Delta Air Lines Inc. (NYSE:DAL)

The financial data reveals notable fluctuations in the company's operating performance and economic value over the analyzed period.

Net Operating Profit After Taxes (NOPAT)

From 2017 through 2019, NOPAT demonstrated relative stability with a slight decline from 6,446 million US dollars in 2017 to 6,032 million in 2018, followed by a rebound to 6,651 million in 2019. However, in 2020, there was a significant downturn resulting in a substantial loss of 13,902 million US dollars, likely reflecting extraordinary challenges during that fiscal year. Recovery began in 2021, with NOPAT returning to a positive figure of 1,932 million US dollars, although still well below pre-2020 levels.

Cost of Capital

The cost of capital exhibited a decreasing trend from 12.58% in 2017 to 9.79% in 2021. It peaked modestly at 13.35% in 2019 before declining, which could suggest changes in market conditions or the company's risk profile over time, impacting the expected return required by investors.

Invested Capital

Invested capital fluctuated within a relatively narrow range, beginning at 44,409 million US dollars in 2017, experiencing a slight decline to 43,326 million in 2018, and then increasing to 47,580 million in 2019. In 2020, it decreased again to 44,197 million but rose to 47,166 million in 2021. These variations indicate ongoing adjustments in asset deployment or financing strategies, possibly reflecting operational scaling or asset revaluation.

Economic Profit

Economic profit, the difference between NOPAT and the cost of capital applied to invested capital, showed a pronounced deterioration. Initially positive and relatively modest—860 million US dollars in 2017 declining to 277 million in 2018 and then slightly increasing to 300 million in 2019—it plunged into significant negative territory in 2020 with a loss of 18,368 million US dollars. Although improved in 2021 to a negative 2,685 million, economic profit remained below zero, signaling that the company did not generate sufficient returns to cover its cost of capital during these years, particularly enduring sharp challenges in 2020.

In summary, the company faced substantial operational disruptions in 2020, adversely impacting profitability and economic value creation. Despite some recovery indications in 2021, key financial metrics had yet to reach their previous positive levels, underscoring continued challenges in restoring full profitability and value generation.

The financial data reveals significant fluctuations in key profitability metrics over the analyzed periods. Notably, net income exhibited a positive and steadily increasing trend from 2017 through 2019, rising from 3,577 million US dollars to 4,767 million US dollars. However, 2020 marked a sharp reversal, with net income declining drastically to a loss of 12,385 million US dollars. This adverse outcome was partially mitigated in 2021, which showed a rebound to a positive net income of 280 million US dollars, although this level remains substantially below the pre-2020 figures.

Similarly, net operating profit after taxes (NOPAT) followed a comparable trajectory. The company maintained strong operating profitability between 2017 and 2019, with NOPAT values ranging from 6,032 million to 6,651 million US dollars. In 2020, a pronounced downturn occurred, as NOPAT fell to a negative 13,902 million US dollars, indicating severe operational challenges during this period. The partial recovery in 2021 saw NOPAT increase to 1,932 million US dollars, signaling some restoration of operational profitability, albeit still at a reduced scale relative to the pre-2020 period.

Profitability Trends

Up through 2019, both net income and NOPAT demonstrated healthy growth and strong profitability.

The year 2020 experienced a drastic and abnormal downturn in profitability, reflecting an exceptional negative impact.

In 2021, there was a modest recovery, though profitability remained significantly below previous peak levels.

Operational Insights

The parallel movement between net income and NOPAT suggests that the core operations rather than extraordinary items primarily drove the financial volatility.

The deep losses in 2020 indicate substantial operational disruptions or extraordinary challenges during that year.

The recovery in 2021 implies initial success in addressing those challenges, though full recovery to earlier profitability levels was not yet achieved.

Overall, the data suggests a company that encountered a period of severe financial distress in 2020, likely due to external or market-wide factors, followed by an initial phase of recovery with cautious improvement in profitability metrics in the subsequent year.

Income Tax Provision (Benefit)

The income tax provision exhibits a fluctuating trend over the analyzed period. Starting at $2,124 million in 2017, it decreased notably to $1,216 million in 2018, before experiencing a moderate increase to $1,431 million in 2019. In 2020, there is a significant shift to a considerable tax benefit of -$3,202 million, indicating either substantial tax credits or loss carrybacks during this period, potentially related to extraordinary circumstances. In 2021, the tax provision returns to a positive value of $118 million, reflecting a recovery or normalization relative to the previous year.

