DAL Refinery Segment

Between mid-September 2023 and mid-November 2023, the refinery completed a turnaround and did not produce any refined products during this time. The turnaround was in accordance with the long-term maintenance plan for the facility to allow for the safe completion of major repairs and upgrades. ######Refinery segment financial information## ######Year Ended December 31,## (in millions, except per gallon data)####2023####2022 Exchange products##$##2,354##$##3,475 Sales of refined products####304####278 Sales to airline segment####1,535####1,976 Third-party refinery sales####3,379####4,977 Operating revenue##$##7,572##$##10,706 Operating income##$##385##$##777 Refinery segment impact on average price per fuel gallon##$##(0.10)##$##(0.23)


DAL Refinery Segment

Refinery revenues decreased in 2023, primarily driven by the decrease in exchange products and third-party refinery sales. These decreases resulted from lower pricing and the turnaround, which was completed between September and November 2023. The refinery operating income decreased in 2023 mainly due to lower pricing and the turnaround.


DAL MD&A - Refinery Segment

A refinery is subject to annual EPA requirements to blend renewable fuels into the gasoline and on-road diesel fuel it produces. A refinery may meet its obligation by blending the necessary volumes of renewable fuels, by purchasing RINs in the open market or through a combination of blending and purchasing RINs. Because Monroe is able to blend only a small amount of renewable fuels, it must purchase the majority of its RINs requirement in the secondary market. Monroe incurred $323 million in RINs compliance costs during 2023, compared to $576 million incurred in 2022. Observable RINs prices declined during 2023 and we acquired RINs assets to satisfy substantially all of our 2023 RINs obligation.


DAL MD&A - Refinery Segment

During 2023, we retired approximately $700 million of our 2021 and 2022 RINs assets to settle our 2021 and 2022 obligations prior to the compliance deadlines.


DAL MD&A - Refinery Segment

For more information regarding the refinery's results, see Note 14 of the Notes to the Consolidated Financial Statements.


DAL Operating Statistics

########Year Ended December 31,#### Consolidated (1)####2023######2022## Revenue passenger miles (in millions)####232,241######195,480## Available seat miles (in millions)####272,033######233,226## Passenger mile yield####21.06##¢####20.57##¢ Passenger revenue per available seat mile ("PRASM")####17.98##¢####17.24##¢ Total revenue per available seat mile ("TRASM")####21.34##¢####21.69##¢ TRASM, adjusted (2)####20.10##¢####19.55##¢ Cost per available seat mile ("CASM")####19.31##¢####20.12##¢ CASM-Ex (2)####13.17##¢####12.87##¢ Passenger load factor####85##%####84##% Fuel gallons consumed (in millions)####3,926######3,412## Average price per fuel gallon (3)##$##2.82####$##3.36## Average price per fuel gallon, adjusted (2)(3)##$##2.83####$##3.36## Approximate full-time equivalent employees, end of period####103,000######95,000##


DAL Operating Statistics

(1)Includes the operations of our regional carriers under capacity purchase agreements. Full-time equivalent employees exclude employees of regional carriers that we do not own.


DAL Operating Statistics

(2)Non-GAAP financial measures are defined and reconciled to TRASM, CASM and average fuel price per gallon, respectively, in "Supplemental Information" below.


DAL Operating Statistics

(3)Includes the impact of refinery segment results and fuel hedge activity.


DAL Financial Condition and Liquidity

As of December 31, 2023, we had $6.8 billion in cash, cash equivalents, short-term investments and aggregate principal amount committed and available to be drawn under our revolving credit facilities ("liquidity"). We expect to meet our liquidity needs for the next twelve months with cash and cash equivalents, short-term investments, restricted cash equivalents and cash flows from operations. We expect to meet our long-term liquidity needs with cash flows from operations and financing arrangements.


DAL Operating Activities

Operating activities in 2023 provided $6.5 billion of cash flow compared to $6.4 billion in 2022. We expect to continue generating cash flows from operations during 2024.


