Delta Air Lines Inc. (NYSE:DAL)

The financial data reveals significant fluctuations in the company's profitability and economic performance over the five-year period ending in 2021.

Net Operating Profit After Taxes (NOPAT)

The company's NOPAT showed a generally positive trend from 2017 through 2019, increasing from $6,446 million to $6,651 million. However, there was a substantial decline in 2020, with NOPAT dropping sharply to a negative value of -$13,902 million. In 2021, a recovery is evident with NOPAT improving to $1,932 million, yet it remains significantly below the pre-2020 levels.

Cost of Capital

The cost of capital fluctuated moderately over the period, starting at 12.56% in 2017 and increasing slightly to a peak of 13.33% in 2019. Following this, it declined to 10.09% in 2020 and further to 9.78% in 2021. This downward trend in the cost of capital during 2020 and 2021 may reflect changes in market conditions or risk perceptions.

Invested Capital

Invested capital exhibited some variability, initially decreasing from $44,409 million in 2017 to $43,326 million in 2018, then rising to $47,580 million in 2019. A reduction occurred again in 2020 to $44,197 million, followed by an increase to $47,166 million in 2021. This pattern indicates adjustments in the company's capital base, possibly reflecting strategic investments or asset restructuring.

Economic Profit

Economic profit decreased markedly over the period. It started at $869 million in 2017, then dropped significantly to $286 million in 2018 and slightly improved to $310 million in 2019. The year 2020 saw a dramatic deterioration with economic profit plunging to -$18,362 million, corresponding with the negative NOPAT in the same year. In 2021, despite some recovery to -$2,679 million, economic profit remained negative, indicating that the company was not generating returns above its cost of capital.

Overall, the data reflects a period of relative stability and growth in operating profitability and economic profit until 2019, followed by a substantial downturn in 2020 likely attributable to extraordinary circumstances. The partial rebound in 2021 suggests initial recovery efforts, though profitability and value creation remain below historical levels. The declining cost of capital coupled with fluctuating invested capital further contextualizes the challenges and strategic financial responses during this timeframe.

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.

The data reveals significant fluctuations in key financial metrics over the analyzed period, reflecting changes in economic profitability and capital utilization.

Economic Profit

Economic profit exhibited a declining trend from 2017 to 2019, dropping from 869 million US dollars in 2017 to 310 million US dollars in 2019. In 2020, there was a drastic decrease, resulting in a substantial economic loss of 18,362 million US dollars. While the loss attenuated in 2021 to 2,679 million US dollars, the level remained negative, signifying ongoing challenges in profitability.

Invested Capital

Invested capital remained relatively stable with slight variances over the period. It decreased modestly from 44,409 million US dollars in 2017 to 43,326 million US dollars in 2018, followed by an increase to 47,580 million US dollars in 2019. Subsequently, it declined again in 2020 to 44,197 million US dollars and rose to 47,166 million US dollars in 2021. Overall, the capital base fluctuated within a narrow range, indicating stable investment levels.

Economic Spread Ratio

The economic spread ratio, representing the difference between return on invested capital and cost of capital, followed a downward trajectory. Starting at a positive 1.96% in 2017, it decreased to 0.66% and 0.65% in 2018 and 2019, respectively. A significant deterioration occurred in 2020, with the ratio plummeting to -41.55%, before partially recovering to -5.68% in 2021. The negative values in the latter years suggest that the company was generating returns below its capital costs during this period.

In summary, the financial indicators demonstrate deteriorating economic profitability commencing prior to 2020, which was exacerbated markedly in 2020. Despite some recovery in 2021, profitability remained below acceptable thresholds, while invested capital levels experienced moderate fluctuations but maintained overall stability.

Economic Profit

The economic profit experienced a significant decline over the observed periods. Beginning at 869 million US dollars in 2017, it decreased sharply to 286 million in 2018 and slightly recovered to 310 million in 2019. However, in 2020, there was a substantial negative shift to negative 18,362 million US dollars, followed by an improvement to negative 2,679 million US dollars in 2021, remaining in the negative territory.

Adjusted Operating Revenue

The adjusted operating revenue showed a growth trend until 2019, rising from 41,436 million US dollars in 2017 to 47,094 million in 2019. In 2020, there was a sharp decrease to 17,549 million US dollars, reflecting a significant impact during that year, followed by partial recovery to 30,276 million US dollars in 2021.

Economic Profit Margin

The economic profit margin followed a declining trajectory over the period analyzed. It started at 2.1% in 2017 and dropped to 0.64% in 2018, maintaining a similar level (0.66%) in 2019. In 2020, this margin dramatically worsened to negative 104.63%, before improving somewhat to negative 8.85% in 2021, but still indicating an unprofitable stance.