Cash Operating Taxes

Cash operating taxes show a mixed and irregular pattern. In 2017, the amount was $381 million, followed by a negative value of -$38 million in 2018, suggesting a possible tax refund or adjustment. The figure then increases slightly to $44 million in 2019 and rises more substantially to $191 million in 2020. The upward trend continues in 2021, reaching $323 million. This increase in cash operating taxes over the last two years could indicate improving operational profitability or changes in tax payment timing and policies.

Total reported debt & leases

From 2017 to 2019, the total reported debt and leases showed a declining trend, decreasing from $21,021 million to $17,255 million. However, there was a significant increase in 2020, with the amount rising sharply to $35,548 million. This elevated level was largely maintained in 2021 at $34,679 million, indicating a substantial buildup of debt and lease obligations during the later years.

Stockholders’ equity

Stockholders' equity exhibited relative stability from 2017 through 2019, fluctuating moderately around the $13,600 to $15,300 million range. In 2020, equity experienced a dramatic reduction to $1,534 million, reflecting severe erosion likely due to losses or adjustments during that period. In 2021, there was a partial recovery, with equity increasing to $3,887 million, though it remained substantially below pre-2020 levels.

Invested capital

Invested capital showed an overall upward trend from 2017 to 2019, rising from $44,409 million to $47,580 million. In 2020, it decreased to $44,197 million, likely driven by changes in debt and equity components as noted. The capital base rebounded in 2021, climbing back to $47,166 million, close to the high point observed in 2019, suggesting efforts to stabilize and restore invested capital after the disruptions of 2020.

Economic Profit

The economic profit experienced a significant decline over the five-year period. Starting at 860 million US dollars in 2017, it decreased sharply to 277 million in 2018, followed by a slight increase to 300 million in 2019. However, the value turned negative in 2020, plummeting to -18,368 million, and improved somewhat in 2021 but remained substantially negative at -2,685 million. This pattern indicates a major downturn in profitability, particularly severe in 2020.

Invested Capital

Invested capital showed moderate fluctuations throughout the period. It began at 44,409 million US dollars in 2017, slightly decreased to 43,326 million in 2018, then increased to 47,580 million in 2019. A decline was observed again in 2020, with capital reducing to 44,197 million, followed by an increase to 47,166 million in 2021. Overall, the invested capital remained relatively stable around the mid-40,000 million range with some variations.

Economic Spread Ratio

The economic spread ratio exhibited a marked downward trend. Initially, it was positive at 1.94% in 2017, then dropped considerably to 0.64% in 2018 and remained almost constant at 0.63% in 2019. In 2020, it drastically fell to -41.56%, corresponding with the large negative economic profit, and although it improved in 2021 to -5.69%, it remained negative. This suggests that the company's returns fell below the cost of capital starting in 2020, reflecting poor economic performance during that period.

The financial data reveals significant fluctuations in economic profit and operating revenue over the five-year period ending in 2021.

Economic Profit

Economic profit showed a strong positive outcome in 2017, with US$860 million, but decreased sharply in 2018 to US$277 million. A slight improvement was noted in 2019 with US$300 million; however, this positive trend was reversed dramatically in 2020, resulting in a large economic loss of US$18,368 million. This loss reduced substantially in 2021 but remained negative at US$2,685 million.

Adjusted Operating Revenue

Adjusted operating revenue exhibited steady growth from 2017 through 2019, increasing from approximately US$41.4 billion to US$47.1 billion. A significant decline was observed in 2020, where revenue dropped to US$17.5 billion, likely reflecting external challenges during that year. In 2021, revenue partially recovered to US$30.3 billion but did not return to pre-2020 levels.

Economic Profit Margin

The economic profit margin followed a similar trend to economic profit. It started at 2.08% in 2017 and declined to just over 0.6% in 2018 and 2019. In 2020, the margin plummeted into negative territory at -104.67%, highlighting the severe economic losses encountered. The margin improved in 2021 to -8.87%, indicating a reduction in losses but continued unprofitability.

Overall, the data indicates that the company faced considerable financial difficulties beginning in 2020, with substantial negative economic profit and margin coinciding with a sharp decline in operating revenue. The partial recovery in 2021 suggests some easing of adverse conditions, but financial performance remains below pre-2020 levels, highlighting ongoing challenges in achieving profitability.