2024 and beyond.

Finance Lease Obligations.

As described further in Note 7 of the Notes to the Consolidated Financial Statements, as of December 31, 2023 we had a total of $1.6 billion of minimum finance lease obligations.

As described further in Note 7 of the Notes to the Consolidated Financial Statements, as of December 31, 2024 we had a total of $897 million of minimum finance lease obligations.

These minimum lease payments range from approximately $30 million to $400 million on an annual basis over the next five years.

Capital Returns to Shareholders.

During 2023, we re-instated our quarterly dividend program with $0.10 per share payments in both the September 2023 and December 2023 quarters, resulting in total dividend payments during the year ended December 31, 2023 of $128 million.

During 2024, we continued our quarterly dividend program with $0.10 per share payments in the March 2024 and June 2024 quarters and $0.15 per share payments in the September 2024 and December 2024 quarters.

Total dividend payments during the year ended December 31, 2024 were $321 million.

On February 6, 2025, the Board of Directors approved and we will pay a quarterly dividend of $0.15 per share on March 20, 2025 to shareholders of record as of February 27, 2025.

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As of December 31, 2024 we had approximately $3.1 billion undrawn and available under our revolving credit facilities.

In addition, we had $450 million of outstanding letters of credit as of December 31, 2023 that did not affect the availability under our revolvers.

We were in compliance with the covenants in our debt agreements at December 31, 2024.

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Customers can also earn miles through participating companies.

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

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

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

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Sale of Miles to Participating Companies.

Customers earn miles based on their spending with participating companies, such as credit card, retail, ridesharing, car rental and hotel companies, with which we have marketing agreements to sell miles.

Customers earn miles based on their spending with participating companies, such as credit card, ridesharing, retail, car rental and hotel companies, with which we have marketing agreements to sell miles.

Our contracts to sell miles under these marketing agreements have multiple performance obligations.

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During the years ended December 31, 2024, 2023 and 2022, total cash sales from marketing agreements related to our loyalty program were $7.4 billion, $6.9 billion and $5.7 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.

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

Our agreements with American Express provide for joint marketing, grant certain benefits to Delta-American Express co-branded credit card holders ("cardholders") and American Express Membership Rewards program participants, and allow American Express to market its services or products using our customer database.

Cardholders earn miles for making purchases using co-branded cards, and certain cardholders may also check their first bag for free, are granted discounted access to Delta Sky Club lounges and receive priority boarding and other benefits while traveling on Delta.

Cardholders earn miles for making purchases using co-branded cards, and certain cardholders may also receive baggage fee waivers, lounge access, priority boarding and other benefits while traveling on Delta.

Additionally, participants in the American Express Membership Rewards program may exchange their points for miles under the loyalty program.

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.

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

Delta Air Lines, Inc.

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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 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 allocate the value based on the relative selling prices of those products and services, which generally consist of award travel, baggage fee waivers, lounge access, priority boarding 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 mileage breakage, (3) published rates on our website for baggage fees, Delta Sky Club lounge access 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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We periodically evaluate the estimated air traffic liability and may record adjustments in our Consolidated Statement of Operations ("income statement").

These adjustments relate primarily to tickets that expire unused ("ticket breakage"), refunds, exchanges, 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.

These adjustments relate primarily to tickets that expire unused ("ticket breakage") and items for which final settlement occurs in periods subsequent to the sale of the related tickets such as refunds, exchanges and transactions with other airlines.

We estimate the value of ticket breakage and recognize revenue at the scheduled flight date.

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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 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.

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, (3) lower passenger demand as a result of weakened U.S.

and global economies or other factors, (4) prolonged interruption to our operations, (5) changes to the regulatory environment, (6) operational or performance changes by other airlines and (7) strategic changes to our operations leading to diminished utilization of the intangible assets.

Our goodwill balance, which is related to the airline segment, was $9.8 billion at December 31, 2024.

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Definite-lived assets consist primarily of marketing and maintenance service agreements.

In 2023, we performed quantitative assessments of our goodwill and indefinite-lived intangible assets, including applicable factors noted in "Key Assumptions" above, and determined that there was no indication that the assets were impaired as the fair value of each asset exceeded its carrying value by at least 20%.