DAL Operating Activities

Our operating cash flow is impacted by the following factors:


DAL Operating Activities

Seasonality of Advance Ticket Sales. We sell tickets for air travel in advance of the customer's travel date. When we receive a cash payment at the time of sale, we record the cash received on advance sales as deferred revenue in air traffic liability. The air traffic liability typically increases during the winter and spring months as advanced ticket sales grow prior to the summer peak travel season and decreases during the summer and fall months.


DAL Operating Activities

Fuel. Fuel expense represented approximately 21% of our total operating expense during 2023. The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations. The average fuel price per gallon decreased in 2023. We expect elevated jet fuel prices in comparison to historical levels to continue during the beginning of 2024 due to current market conditions, further exacerbated by geopolitical events. As capacity increased throughout the year, fuel consumption was higher in 2023 than 2022 as well. We expect fuel consumption to increase in 2024 aligned with capacity, partially offset by improvements in the fuel efficiency of our fleet.


DAL Operating Activities

We expect our commitment to environmental sustainability to depend on increased use of SAF, which is not presently available at scale or at prices competitive to jet fuel. While we do not expect a material adverse effect on our Consolidated Financial Statements in the near-term from the use of SAF, we are unable to predict the financial impact of increased use of SAF on our Consolidated Financial Statements over the longer term as government policies and incentives for, and sufficient third-party investment in, SAF are necessary to make its use in larger quantities commercially and economically feasible.


DAL Operating Activities

Employee Benefit Obligations. We sponsor defined benefit pension plans for eligible employees and retirees. These plans are generally closed to new entrants and are frozen for future benefit accruals. Our funding obligations for these plans are governed by the Employee Retirement Income Security Act ("ERISA") and any applicable legislation. We had no minimum funding requirements in 2023, and have no such requirements in 2024. At the current level of funding, plan assets and investment returns are expected to satisfy a majority of future benefit payments. Estimates of future funding requirements are based on various assumptions and could vary materially from actual funding requirements. Assumptions include, among other things, the actual and projected market performance of assets, statutory requirements and demographic data for participants.


DAL Operating Activities

In addition, we have employee benefit obligations relating primarily to projected future benefit payments from our unfunded postretirement and postemployment plans. See Note 9 of the Notes to the Consolidated Financial Statements for more information on our employee benefit obligations.


DAL Operating Activities

Profit Sharing. Our broad-based employee profit sharing program provides that, for each year in which we have an annual pre-tax profit, as defined by the terms of the program, we will pay a specified portion of that profit to employees. In determining the amount of profit sharing, the program defines profit as pre-tax profit adjusted for profit sharing and certain other items.


DAL Operating Activities

We pay profit sharing annually in February. We paid $563 million in 2023 to our employees in recognition of their contributions toward meeting our financial goals. During the year ended December 31, 2023, we recorded $1.4 billion in profit sharing expense based on 2023 pre-tax profit, which we will pay to employees in February 2024.


DAL MD&A - Financial Condition and Liquidity

Contract Carrier Obligations. We have certain estimated minimum fixed obligations under capacity purchase agreements with third-party regional carriers. These minimum amounts are based on the required minimum levels of flying by the regional carriers under the respective agreements and assumptions regarding the costs associated with such minimum levels of flying. As of December 31, 2023 the total of these minimum amounts was $8.8 billion and range from approximately $1.3 billion to $1.6 billion on an annual basis over the next five years. See Note 10 of the Notes to the Consolidated Financial Statements for more information on our contract carrier obligations.


Operating Lease Obligations. As described further in Note 7 of the Notes to the Consolidated Financial Statements, as of December 31, 2023 we had a total of $9.2 billion of minimum operating lease obligations. These minimum lease payments range from approximately $800 million to $1.0 billion on an annual basis over the next five years.


