Delta Air Lines Inc. (NYSE:DAL)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes experienced fluctuations over the analyzed period. Initially, there was a decline from $6,446 million in 2017 to $6,032 million in 2018. This was followed by an increase to $6,651 million in 2019. However, a significant deterioration occurred in 2020, resulting in a substantial negative figure of -$13,902 million. In 2021, a partial recovery was observed, with NOPAT rising to $1,932 million, yet still remaining well below pre-2020 levels.

Cost of Capital

The cost of capital showed a general declining trend throughout the period. It increased slightly from 12.59% in 2017 to 13.36% in 2019, indicating rising capital costs during that time. Subsequently, it notably decreased to 10.11% in 2020 and further to 9.8% in 2021, reflecting a lowering of capital expenses, which may be associated with changing market conditions or financial strategy adjustments.

Invested Capital

Invested capital exhibited moderate variability. It began at $44,409 million in 2017 and slightly decreased to $43,326 million in 2018. Then, it increased significantly to $47,580 million in 2019 before declining again to $44,197 million in 2020. By 2021, it rose to $47,166 million, nearing the previous peak. This pattern suggests shifts in asset base or operational scale, possibly influenced by the economic environment and corporate investments.

Economic Profit

The economic profit, calculated as NOPAT minus the cost of capital charge on invested capital, followed a downward trajectory. It started positively at $855 million in 2017 but dropped sharply to $273 million in 2018 and then slightly to $295 million in 2019. A dramatic negative swing occurred in 2020, with economic profit falling to -$18,371 million, paralleling the large loss in NOPAT. In 2021, although economic profit improved to -$2,689 million, it remained significantly negative, indicating ongoing challenges in generating returns above the cost of capital.

Overall Analysis

The data reflects a volatile financial performance over the five-year period. The year 2020 marks a pronounced disruption, likely related to extraordinary external factors, as evidenced by substantial negative NOPAT and economic profit. Despite some recovery in 2021, profitability metrics have not returned to previous levels, and economic profit remains negative. The decreasing cost of capital in the later years may have partially alleviated financial pressures, while fluctuations in invested capital suggest adaptive capital management amid changing operational requirements.

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 demonstrated a significant decline over the period analyzed. It started at a positive value of 855 million US dollars in 2017, dropped sharply to 273 million in 2018, and then remained relatively flat at 295 million in 2019. A substantial downturn occurred in 2020, where economic profit turned negative, reaching -18,371 million US dollars, indicating a severe loss. In 2021, there was a partial recovery, but the company still reported a negative economic profit of -2,689 million.

Invested Capital

Invested capital showed moderate fluctuations but generally maintained a steady range throughout the years. Beginning at 44,409 million US dollars in 2017, it slightly decreased to 43,326 million in 2018, then increased to 47,580 million in 2019. The figure declined to 44,197 million in 2020 before rising again to 47,166 million in 2021. This suggests ongoing investment activity with some adjustments likely in response to operational conditions.

Economic Spread Ratio

The economic spread ratio experienced a drastic shift across the periods. It started at a healthy positive rate of 1.93% in 2017 but declined steeply to 0.63% in 2018 and remained nearly stable at 0.62% in 2019. The spread turned sharply negative in 2020, reaching -41.57%, reflecting significant inefficiencies or losses in capital deployment that year. In 2021, the ratio improved but remained negative at -5.7%, indicating ongoing challenges in generating returns above the cost of capital.

The financial data reveals notable fluctuations in key performance indicators over the five-year period ending in 2021. There is a clear decline in economic profit, especially during the years 2020 and 2021, which reflects a significant loss compared to earlier years.

Economic Profit

Economic profit remained positive and relatively stable from 2017 through 2019, with values of 855 million USD in 2017, 273 million USD in 2018, and 295 million USD in 2019. However, in 2020, there was a steep decline resulting in a substantial negative economic profit of -18,371 million USD, followed by an improvement in 2021 to -2,689 million USD, though still negative.

Adjusted Operating Revenue

The adjusted operating revenue demonstrated growth from 41,436 million USD in 2017 to 47,094 million USD in 2019, showing consistent upward momentum prior to 2020. This was followed by a sharp decline to 17,549 million USD in 2020, then a partial recovery to 30,276 million USD in 2021, although remaining below pre-2020 levels.

Economic Profit Margin

Economic profit margin, as a percentage of revenue, mirrored the economic profit trend. It declined from a margin of 2.06% in 2017 to 0.63% in 2019, indicating a reduction in profitability efficiency. In 2020, the margin plunged significantly to -104.68%, reflecting substantial losses relative to revenue during this period. The margin showed some recovery in 2021 to -8.88%, but profitability remained negative.

Overall, the data indicates that the company experienced strong performance and profitability up until 2019, followed by significant operational and economic challenges starting in 2020. This is evident in the pronounced drop in both revenue and profitability metrics, with indicators showing partial recovery by 2021, but levels had not returned to pre-2020 figures. The patterns suggest external or internal factors causing considerable disruption during the 2020-2021 period, with an improving but still challenging environment as of the latest data point.