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 = -3,316
The analysis of economic profit from 2017 to 2021 reveals a consistent inability to generate returns in excess of the cost of capital, as economic profit remained negative throughout the entire period. While the losses were marginal in the early stages, the period was characterized by extreme volatility, culminating in a severe capital erosion in 2020 before a partial recovery began in 2021.
- Net Operating Profit After Taxes (NOPAT) Trends
- Operating performance remained relatively stable and positive between 2017 and 2019, with NOPAT fluctuating between US$ 6,032 million and US$ 6,651 million. A critical inflection point occurred in 2020, where NOPAT collapsed to negative US$ 13,902 million. Although a recovery is evident in 2021 with a return to positive territory at US$ 1,932 million, this figure remains significantly below pre-2020 levels.
- Cost of Capital and Invested Capital Dynamics
- The cost of capital exhibited a gradual increase from 14.59% in 2017 to a peak of 15.49% in 2019, followed by a notable decrease to 11.13% by 2021. Simultaneously, invested capital remained relatively stable, oscillating within a range of US$ 43,326 million to US$ 47,580 million. The relative stability of the invested capital base suggests that the swings in economic profit were driven primarily by operational earnings rather than major shifts in the capital structure.
- Economic Profit Trajectory
- Economic profit demonstrated a progressive deterioration from 2017 to 2019, moving from a near-breakeven loss of US$ 31 million to a loss of US$ 719 million. The deficit expanded drastically in 2020 to US$ 18,957 million, mirroring the collapse in NOPAT. By 2021, the economic profit improved to negative US$ 3,316 million, indicating that while the magnitude of value destruction decreased, the company still failed to meet its required rate of return on invested capital.
In summary, the period was marked by a transition from marginal value destruction to a catastrophic operational failure in 2020, followed by a stabilization phase. The persistence of negative economic profit suggests that the returns generated on invested capital have been insufficient to cover the cost of funding those assets for five consecutive years.
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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 $47,166 million, close to the high point observed in 2019, suggesting efforts to stabilize and restore invested capital after the disruptions of 2020.
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Cost of Capital
Delta Air Lines Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 27,088) | 27,088) | ÷ | 63,583) | = | 0.43 | 0.43 | × | 20.96% | = | 8.93% | ||
| Debt and finance leases3 | 28,736) | 28,736) | ÷ | 63,583) | = | 0.45 | 0.45 | × | 5.12% × (1 – 21.00%) | = | 1.83% | ||
| Operating lease liability4 | 7,759) | 7,759) | ÷ | 63,583) | = | 0.12 | 0.12 | × | 3.81% × (1 – 21.00%) | = | 0.37% | ||
| Total: | 63,583) | 1.00 | 11.13% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ 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 | × | 20.96% | = | 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% | = | 14.19% | ||
| 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 | 14.59% | ||||||||||
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 | (3,316) | (18,957) | (719) | (642) | (31) | |
| 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. | -22.80% | — | — | — | — | |
| 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 × -3,316 ÷ 47,166 = -7.03%
4 Click competitor name to see calculations.
The analysis of economic value added between 2017 and 2021 reveals a consistent period of value destruction, characterized by negative economic profits and a negative economic spread ratio throughout the five-year window.
- Economic Profit Trends
- Economic profit remained negative for the entire duration, indicating that the return on invested capital failed to exceed the cost of capital. A gradual deterioration was observed from 2017 to 2019, with losses increasing from -31 million USD to -719 million USD. A severe contraction occurred in 2020, where economic profit plummeted to -18,957 million USD. While a significant recovery took place in 2021, with losses narrowing to -3,316 million USD, the figure remained substantially below pre-2020 levels.
- Invested Capital Stability
- Invested capital exhibited relative stability, fluctuating within a range of approximately 43 billion to 48 billion USD. The capital base grew from 44,409 million USD in 2017 to 47,580 million USD in 2019, followed by a slight decrease to 44,197 million USD in 2020 and a subsequent rise to 47,166 million USD in 2021. The lack of extreme volatility in the invested capital base suggests that the swings in economic profit were primarily driven by operational performance and external shocks rather than massive changes in capital investment.
- Economic Spread Ratio Analysis
- The economic spread ratio confirms a persistent inability to generate returns above the weighted average cost of capital. The ratio was near equilibrium in 2017 at -0.07%, but shifted negatively to -1.51% by 2019. In 2020, the ratio reached a critical low of -42.89%, highlighting a profound gap between the cost of funding and the actual return on assets. An improvement to -7.03% in 2021 indicates a trend toward stabilization, although the continued negative spread confirms that the company was still eroding economic 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 | (3,316) | (18,957) | (719) | (642) | (31) | |
| 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. | -5.98% | — | — | — | — | |
| 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 × -3,316 ÷ 30,276 = -10.95%
3 Click competitor name to see calculations.
The analysis of economic value added reveals a consistent failure to achieve positive economic profit between 2017 and 2021, indicating that the return on invested capital remained below the required cost of capital throughout the period. The financial trajectory is characterized by a period of moderate decline, a severe collapse in 2020, and a partial recovery in 2021.
- Economic Profit Trends
- Economic profit exhibited a downward trajectory from 2017 to 2019, moving from a marginal loss of -31 million USD to -719 million USD. A critical deterioration occurred in 2020, where losses expanded exponentially to -18,957 million USD. By 2021, there was a significant reduction in losses to -3,316 million USD, though the figure remained substantially negative.
- Adjusted Operating Revenue Performance
- Revenue showed steady growth from 2017 through 2019, peaking at 47,094 million USD. This growth was abruptly reversed in 2020, with revenue falling to 17,549 million USD, a decline of approximately 62.7% from the previous year. The 2021 period showed a recovery to 30,276 million USD, representing a return toward pre-crisis levels but still remaining below the 2019 peak.
- Economic Profit Margin Analysis
- The economic profit margin serves as a volatility indicator for the period. From 2017 to 2019, the margin shifted from a near-neutral -0.07% to -1.53%. In 2020, the margin collapsed to -108.02%, signifying that the economic loss exceeded the total adjusted operating revenue for that year. The margin improved to -10.95% in 2021, reflecting a stabilization of operations and a reduction in the scale of capital erosion.
The correlation between the sharp decline in adjusted operating revenue and the surge in economic losses in 2020 suggests an extreme sensitivity to operational disruptions. While the 2021 data indicates a positive trend in both revenue and margin recovery, the persistent negative economic profit suggests that the company had not yet regained the ability to create value above its cost of capital by the end of the analyzed period.
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