New York-JFK Airport Expansion. We are enhancing and expanding our facilities at Terminal 4 of JFK to strengthen our competitive position and offer a premium travel experience for customers in New York City. Terminal 4 is operated by JFK International Air Terminal LLC ("IAT"), a private party, under its lease with the Port Authority of New York and New Jersey ("Port Authority"). We have a long-term agreement with IAT to sublease space in Terminal 4 through 2043.


In 2021, the Port Authority approved plans to renovate and expand Terminal 4 in order to facilitate Delta's relocation from Terminal 2 and consolidation of its operations into Terminal 4. The project is adding 10 new gates and other complementary facilities, including an additional Delta Sky Club and a new Delta premium lounge. The project is estimated to cost approximately $1.6 billion and will be funded primarily with bonds issued in 2022 by the New York Transportation Development Corporation ("NYTDC") for which our landlord, IAT, is the obligor. The majority of project costs are being used to expand or modify Delta's leased premises. Construction started in late 2021 and in 2023 we substantially completed a majority of Delta's portion of the project and consolidated all operations to Terminal 4.


Other Obligations. We have certain purchase obligations under which we are required to make minimum payments for goods and services, including, but not limited to, aviation-related, maintenance, insurance, marketing, technology, sponsorships and other third-party services and products. As of December 31, 2023, we had approximately $9.2 billion of such obligations, which range from approximately $300 million to $1.1 billion on an annual basis over the next five years.


DAL Investing Activities

Short-Term Investments. In 2023, we redeemed a net of $2.2 billion in short-term investments. See Note 1 and Note 3 of the Notes to the Consolidated Financial Statements for further information on these investments.


DAL Investing Activities

Capital Expenditures. Our capital expenditures (i.e., property and equipment additions in our Consolidated Statements of Cash Flows ("cash flows statement")) were $5.3 billion and $6.4 billion in 2023 and 2022, respectively. Our capital expenditures are primarily related to the purchases of aircraft, airport construction projects, fleet modifications and technology enhancements.


DAL Investing Activities

We have committed to future aircraft purchases and have obtained, but are under no obligation to use, long-term financing commitments for a substantial portion of the purchase price of the aircraft. Excluding the New York-LaGuardia airport project discussed below, our expected 2024 capital spend of approximately $5 billion, which may vary depending on financing decisions, will be primarily for aircraft, including deliveries and advance deposit payments, as well as fleet modifications and technology enhancements. As described in Part I, Item 1. "Business - Environmental Sustainability," aircraft fleet renewal is an important component of our environmental sustainability strategy and the path to achievement of our ambitious climate goals, which will continue to require extensive capital investment in future periods. See Note 10 of the Notes to the Consolidated Financial Statements for additional information regarding our aircraft purchase commitments, which totaled approximately $17.5 billion as of December 31, 2023.


DAL Investing Activities

New York-LaGuardia Redevelopment. As part of the terminal redevelopment project at LaGuardia Airport, we are partnering with the Port Authority to replace Terminals C and D with a new state-of-the-art terminal facility consisting of 37 gates across four concourses connected to a central headhouse. The completed terminal redevelopment features a new, larger Delta Sky Club, wider concourses, more gate seating and nearly double the amount of concessions space than the prior terminals. The completed facility also offers direct access between the parking garage and terminal and improved roadways and drop-off/pick-up areas. Construction is underway and is being phased to limit passenger inconvenience.


DAL Investing Activities

We have opened Concourse E, Concourse G, the headhouse (including the Delta Sky Club), the terminal roadways and portions of Concourse D and Concourse F. Due to an acceleration effort that commenced in 2020, substantial completion is expected by the end of 2024.


In connection with the redevelopment, during 2017, we entered into an amended and restated terminal lease with the Port Authority with a term through 2050. Pursuant to the lease agreement, as amended to date, we (1) are funding (through debt issuance and existing cash) and undertaking the design, management and construction of the terminal and certain off-premises supporting facilities, (2) are receiving a Port Authority contribution of approximately $500 million to facilitate construction of the terminal and other supporting infrastructure, (3) will be responsible for all operations and maintenance during the term of the lease and (4) will have preferential rights to all gates in the terminal subject to Port Authority requirements with respect to accommodation of designated carriers.