Assumptions are sensitive to uncertainty about future events, the macroeconomic environment and other market-based risk factors.

A change in key assumptions such as the discount rate or projected future revenues, expenses and cash flows could materially affect the determination of fair values.

Management evaluated estimates and assumptions used in the valuations, considering market and industry-specific conditions.

During the December 2024 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.

We previously performed quantitative assessments in the December 2023 quarter, noting no impairment of goodwill or indefinite-lived intangible assets.

For additional information on our goodwill and indefinite-lived intangible assets' significant accounting policies and the related fair values and book values, see Note 5 of the Notes to the Consolidated Financial Statements.

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These plans are generally closed to new entrants and frozen for future benefit accruals.

As of December 31, 2023, the unfunded benefit obligation for these plans recorded on our balance sheets was $145 million, which is the net of our benefit obligation of $15.9 billion and plan assets of $15.8 billion.

We had no minimum funding requirements in 2023, and have no such requirements in 2024.

As of December 31, 2024, the funded status for these plans recorded on our balance sheets was $938 million, which is the net of our benefit obligation of $15.0 billion and plan assets of $15.9 billion.

We had no minimum funding requirements in 2024, and estimate that there will be approximately $80 million of minimum funding requirements under these plans in 2025.

The most critical assumptions impacting our defined benefit pension plan obligations, plan assets and net periodic cost/(benefit) are the discount rate, the expected long-term rate of return on plan assets and life expectancy of plan participants.

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We used a weighted average discount rate to value the obligations of 5.71% and 5.31% at December 31, 2024 and 2023, respectively.

Delta Air Lines, Inc.

| 2023 Form 10-K 47

MD&A - Critical Accounting Estimates

Expected Long-Term Rate of Return.

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We review our rate of return on plan assets assumptions annually.

Delta Air Lines, Inc.

| 2024 Form 10-K

MD&A - Critical Accounting Estimates

The investment strategy for our defined benefit pension plan assets is to earn a long-term return that meets or exceeds our annualized return target while taking an acceptable level of risk and maintaining sufficient liquidity to pay current benefits and other cash obligations of the plan.

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Change in Assumption Effect on 2025

Pension Cost/(Benefit) Effect on Accrued

Pension Liability at

December 31, 2023

Pension Cost/(Benefit)

Effect on Accrued Pension Liability at December 31, 2024

0.50% decrease in weighted average discount rate $ 12 million $ 674 million

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Each year we review information published by the Society of Actuaries and other publicly available information to develop our best estimate of life expectancy for purposes of measuring pension and other postretirement and postemployment benefit obligations.

Our funding obligations for qualified defined benefit plans are governed by ERISA 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 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.

While this recent legislation makes our funding obligations for these plans more predictable, factors outside our control continue to have an impact on the funding requirements.

Our funding obligations for qualified defined benefit plans are governed by ERISA and any additional applicable legislation.

Under current legislation, 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.

While recent legislation makes our funding obligations for these plans more predictable, factors outside our control continue to have an impact on the funding requirements.

Estimates of future funding requirements are based on various assumptions and can vary materially from actual funding requirements.

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For additional information on our significant accounting policies related to defined benefit pension plans, see Note 9 of the Notes to the Consolidated Financial Statements.

Delta Air Lines, Inc.

| 2023 Form 10-K 48

MD&A - Critical Accounting Estimates

Recent Accounting Standards

Standards Effective in Future Years

Fair Value of Equity Investments.

In June 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2022-03, "Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions." Under this standard, a contractual restriction on the sale of an equity security is not considered in measuring the security's fair value.

The standard also requires certain disclosures for equity securities that are subject to contractual restrictions.

The ASU becomes effective January 1, 2024, however we early adopted this standard as of December 31, 2023.

The new standard does not impact the valuation of our equity investments, but we have included the newly required disclosures related to the contractual sale restrictions associated with our investment in Wheels Up.

See Note 4 of the Notes to the Consolidated Financial Statements for additional details.

Segment Reporting.

In November 2023, the FASB issued ASU No.

Recently Adopted Standards

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures." This standard requires disclosure of significant segment expenses and other segment items by reportable segment.

