Delta Air Lines Inc. (NYSE:DAL)

Net Operating Profit After Taxes (NOPAT)

The NOPAT values display a generally stable performance during the years 2017 through 2019, ranging from approximately 6,000 to 6,650 million US dollars. However, a significant decline occurs in 2020, where NOPAT drops sharply to a negative value of -13,902 million US dollars, indicating a severe operational loss. In 2021, there is a partial recovery, with NOPAT rising to 1,932 million US dollars, though it remains substantially below pre-2020 levels.

Cost of Capital

The cost of capital shows an increasing trend from 12.58% in 2017 to a peak of 13.35% in 2019. Following this, there is a noticeable decline during 2020 and 2021, reaching 9.79% in the latter year. This reduction may reflect adjustments in market conditions, company risk profile, or capital structure changes during the pandemic period.

Invested Capital

Invested capital exhibits moderate fluctuation over the analyzed period. It begins at 44,409 million US dollars in 2017, slightly decreases in 2018, then reaches a peak of 47,580 million US dollars in 2019. A reduction is observed in 2020, dropping to 44,197 million US dollars, followed by an increase in 2021 to 47,166 million US dollars, nearly returning to the 2019 peak level.

Economic Profit

Economic profit trends closely follow the changes in NOPAT and cost of capital dynamics. Positive economic profit is noted from 2017 through 2019, albeit declining from 860 million to 301 million US dollars, indicating diminishing returns relative to capital costs. A drastic shift occurs in 2020, where economic profit plummets to a highly negative figure of -18,368 million US dollars, reflecting significant value destruction. In 2021, economic profit improves to -2,685 million US dollars but remains negative, suggesting the firm has not fully recovered to generate returns above its cost of capital.

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 Trends

The economic profit demonstrated a significant decline over the reported periods. Starting at a positive 860 million USD in 2017, it dropped sharply to 278 million USD in 2018 and showed a slight improvement to 301 million USD in 2019. However, the trend reversed dramatically in 2020 with a substantial negative economic profit of -18,368 million USD, partially recovering to a negative -2,685 million USD in 2021. This trend indicates severe profitability challenges in the latter years, particularly linked to events affecting 2020.

Invested Capital Trends

Invested capital fluctuated moderately over the time span. Beginning at about 44,409 million USD in 2017, it experienced a slight decrease in 2018 to 43,326 million USD, followed by a rise to 47,580 million USD in 2019. The capital dipped again in 2020 to 44,197 million USD and then increased slightly to 47,166 million USD in 2021. The invested capital levels suggest ongoing substantial asset or investment bases with some variability likely linked to strategic or operational adjustments.

Economic Spread Ratio Trends

The economic spread ratio, which measures the return on invested capital compared to its cost, shows a stark and adverse trajectory. From positive returns of 1.94% in 2017, it dropped to marginally positive levels in 2018 (0.64%) and 2019 (0.63%). The spread then plunged to a negative -41.56% in 2020, indicating returns far below costs, and improved somewhat to -5.69% in 2021, but remained negative. This reflects a significant deterioration in the company’s ability to generate returns above its cost of capital, especially in 2020.

Overall Analysis

Overall, the data depicts a company facing a severe downturn in economic profitability and returns on capital starting in 2020, with invested capital remaining substantial but insufficient to generate positive economic value. This pattern is consistent with extraordinary challenges affecting profitability and returns during this period, with some partial recovery in 2021 yet still not reaching positive economic profit or spread levels.

The financial indicators demonstrate a volatile trend over the five-year period under review. There is clear evidence of a substantial decline in economic profit, which illustrates the company's fluctuating profitability and the impact of external or operational challenges.

Economic Profit

The economic profit exhibited a strong positive value in 2017, peaking at 860 million US dollars. However, this figure sharply declined in 2018 to 278 million and marginally improved to 301 million in 2019. A dramatic reversal occurred in 2020, where economic profit plunged to a significant loss of 18,368 million US dollars, reflecting severe financial difficulties. Although there was some recovery in 2021, with losses narrowing to 2,685 million US dollars, the figure remained negative.

Adjusted Operating Revenue

Adjusted operating revenue showed gradual growth from 41,436 million US dollars in 2017 to 47,094 million US dollars in 2019, indicating steady top-line performance prior to 2020. In 2020, a drastic contraction occurred, with revenue dropping to 17,549 million US dollars, likely a consequence of adverse operational conditions. The subsequent year, 2021, witnessed a rebound to 30,276 million US dollars, demonstrating partial recovery but still below pre-2020 levels.

Economic Profit Margin

The economic profit margin followed a diminishing trend, starting at 2.08% in 2017 and falling to 0.64% by 2019. In 2020, the margin drastically deteriorated to a negative 104.66%, reflecting significant losses relative to revenue. By 2021, the margin improved to negative 8.87%, indicating a partial recovery but still representing a loss-making position from an economic profit perspective.

Overall, the data reflects a considerable impact on profitability and revenue starting in 2020, with signs of recovery in 2021. The sharp downturn in economic profit and margins corresponds with the substantial revenue decline, suggesting that the period under review includes extraordinary disruptions affecting operational efficiency and financial outcomes. The partial recovery in the final year suggests a response to these challenges, although performance had not yet returned to the prior profitable levels.