The project is expected to cost $4.3 billion and the total amount spent to date is approximately $3.7 billion. We currently expect our net project cost to be approximately $3.8 billion and we bear the risks of project construction, including any potential cost over-runs. We entered into loan agreements to fund a portion of the construction, which are recorded on our Consolidated Balance Sheets ("balance sheets") as debt with the proceeds reflected as restricted cash. Using funding primarily provided by these arrangements, we spent approximately $500 million, $650 million and $950 million during 2023, 2022 and 2021, respectively. We expect to spend approximately $500 million during 2024. See Note 6 of the Notes to the Consolidated Financial Statements for additional information on the debt related to the redevelopment project, including the $878 million of NYTDC Special Facilities Revenue Bonds, Series 2023 issued during 2023.


Los Angeles International Airport ("LAX") Construction. As part of the terminal redevelopment project at LAX, we are modernizing, upgrading, and providing post-security connection to Terminals 2 and 3. We announced this project and executed a modified lease agreement during 2016 with the City of Los Angeles (the "City"), which owns and operates LAX. This project includes a new centralized ticketing and arrival hall, a new security checkpoint, core infrastructure to support the City's planned airport people mover, ramp improvements and a post-security connector to the north side of the Tom Bradley International Terminal.


The project is expected to cost approximately $2.4 billion. A substantial majority of the project costs are being funded through the Regional Airports Improvement Corporation ("RAIC"), a California public benefit corporation, using a revolving credit facility provided by a group of lenders. The credit facility was executed in 2017 and we have guaranteed the obligations of the RAIC under the credit facility. During 2023, the revolving credit facility agreement was amended and the revolver capacity was reduced to $626 million. Loans made under the credit facility are being repaid with the proceeds from the City’s purchase of completed project assets. Under the lease agreement and subsequent project component approvals by the City's Board of Airport Commissioners, the City has appropriated to date approximately $1.8 billion to purchase completed project assets, representing the maximum allowable reimbursement by the City. Costs incurred in excess of the $1.8 billion maximum will not be reimbursed by the City. We currently expect our net project costs to be approximately $600 million, of which approximately $350 million has been reflected as investing activities and approximately $200 million as operating activities in our cash flows statement since the project started in 2017.


In 2020, we enhanced the project’s scope to include a more customer-friendly design of Terminal 3, an expanded Delta Sky Club and baggage system upgrades designed to increase the terminals’ operational efficiency going forward. In 2023, we substantially completed all construction for this project.


Wheels Up. We announced an expanded strategic partnership with Wheels Up, which included an agreement for a new credit facility to Wheels Up. This new credit facility is comprised of a $390 million term loan, of which we contributed $150 million and several other lenders contributed the remaining $240 million, and a $100 million liquidity facility that we made available to Wheels Up in the event the company's liquidity falls below $100 million. Our $150 million cash contribution was reflected as an investing outflow in our cash flows statement.


DAL Financing Activities

Debt and Finance Leases. In 2023, we had cash outflows of approximately $4.1 billion related to repayments of our debt and finance leases, including early repayment activities of $1.4 billion in principal for the repurchase of various secured and unsecured notes and the SkyMiles Term Loan through repurchases on the open market and $585 million in early principal repayments on various notes secured by aircraft. We will continue to seek opportunities to pre-pay our debt, in addition to periodic amortization payments and scheduled maturities, during 2024 and beyond.


DAL Financing Activities

In the March 2023 quarter, both Fitch and S&P credit rating agencies upgraded our debt rating outlooks to stable and positive, respectively. In the September 2023 quarter, S&P upgraded our credit rating to BB+.


DAL Financing Activities

The principal amount of our debt and finance leases was $20.1 billion at December 31, 2023.