This ASU becomes effective for annual periods beginning in 2024 and interim periods in 2025.

We are assessing the impact of this ASU and upon adoption expect that any impact would be limited to additional segment expense disclosures in the footnotes to our Consolidated Financial Statements.

We adopted this standard effective January 1, 2024.

See Note 14 of the Notes to the Consolidated Financial Statements for further information regarding our segment reporting.

Standards Effective in Future Years

Income Taxes.

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Improvements to Income Tax Disclosures." This standard enhances disclosures related to income taxes, including the rate reconciliation and information on income taxes paid.

This ASU becomes effective January 1, 2025.

We are assessing the impact of this ASU and upon adoption may be required to include certain additional disclosures in the footnotes to our Consolidated Financial Statements.

This ASU is effective beginning January 1, 2025.

Upon adoption of this ASU we expect to include certain additional disclosures in the effective income tax rate reconciliation in the footnotes to our Consolidated Financial Statements.

Delta Air Lines, Inc.

| 2024 Form 10-K

MD&A - Supplemental Information

MD&A - Critical Accounting Estimates

Disaggregation of Income Statement Expenses.

In November 2024, the FASB issued ASU No.

2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)." This standard requires disclosure of specific information about costs and expenses and becomes effective January 1, 2027.

We are assessing the impact of this ASU and, upon adoption, may be required to include certain additional disclosures in the footnotes to our Consolidated Financial Statements.

Supplemental Information

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Adjusting for these expenses allows investors to better understand and analyze our core cost performance.

• Restructuring charges.

During 2020, we recorded restructuring charges for items such as fleet impairments and voluntary early retirement and separation programs following strategic business decisions in response to the COVID-19 pandemic.

During 2022, we recognized adjustments to certain of those restructuring charges, representing changes in our estimates.

• Third-party refinery sales.

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One-time pilot agreement expenses

Restructuring charges — (124)

Operating income, adjusted

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MTM adjustments and settlements on hedges (21) 52

One-time pilot agreement charges (864) —

Restructuring charges — 124

One-time pilot agreement expenses — (864)

Operating expense, adjusted $ 50,985 $ 48,335

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Adjusted for:

Third-party refinery sales (1.24) (2.13)

Aircraft fuel and related taxes (3.66) (4.07)

Third-party refinery sales (1.61) (1.24)

Profit sharing (0.48) (0.51)

One-time pilot agreement expenses — (0.32)

Restructuring charges — 0.05

CASM-Ex 13.54 ¢ 13.17 ¢

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We adjust for this activity to provide investors a better understanding of the company's free cash flow generated by our operations.

• Strategic investments and related.

Cash flows related to our investments in and related transactions with other airlines are included in our GAAP investing activities.

We adjust for this activity because it provides a more meaningful comparison to our airline industry peers.

• Net cash flows related to certain airport construction projects and other.

Cash flows related to certain airport construction projects are included in our GAAP operating activities and capital expenditures.

We have adjusted for these items because management believes investors should be informed that a portion of these capital expenditures from airport construction projects are either reimbursed by a third-party or funded with restricted cash specific to these projects.

• Financed aircraft acquisitions.

This adjustment reflects aircraft deliveries that are leased as capital expenditures.

The adjustment is based on their original contractual purchase price or an estimate of the aircraft's fair value and provides a more meaningful view of our investing activities.

• Pilot agreement payment .

In the March 2023 quarter, Delta pilots ratified a new four-year Pilot Working Agreement effective January 1, 2023.

The agreement includes a provision for a one-time payment made upon ratification in the March 2023 quarter of $735 million.

Adjusting for this item provides investors a better understanding of our recurring free cash flow generated by our operations.

We have adjusted for these items, which were primarily funded by cash restricted for airport construction, to provide investors a better understanding of the company's free cash flow that is core to our operations.

Free cash flow reconciliation

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Net redemptions of short-term investments (1,137)

Strategic investments and related 152

Net cash flows related to certain airport construction projects and other 276

Financed aircraft acquisitions (461)

Pilot agreement payment 735

Free cash flow $ 3,424

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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 7. Management’s Discussion and Analysis