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 – 11.12% × 47,166 = -3,315
The financial performance from 2017 to 2021 reflects a consistent failure to generate positive economic profit, indicating that returns on invested capital were insufficient to cover the cost of capital throughout the analyzed period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrated relative stability between 2017 and 2019, peaking at 6,651 million US$ in 2019. A severe contraction occurred in 2020, with NOPAT plummeting to -13,902 million US$. While a recovery to positive territory was achieved in 2021 with 1,932 million US$, the value remained significantly lower than the levels observed prior to 2020.
- Cost of Capital and Invested Capital
- The cost of capital showed a moderate increase from 14.58% in 2017 to 15.49% in 2019, followed by a significant decrease to 11.12% by 2021. During the same period, invested capital remained relatively constant, fluctuating between a low of 43,326 million US$ in 2018 and a high of 47,580 million US$ in 2019, ultimately closing at 47,166 million US$ in 2021.
- Economic Profit Trends
- Economic profit remained negative for the entire five-year duration, signaling continuous value destruction. The deficit widened from a marginal -30 million US$ in 2017 to -718 million US$ in 2019. The most acute decline occurred in 2020, where economic profit dropped to -18,956 million US$. Although this figure improved to -3,315 million US$ in 2021, the organization did not return to a state of positive economic value added.
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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 $47,166 million, close to the high point observed in 2019, suggesting efforts to stabilize and restore invested capital after the disruptions of 2020.
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Cost of Capital
Delta Air Lines Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 27,088) | 27,088) | ÷ | 63,583) | = | 0.43 | 0.43 | × | 20.96% | = | 8.93% | ||
| Debt and finance leases3 | 28,736) | 28,736) | ÷ | 63,583) | = | 0.45 | 0.45 | × | 5.12% × (1 – 21.00%) | = | 1.83% | ||
| Operating lease liability4 | 7,759) | 7,759) | ÷ | 63,583) | = | 0.12 | 0.12 | × | 3.81% × (1 – 21.00%) | = | 0.37% | ||
| Total: | 63,583) | 1.00 | 11.12% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ 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 | × | 20.96% | = | 8.91% | ||
| 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 | 11.44% | ||||||||||
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 | × | 20.96% | = | 14.32% | ||
| 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 | 15.49% | ||||||||||
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 | × | 20.96% | = | 14.18% | ||
| 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 | 15.40% | ||||||||||
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 | × | 20.96% | = | 13.41% | ||
| 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 | 14.58% | ||||||||||
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 | (3,315) | (18,956) | (718) | (641) | (30) | |
| Invested capital2 | 47,166) | 44,197) | 47,580) | 43,326) | 44,409) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -7.03% | -42.89% | -1.51% | -1.48% | -0.07% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| FedEx Corp. | -2.82% | -7.38% | — | — | — | |
| Uber Technologies Inc. | -22.79% | — | — | — | — | |
| Union Pacific Corp. | -2.24% | — | — | — | — | |
| United Airlines Holdings Inc. | -10.26% | — | — | — | — | |
| United Parcel Service Inc. | 17.60% | — | — | — | — | |
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 × -3,315 ÷ 47,166 = -7.03%
4 Click competitor name to see calculations.
The analysis of economic value creation indicates a period of sustained value destruction from 2017 through 2021, characterized by consistent negative economic profits and a severely degraded economic spread ratio.
- Economic Profit Trends
- Economic profit remained negative throughout the entire five-year period, signaling that the company failed to generate returns exceeding its cost of capital. A marginal deficit of US$ 30 million in 2017 widened to US$ 641 million in 2018 and US$ 718 million in 2019. A catastrophic decline occurred in 2020, where economic profit plummeted to negative US$ 18,956 million, before partially recovering to negative US$ 3,315 million in 2021.
- Invested Capital Dynamics
- The invested capital remained relatively stable despite the volatility in profitability. The capital base fluctuated within a range of approximately US$ 43.3 billion to US$ 47.6 billion. This stability suggests that the drastic swings in economic profit were driven by operational performance and external shocks rather than significant changes in the scale of the invested capital base.
- Economic Spread Ratio Analysis
- The economic spread ratio exhibits a pattern of extreme volatility and value erosion. From a near-breakeven position of -0.07% in 2017, the ratio deteriorated to -1.51% by 2019. The ratio collapsed to -42.89% in 2020, representing a massive gap between the return on invested capital and the cost of capital. While the ratio improved to -7.03% in 2021, the persistent negative value confirms that the company continued to destroy shareholder value at the end of the period.
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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 | (3,315) | (18,956) | (718) | (641) | (30) | |
| 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 | -10.95% | -108.02% | -1.53% | -1.43% | -0.07% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| FedEx Corp. | -2.16% | -6.14% | — | — | — | |
| Uber Technologies Inc. | -21.00% | — | — | — | — | |
| Union Pacific Corp. | -5.97% | — | — | — | — | |
| United Airlines Holdings Inc. | -21.61% | — | — | — | — | |
| 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 × -3,315 ÷ 30,276 = -10.95%
3 Click competitor name to see calculations.
The analysis of economic value creation from 2017 to 2021 reveals a period of consistent value erosion, characterized by a severe volatility peak in 2020 followed by a partial recovery in 2021. Throughout the entire five-year period, the economic profit remained negative, indicating that the returns generated were insufficient to cover the cost of capital.
- Economic Profit Trends
- A progressive decline in economic profit is observed from 2017 to 2019, moving from -30 million US$ to -718 million US$. This deterioration accelerated sharply in 2020, with economic profit plummeting to -18,956 million US$. By 2021, a significant reduction in losses occurred, with the figure improving to -3,315 million US$, although it remained substantially lower than pre-2020 levels.
- Adjusted Operating Revenue Performance
- Operating revenues showed a steady upward trajectory between 2017 and 2019, growing from 41,436 million US$ to 47,094 million US$. This growth was abruptly reversed in 2020, as revenue collapsed to 17,549 million US$. A recovery trend emerged in 2021, with revenue increasing to 30,276 million US$, though this represented only approximately 64% of the 2019 peak.
- Economic Profit Margin Analysis
- The economic profit margin remained marginally negative between 2017 and 2019, fluctuating between -0.07% and -1.53%. In 2020, the margin experienced an extreme contraction to -108.02%, signifying that the economic loss exceeded the total adjusted operating revenue for that period. While the margin improved to -10.95% in 2021, the value indicates that the recovery in revenue had not yet been matched by a corresponding return to economic profitability.
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