Future Debt Obligations. As described further in Note 6 of the Notes to the Consolidated Financial Statements, as of December 31, 2023, scheduled maturities of our debt in 2024 and 2025 were $2.6 billion and $2.0 billion, respectively, with maturities from 2026 through 2028 ranging between $1.9 billion and $2.6 billion annually. As of December 31, 2023, scheduled maturities after 2028 aggregate to $7.2 billion. In addition, we are obligated to make periodic interest payments at fixed and variable rates, depending on the terms of the applicable debt agreements. Based on applicable interest rates and scheduled debt maturities as of December 31, 2023, these interest obligations total approximately $4.0 billion and range from approximately $300 million to $800 million on an annual basis over the next five years. We will continue to seek opportunities to pre-pay our debt, in addition to periodic amortization payments and scheduled maturities, during 2024 and beyond.


Finance Lease Obligations. As described further in Note 7 of the Notes to the Consolidated Financial Statements, as of December 31, 2023 we had a total of $1.6 billion of minimum finance lease obligations. These minimum lease payments range from approximately $200 million to $400 million on an annual basis over the next five years.


Capital Returns to Shareholders. During 2023, we re-instated our quarterly dividend program with $0.10 per share payments in both the September 2023 and December 2023 quarters, resulting in total dividend payments during the year ended December 31, 2023 of $128 million.


On February 8, 2024, the Board of Directors approved and we will pay a quarterly dividend of $0.10 per share on March 18, 2024 to shareholders of record as of February 26, 2024.


Undrawn Lines of Credit. As of December 31, 2023 we had approximately $2.9 billion undrawn and available under our revolving credit facilities. In addition, we had $450 million of outstanding letters of credit as of December 31, 2023 that did not affect the availability under our revolvers.


Covenants. We were in compliance with the covenants in our debt agreements at December 31, 2023. See Note 6 of the Notes to the Consolidated Financial Statements for more information on the covenants in our debt agreements.


DAL Critical Accounting Estimates

Our critical accounting estimates are those estimates made in accordance with generally accepted accounting principles in the U.S. ("GAAP") that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our consolidated results of operations or financial condition. Accordingly, the actual results may differ materially from these estimates. For a discussion of our significant accounting policies, see Note 1 of the Notes to the Consolidated Financial Statements, unless otherwise noted below.


DAL Loyalty Program

Our SkyMiles loyalty program generates customer loyalty by rewarding customers with incentives to travel on Delta. This program allows customers to earn miles by flying on Delta, Delta Connection carriers and other airlines that participate in the loyalty program. When traveling, customers earn miles primarily based on the passenger's loyalty program status, fare class and ticket price. Customers can also earn miles through participating companies. Miles are redeemable by customers in future periods for air travel on Delta and other participating airlines, access to Delta Sky Club and other program awards. To facilitate transactions with participating companies, we sell miles to non-airline businesses and other airlines.


DAL Loyalty Program

The loyalty program includes two types of transactions that are considered revenue arrangements with multiple performance obligations (1) passenger ticket sales earning miles and (2) sale of miles to participating companies.


DAL Loyalty Program

Passenger Ticket Sales Earning Miles. Passenger ticket sales earning miles provide customers with (1) miles earned and (2) air transportation, which are each considered performance obligations. We value each performance obligation on a standalone basis. To value the miles earned, we consider the quantitative value a passenger receives by redeeming miles for a ticket rather than paying cash, which is referred to as equivalent ticket value ("ETV"). Our estimate of ETV is adjusted for miles that are not likely to be redeemed ("mileage breakage"). We use statistical models to estimate mileage breakage based on historical redemption patterns. A change in assumptions regarding the redemption activity for miles or the estimated fair value of miles expected to be redeemed could have a material impact on our revenue in the year in which the change occurs and in future years. We recognize mileage breakage proportionally during the period in which the remaining miles are actually redeemed.


DAL Loyalty Program

At December 31, 2023, the aggregate deferred revenue balance associated with the SkyMiles program was $8.4 billion. A hypothetical 10% change in the number of outstanding miles estimated to be redeemed would result in an impact of less than 1% of total operating revenue recognized for the year ended December 31, 2023.


