Delta Air Lines Inc. (NYSE:DAL)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes demonstrated relative stability and growth from 2017 to 2019, increasing from 6,446 million USD to 6,651 million USD. However, in 2020, a significant decline occurred, with NOPAT turning negative to -13,902 million USD, reflecting a major operational loss. In 2021, there was a recovery to 1,932 million USD, although this figure remained considerably below pre-2020 levels.

Cost of Capital

The cost of capital showed a gradual downward trend over the period, starting at 12.58% in 2017 and decreasing to 9.79% in 2021. Notably, the decline accelerated during 2020 and 2021, reaching its lowest point in the final year observed, which may suggest changes in the company's risk profile or financing conditions.

Invested Capital

Invested capital experienced fluctuations without a clear directional trend. After a slight decrease from 44,409 million USD in 2017 to 43,326 million USD in 2018, it rose again to 47,580 million USD in 2019. The level declined to 44,197 million USD in 2020 and rebounded to 47,166 million USD in 2021. These variations suggest adjustments in asset base or capital structure, possibly in response to operational and market conditions.

Economic Profit

Economic profit mirrored the pattern observed in NOPAT but with more pronounced variability. It declined sharply from 858 million USD in 2017 to 275 million USD in 2018, then modestly increased to 298 million USD in 2019. The impact of 2020 was severe, with economic profit plunging to a negative 18,369 million USD, indicating a substantial destruction of value during that year. Although economic profit improved in 2021, rising to a negative 2,687 million USD, it remained below breakeven, reflecting ongoing challenges in achieving value creation.

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 exhibits a significant decline over the analyzed periods. In 2017, the economic profit was substantially positive at 858 million USD, but it decreased sharply to 275 million USD in 2018 and remained relatively stable at 298 million USD in 2019. However, there was a drastic downturn starting in 2020, with economic profit plunging to negative 18,369 million USD, followed by a less severe but still negative performance in 2021 at negative 2,687 million USD.

Invested Capital

The invested capital experienced moderate fluctuations. It decreased slightly from 44,409 million USD in 2017 to 43,326 million USD in 2018, then increased to 47,580 million USD in 2019. A subsequent decline followed in 2020 to 44,197 million USD, with a rebound to 47,166 million USD in 2021, indicating some recovery and adjustment of capital investment levels over the period.

Economic Spread Ratio

The economic spread ratio shows a marked deterioration throughout the timeline. Starting at a positive 1.93% in 2017, it dropped significantly to 0.64% in 2018 and remained relatively stable at 0.63% in 2019. The ratio then declined precipitously into negative territory, reaching negative 41.56% in 2020 and improving slightly but remaining negative at negative 5.7% in 2021. This trend suggests a deterioration in the return on invested capital relative to the cost of capital, particularly pronounced in 2020.

Overall Analysis

The data indicates the company was generating positive economic profit and maintaining a positive economic spread ratio through 2019, despite some volatility. From 2020 onwards, likely influenced by extraordinary external factors, there was a substantial negative impact on profitability and returns, resulting in significant economic losses and negative spreads. The invested capital levels reflect management's continued investment but with a reduction during the peak loss period in 2020. The partial recovery in 2021, while notable, does not yet signify a return to the prior positive performance levels.

The financial data reflects significant fluctuations in economic profitability and revenue over the five-year period under review.

Economic Profit

The economic profit demonstrated a strong positive performance in 2017 with a value of $858 million, followed by a marked decline in subsequent years, dropping to $275 million in 2018 and remaining relatively stable at $298 million in 2019. A substantial downturn occurred in 2020, with economic profit plunging to a negative $18,369 million, indicating considerable losses. Although there was some recovery in 2021, economic profit remained negative at $2,687 million, reflecting ongoing challenges.

Adjusted Operating Revenue

Adjusted operating revenue showed a generally positive trend from 2017 through 2019, increasing steadily from $41,436 million to $47,094 million. However, 2020 witnessed a sharp decline to $17,549 million, which correlates with the significant reduction in economic profit. The following year saw a partial rebound to $30,276 million, indicating a gradual recovery in revenue generation.

Economic Profit Margin

The economic profit margin followed a similar trajectory to the economic profit figures, starting at 2.07% in 2017 and declining to 0.62% and 0.63% in 2018 and 2019 respectively, suggesting diminishing profitability. The margin then dramatically worsened in 2020, registering at -104.67%, highlighting the extent of the loss relative to revenue. By 2021, the margin improved substantially but remained negative at -8.87%, signaling continued unprofitability despite better performance compared to the preceding year.