Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
Delta Air Lines Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,932 – 11.13% × 47,166 = -3,319
An analysis of the economic profit from 2017 to 2021 reveals a consistent failure to generate value above the cost of capital, with a severe deterioration occurring in 2020 followed by a partial recovery in 2021.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT remained relatively stable between 2017 and 2019, fluctuating between 6,032 million and 6,651 million US$. A catastrophic decline occurred in 2020, with NOPAT falling to negative 13,902 million US$. While the figure returned to positive territory in 2021 at 1,932 million US$, this represented a significant reduction compared to pre-2020 levels.
- Invested Capital and Cost of Capital
- Invested capital exhibited low volatility, remaining within a range of 43,326 million to 47,580 million US$ throughout the five-year period. The cost of capital trended upward from 14.60% in 2017 to a peak of 15.50% in 2019, before decreasing to 11.13% by 2021. This reduction in the cost of capital in the final two years suggests a decrease in the required return on invested capital, although not enough to offset operating losses.
- Economic Profit Trajectory
- Economic profit was negative for every year analyzed, indicating that the company did not create economic value for its shareholders during this timeframe. The deficit expanded from a marginal 36 million US$ in 2017 to 725 million US$ in 2019. The loss peaked in 2020 at 18,960 million US$, driven primarily by the collapse of NOPAT. By 2021, the economic profit improved to negative 3,319 million US$, reflecting the return to positive operating profit and a lower cost of capital.
The overall trend indicates that while the operational collapse of 2020 was the primary driver of value destruction, the company struggled to achieve a positive economic profit even during periods of operational stability between 2017 and 2019.
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Net Operating Profit after Taxes (NOPAT)
Delta Air Lines Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for uncollectible accounts.
3 Addition of increase (decrease) in loyalty program deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net income (loss).
5 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 7,759 × 3.81% = 296
6 2021 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= 1,575 × 21.00% = 331
7 Addition of after taxes interest expense to net income (loss).
8 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 56 × 21.00% = 12
9 Elimination of after taxes investment income.
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.
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Cash Operating Taxes
Delta Air Lines Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
- 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 $323 million. This increase in cash operating taxes over the last two years could indicate improving operational profitability or changes in tax payment timing and policies.
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Invested Capital
Delta Air Lines Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of loyalty program deferred revenue.
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of investments.
- 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 $47,166 million, close to the high point observed in 2019, suggesting efforts to stabilize and restore invested capital after the disruptions of 2020.
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Cost of Capital
Delta Air Lines Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 27,088) | 27,088) | ÷ | 63,583) | = | 0.43 | 0.43 | × | 20.98% | = | 8.94% | ||
| Debt and finance leases3 | 28,736) | 28,736) | ÷ | 63,583) | = | 0.45 | 0.45 | × | 5.12% × (1 – 21.00%) | = | 1.83% | ||
| Operating lease liability4 | 7,759) | 7,759) | ÷ | 63,583) | = | 0.12 | 0.12 | × | 3.81% × (1 – 21.00%) | = | 0.37% | ||
| Total: | 63,583) | 1.00 | 11.13% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 27,625) | 27,625) | ÷ | 64,999) | = | 0.43 | 0.43 | × | 20.98% | = | 8.92% | ||
| Debt and finance leases3 | 30,983) | 30,983) | ÷ | 64,999) | = | 0.48 | 0.48 | × | 5.71% × (1 – 21.00%) | = | 2.15% | ||
| Operating lease liability4 | 6,391) | 6,391) | ÷ | 64,999) | = | 0.10 | 0.10 | × | 4.88% × (1 – 21.00%) | = | 0.38% | ||
| Total: | 64,999) | 1.00 | 11.45% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 37,849) | 37,849) | ÷ | 55,398) | = | 0.68 | 0.68 | × | 20.98% | = | 14.33% | ||
| Debt and finance leases3 | 11,454) | 11,454) | ÷ | 55,398) | = | 0.21 | 0.21 | × | 5.18% × (1 – 21.00%) | = | 0.85% | ||
| Operating lease liability4 | 6,095) | 6,095) | ÷ | 55,398) | = | 0.11 | 0.11 | × | 3.73% × (1 – 21.00%) | = | 0.32% | ||
| Total: | 55,398) | 1.00 | 15.50% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 34,681) | 34,681) | ÷ | 51,240) | = | 0.68 | 0.68 | × | 20.98% | = | 14.20% | ||
| Debt and finance leases3 | 9,803) | 9,803) | ÷ | 51,240) | = | 0.19 | 0.19 | × | 5.51% × (1 – 21.00%) | = | 0.83% | ||
| Operating lease liability4 | 6,756) | 6,756) | ÷ | 51,240) | = | 0.13 | 0.13 | × | 3.69% × (1 – 21.00%) | = | 0.38% | ||
| Total: | 51,240) | 1.00 | 15.42% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 37,792) | 37,792) | ÷ | 59,072) | = | 0.64 | 0.64 | × | 20.98% | = | 13.42% | ||
| Debt and finance leases3 | 9,094) | 9,094) | ÷ | 59,072) | = | 0.15 | 0.15 | × | 5.71% × (1 – 35.00%) | = | 0.57% | ||
| Operating lease liability4 | 12,187) | 12,187) | ÷ | 59,072) | = | 0.21 | 0.21 | × | 4.51% × (1 – 35.00%) | = | 0.60% | ||
| Total: | 59,072) | 1.00 | 14.60% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance leases. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Delta Air Lines Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (3,319) | (18,960) | (725) | (647) | (36) | |
| Invested capital2 | 47,166) | 44,197) | 47,580) | 43,326) | 44,409) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -7.04% | -42.90% | -1.52% | -1.49% | -0.08% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| FedEx Corp. | -2.83% | -7.39% | — | — | — | |
| Uber Technologies Inc. | -22.81% | — | — | — | — | |
| Union Pacific Corp. | -2.24% | — | — | — | — | |
| United Airlines Holdings Inc. | -10.26% | — | — | — | — | |
| United Parcel Service Inc. | 17.59% | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -3,319 ÷ 47,166 = -7.04%