DAL Loyalty Program

We defer revenue for the miles when earned and recognize loyalty travel awards in passenger revenue as the miles are redeemed and transportation is provided. We record the air transportation portion of the passenger ticket sales in air traffic liability and recognize passenger revenue when we provide transportation or if the ticket goes unused. A hypothetical 10% increase in our estimate of the ETV of a mile would have decreased total operating revenue by less than 1% for the year ended December 31, 2023, as a result of an increase in the amount of revenue deferred associated with the miles earned.


DAL Loyalty Program

Sale of Miles to Participating Companies. Customers earn miles based on their spending with participating companies, such as credit card, retail, ridesharing, car rental and hotel companies, with which we have marketing agreements to sell miles. Our contracts to sell miles under these marketing agreements have multiple performance obligations. Payments are typically due to us monthly based on the volume of miles sold during the period, and the initial terms of our marketing contracts are from one to thirteen years. During the years ended December 31, 2023, 2022 and 2021, total cash sales from marketing agreements related to our loyalty program were $6.9 billion, $5.7 billion and $4.1 billion, respectively, which are allocated to travel and other performance obligations, as discussed below.


DAL Loyalty Program

Our most significant contract to sell miles relates to our co-brand credit card relationship with American Express. Our agreements with American Express provide for joint marketing, grant certain benefits to Delta-American Express co-branded credit card holders ("cardholders") and American Express Membership Rewards program participants, and allow American Express to market its services or products using our customer database. Cardholders earn miles for making purchases using co-branded cards, and certain cardholders may also check their first bag for free, are granted discounted access to Delta Sky Club lounges and receive priority boarding and other benefits while traveling on Delta. Additionally, participants in the American Express Membership Rewards program may exchange their points for miles under the loyalty program. We sell miles at agreed-upon rates to American Express which are then provided to their customers under the co-brand credit card program and the Membership Rewards program.


DAL MD&A - Critical Accounting Estimates

We account for marketing agreements, including those with American Express, by allocating the consideration to the individual products and services delivered. We allocate the value based on the relative selling prices of those products and services, which generally consist of award travel, priority boarding, baggage fee waivers, lounge access and the use of our brand. We determine our best estimate of the selling prices by using a discounted cash flow analysis using multiple inputs and assumptions, including (1) the expected number of miles awarded and number of miles redeemed, (2) ETV for the award travel obligation adjusted for mileage breakage, (3) published rates on our website for baggage fees, discounted access to Delta Sky Club lounges and other benefits while traveling on Delta, (4) brand value (using estimated royalties generated from the use of our brand) and (5) volume discounts provided to certain partners.


We defer the amount allocated to award travel as part of loyalty program deferred revenue and recognize loyalty travel awards in passenger revenue as the miles are redeemed and transportation is provided. Revenue allocated to services performed in conjunction with a passenger’s flight, such as baggage fee waivers, is recognized as travel-related services in passenger revenue when the related service is performed. Revenue allocated to Delta Sky Club lounge access is recognized as miscellaneous in other revenue as access is provided. Revenue allocated to the remaining performance obligations, primarily brand value, is recorded as loyalty program in other revenue as miles are delivered.


The timing of mile redemptions can vary widely; however, the majority of new miles have historically been redeemed within two years of being earned. The loyalty program deferred revenue classified as a current liability represents our estimate of revenue expected to be recognized in the next twelve months based on projected redemptions, while the balance classified as a noncurrent liability represents our estimate of revenue expected to be recognized beyond twelve months.


For additional information on our significant accounting policies related to the loyalty program, see Note 2 of the Notes to the Consolidated Financial Statements.


