Delta Air Lines Inc. (NYSE:DAL)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes showed an increasing trend from 2017 through 2019, rising from 6,446 million USD to 6,651 million USD. However, in 2020, there was a significant decline, with NOPAT turning negative to -13,902 million USD, reflecting substantial losses during that year. In 2021, the company showed signs of recovery with NOPAT rebounding to 1,932 million USD, though it remained well below pre-2020 levels.

Cost of Capital

The cost of capital exhibited a gradual decline over the five-year period. It started at 12.72% in 2017 and increased slightly in 2018 and 2019 to around 13.43% and 13.49%, respectively, before declining to 10.2% in 2020 and further to 9.88% in 2021. This downward trend in the last two years suggests a reduction in the company's required return rate or cost associated with financing.

Invested Capital

Invested capital varied moderately over the period. Beginning at 44,409 million USD in 2017, it decreased slightly to 43,326 million USD in 2018, then increased to 47,580 million USD in 2019. In 2020, invested capital dropped again to 44,197 million USD but rose back up to 47,166 million USD in 2021. This indicates fluctuating investment levels with an overall stable magnitude near the mid-40,000 million USD range.

Economic Profit

Economic profit, a measure reflecting value creation over the cost of capital, showed positive values in 2017, 2018, and 2019, albeit with a significant decrease from 799 million USD in 2017 to 230 million USD in 2019. In 2020, economic profit turned sharply negative to -18,408 million USD, illustrating a considerable destruction of value coinciding with the large NOPAT losses. Although there was some recovery in 2021, economic profit remained negative at -2,729 million USD, indicating that despite improved profitability, the company had not yet returned to generating economic value over 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.

The financial data over the observed periods reveals significant trends in economic profit, invested capital, and the economic spread ratio.

Economic Profit

Economic profit showed a declining trend, starting from a positive value of 799 million US dollars in 2017 and decreasing sharply to 214 million in 2018 and 230 million in 2019. This was followed by a dramatic downturn with negative values in 2020 and 2021, recording losses of 18,408 million and 2,729 million US dollars respectively. The pronounced negative economic profit in 2020 corresponds to a substantial adverse event impacting company profitability, with a partial recovery in 2021 though still remaining negative.

Invested Capital

Invested capital demonstrated relative stability with minor fluctuations. The value was 44,409 million US dollars in 2017, slightly decreasing to 43,326 million in 2018. It increased again to 47,580 million in 2019 and then slightly declined to 44,197 million in 2020. By 2021, invested capital rose to 47,166 million US dollars. This indicates overall a moderate upward trend in capital invested by the company, suggesting ongoing investment activities despite profitability challenges.

Economic Spread Ratio

The economic spread ratio reflects a similar pattern to economic profit, with a strong decline over the five-year period. Initially, it was positive and moderate at 1.8% in 2017, dropping to around 0.49% in 2018 and 0.48% in 2019. This ratio then fell sharply into negative territory in 2020 (-41.65%) and 2021 (-5.78%), signaling that the company's returns on invested capital were significantly below its cost of capital during these later years, reinforcing the negative economic profit indications.

In summary, the data indicates that while invested capital remained relatively steady with a moderate upward trajectory, economic profitability declined substantially, converting from modest positive figures to significant negative values from 2020 onward. This was accompanied by a drastic deterioration in the economic spread ratio, reflecting operational challenges or adverse market conditions that severely impacted financial performance during these years.

Economic profit

The economic profit exhibited a declining trend over the analyzed period. Starting at $799 million in 2017, it sharply decreased to $214 million in 2018 and remained relatively stable at $230 million in 2019. However, a significant downturn occurred in 2020, with economic profit dropping drastically to a negative value of $-18,408 million, indicating substantial losses. In 2021, there was a partial recovery, with economic profit improving to negative $-2,729 million, though still indicating a loss.

Adjusted operating revenue

Adjusted operating revenue showed an increasing trend from 2017 through 2019, rising from $41,436 million in 2017 to $47,094 million in 2019. However, there was a sharp decline in 2020, with revenues falling to $17,549 million, representing a steep contraction. In 2021, revenues improved significantly to $30,276 million, indicating partial recovery but still remaining below pre-2020 levels.

Economic profit margin

The economic profit margin mirrored the trend in economic profit, starting at a healthy 1.93% in 2017 before declining sharply to 0.48% in 2018 and remaining roughly stable at 0.49% in 2019. A drastic contraction occurred in 2020, with the margin turning deeply negative at -104.9%, reflecting significant economic losses relative to revenue. In 2021, the margin improved to -9.01%, signaling an ongoing recovery but continued negative profitability.

Summary

The data reflects stable but gradually weakening economic profitability and margins through 2019, followed by a severe impact in 2020, likely due to extraordinary external challenges affecting operations. Adjusted operating revenue also declined sharply in 2020, aligning with the reduced economic profit. The partial recovery in 2021 across all measures suggests improvement, yet the company remained below the profitability and revenue levels observed prior to 2020. The persistent negative economic profit margin in 2021 highlights ongoing challenges in achieving positive economic returns.