4 Click competitor name to see calculations.
The analysis of economic value added between 2017 and 2021 reveals a persistent failure to generate positive economic profit, indicating that the returns on invested capital remained below the required cost of capital throughout the period. The trajectory is characterized by a period of gradual decline, a severe collapse in 2020, and a partial recovery in 2021.
- Economic Profit Trends
- Economic profit exhibited a consistent negative trend from 2017 through 2020. A marginal loss of US$ 36 million in 2017 deepened to US$ 647 million in 2018 and US$ 725 million in 2019. A critical deterioration occurred in 2020, with losses expanding to US$ 18,960 million. Although the losses narrowed significantly to US$ 3,319 million in 2021, the company continued to destroy economic value.
- Invested Capital Dynamics
- Invested capital remained relatively stable throughout the five-year window, fluctuating between a low of US$ 43,326 million in 2018 and a peak of US$ 47,580 million in 2019. The lack of significant volatility in the capital base suggests that the drastic swings in economic profit were the result of operational performance and external shocks rather than major shifts in the company's asset base or capital investment strategy.
- Economic Spread Ratio Performance
- The economic spread ratio highlights the severity of the value destruction relative to the capital employed. The ratio shifted from a near-break-even state of -0.08% in 2017 to -1.52% in 2019. A precipitous drop to -42.90% was recorded in 2020, marking an extreme disconnection between generated returns and the cost of capital. The recovery to -7.04% in 2021 signifies a substantial improvement in operational efficiency, although the ratio remains negative, confirming that the cost of capital still exceeds the return on investment.
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Economic Profit Margin
Delta Air Lines Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (3,319) | (18,960) | (725) | (647) | (36) | |
| Operating revenue | 29,899) | 17,095) | 47,007) | 44,438) | 41,244) | |
| Add: Increase (decrease) in loyalty program deferred revenue | 377) | 454) | 87) | 320) | 192) | |
| Adjusted operating revenue | 30,276) | 17,549) | 47,094) | 44,758) | 41,436) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -10.96% | -108.04% | -1.54% | -1.45% | -0.09% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| FedEx Corp. | -2.16% | -6.14% | — | — | — | |
| Uber Technologies Inc. | -21.01% | — | — | — | — | |
| Union Pacific Corp. | -5.98% | — | — | — | — | |
| United Airlines Holdings Inc. | -21.62% | — | — | — | — | |
| United Parcel Service Inc. | 8.03% | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted operating revenue
= 100 × -3,319 ÷ 30,276 = -10.96%
3 Click competitor name to see calculations.
An analysis of the economic performance between 2017 and 2021 reveals a consistent failure to generate positive economic value, characterized by a marginal deficit in the early period, a severe systemic collapse in 2020, and a subsequent partial recovery in 2021.
- Economic Profit Trajectory
- Economic profit remained negative throughout the observed five-year period. A relatively small deficit of US$ 36 million in 2017 expanded to US$ 647 million in 2018 and US$ 725 million in 2019. This trend culminated in a catastrophic decline in 2020, with the deficit reaching US$ 18,960 million. By 2021, a significant recovery was observed as the economic profit improved to a deficit of US$ 3,319 million, although it remained substantially below the 2017–2019 levels.
- Adjusted Operating Revenue Trends
- Revenue exhibited a steady growth pattern from 2017 to 2019, rising from US$ 41,436 million to a peak of US$ 47,094 million. This growth was abruptly reversed in 2020, with revenue plummeting to US$ 17,549 million. A recovery trend emerged in 2021, with revenue increasing to US$ 30,276 million, although this figure represents only approximately 64% of the 2019 peak.
- Economic Profit Margin Analysis
- The economic profit margin demonstrates extreme volatility. Between 2017 and 2019, the margin widened from -0.09% to -1.54%, indicating a gradual decline in the efficiency of capital utilization. In 2020, the margin collapsed to -108.04%, reflecting a situation where economic losses exceeded total adjusted operating revenue. The margin improved to -10.96% in 2021, confirming a trajectory toward stabilization, despite the continued failure to achieve a positive economic profit.
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