DAL Passenger Ticket Sales

We defer sales of passenger tickets to be flown by us or that we sell on behalf of other airlines in our air traffic liability. Passenger revenue is recognized when we provide transportation. For tickets that we sell on behalf of other airlines, we reduce the air traffic liability when consideration is remitted to those airlines. The air traffic liability primarily includes sales of passenger tickets with scheduled departure dates in the future and travel credits, which can be applied as payment toward the cost of a ticket. We periodically evaluate the estimated air traffic liability and may record adjustments in our Consolidated Statement of Operations ("income statement"). These adjustments relate primarily to tickets that expire unused ("ticket breakage"), refunds, exchanges, transactions with other airlines and other items for which final settlement occurs in periods subsequent to the sale of the related tickets at amounts other than the original sales price.


DAL Passenger Ticket Sales

We estimate the value of ticket breakage and recognize revenue at the scheduled flight date. Our ticket breakage estimates are primarily based on historical experience, ticket contract terms and customers’ travel behavior. At December 31, 2023, the aggregate air traffic liability balance was $7.0 billion. A hypothetical 10% change in the amount of tickets estimated to expire unused would result in an impact of less than 1% of total operating revenue for the year ended December 31, 2023.


DAL Passenger Ticket Sales

For additional information on our significant accounting policies related to passenger ticket sales, see Note 2 of the Notes to the Consolidated Financial Statements.


DAL Goodwill and Indefinite-Lived Intangible Assets

We apply a fair value-based impairment test to the carrying value of goodwill and indefinite-lived intangible assets on an annual basis (as of October 1) and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. We assess the value of our goodwill and indefinite-lived assets under either a qualitative or quantitative approach. Under a qualitative approach, we consider various market factors, including certain of the key assumptions listed below. We analyze these factors to determine if events and circumstances have affected the fair value of goodwill and indefinite-lived intangible assets. If we determine that it is more likely than not that the asset may be impaired, we use the quantitative approach to assess the asset's fair value and the amount of the impairment. Under a quantitative approach, we calculate the fair value of the asset incorporating the key assumptions listed below into our calculation.


When we evaluate goodwill for impairment using a quantitative approach, we estimate the fair value of the reporting unit by considering both comparable public company multiples (a market approach) and projected discounted future cash flows (an income approach). When we perform a quantitative impairment assessment of our indefinite-lived intangible assets, fair value is estimated based on (1) recent market transactions, where available, (2) the royalty method for the Delta tradename (which assumes hypothetical royalties generated from using our tradename) or (3) projected discounted future cash flows (an income approach).


Key Assumptions. The key assumptions in our impairment tests include (1) forecasted revenues, expenses and cash flows, (2) current discount rates, (3) observable market transactions and (4) anticipated changes to the regulatory environment (e.g., changes in slot access and/or availability, additional Open Skies agreements or changes to antitrust approvals). These assumptions are consistent with those that hypothetical market participants would use. Because we are required to make estimates and assumptions when evaluating goodwill and indefinite-lived intangible assets for impairment, actual transaction amounts may differ materially from these estimates. In addition, when performing a qualitative valuation, we consider the amount by which the intangible assets' fair values exceeded their respective carrying values in the most recent fair value measurements calculated using a quantitative approach.


Changes in certain events and circumstances could result in impairment or a change from indefinite-lived to definite-lived. Factors which could cause impairment include, but are not limited to (1) negative trends in our market capitalization, (2) reduced profitability resulting from lower passenger mile yields or higher input costs (primarily related to fuel and employees), (3) lower passenger demand as a result of weakened U.S. and global economies or other factors, (4) interruption to our operations due to a prolonged employee strike, terrorist attack or other reasons, (5) changes to the regulatory environment (e.g., changes in slot access and/or availability, additional Open Skies agreements or changes to antitrust approvals), (6) competitive changes by other airlines and (7) strategic changes to our operations leading to diminished utilization of the intangible assets.


Goodwill. Our goodwill balance, which is related to the airline segment, was $9.8 billion at December 31, 2023.


Identifiable Intangible Assets. Our identifiable intangible assets, which are related to the airline segment, had a net carrying amount of $6.0 billion at December 31, 2023, of which $5.9 billion related to indefinite-lived intangible assets. Indefinite-lived assets are not amortized and consist of routes, slots, the Delta tradename and assets related to alliances and collaborative arrangements. Definite-lived assets consist primarily of marketing and maintenance service agreements.


In 2023, we performed quantitative assessments of our goodwill and indefinite-lived intangible assets, including applicable factors noted in "Key Assumptions" above, and determined that there was no indication that the assets were impaired as the fair value of each asset exceeded its carrying value by at least 20%. Assumptions are sensitive to uncertainty about future events, the macroeconomic environment and other market-based risk factors. A change in key assumptions such as the discount rate or projected future revenues, expenses and cash flows could materially affect the determination of fair values. Management evaluated estimates and assumptions used in the valuations, considering market and industry-specific conditions.


For additional information on our goodwill and indefinite-lived intangible assets' significant accounting policies and the related fair values and book values, see Note 5 of the Notes to the Consolidated Financial Statements.


DAL Defined Benefit Pension Plans

We sponsor defined benefit pension plans for eligible employees and retirees. These plans are generally closed to new entrants and frozen for future benefit accruals. As of December 31, 2023, the unfunded benefit obligation for these plans recorded on our balance sheets was $145 million, which is the net of our benefit obligation of $15.9 billion and plan assets of $15.8 billion. We had no minimum funding requirements in 2023, and have no such requirements in 2024. The most critical assumptions impacting our defined benefit pension plan obligations, plan assets and net periodic cost/(benefit) are the discount rate, the expected long-term rate of return on plan assets and life expectancy of plan participants.


DAL Defined Benefit Pension Plans

Discount Rate. We determine our discount rate on our measurement date primarily by reference to annualized rates earned on high-quality fixed income investments and yield-to-maturity analyses specific to our estimated future benefit payments for each plan. We used a weighted average discount rate to value the obligations of 5.31% and 5.62% at December 31, 2023 and 2022, respectively.


Expected Long-Term Rate of Return. Our expected long-term rate of return on plan assets is based primarily on plan-specific investment studies using historical market return and volatility data. Modest excess return expectations versus some public market indices are incorporated into the return projections based on the actively managed structure of the investment programs and their records of achieving such returns historically. We also expect to receive a premium for investing in less liquid private markets. We review our rate of return on plan assets assumptions annually.


The investment strategy for our defined benefit pension plan assets is to earn a long-term return that meets or exceeds our annualized return target while taking an acceptable level of risk and maintaining sufficient liquidity to pay current benefits and other cash obligations of the plan. This is achieved by investing in a globally diversified mix of public and private equity, fixed income, real assets, hedge funds and other assets and instruments. The expected long-term rate of return on our defined benefit pension plan assets is 7.00%.


The impact of a 0.50% change in weighted average discount rate and 1.00% change in expected long-term rate of return on assets are shown in the table below: Benefit plan effects of change in assumptions used############ Change in Assumption####Effect on 2024 Pension Cost/(Benefit)######Effect on Accrued Pension Liability at December 31, 2023## 0.50% decrease in weighted average discount rate##$##(5)##million##$##742##million 0.50% increase in weighted average discount rate##$##1##million##$##(685)##million 1.00% decrease in expected long-term rate of return on assets##$##150##million##$##—## 1.00% increase in expected long-term rate of return on assets##$##(150)##million##$##—##


Life Expectancy. Changes in life expectancy may significantly impact our benefit obligations and future net periodic cost/(benefit). Each year we review information published by the Society of Actuaries and other publicly available information to develop our best estimate of life expectancy for purposes of measuring pension and other postretirement and postemployment benefit obligations.


Funding. Our funding obligations for qualified defined benefit plans are governed by ERISA and any applicable legislation. Under the Pension Protection Act of 2006, we elected alternative funding rules so that the unfunded liability for a frozen defined benefit plan may be amortized over a fixed 17-year period and is calculated using an 8.85% discount rate until the 17-year period expires for all frozen defined benefit plans by the end of 2024. Upon expiration, under legislation passed in 2021, any required funding would be amortized over a rolling 15-year period and calculated using a discount rate of no less than 4.75% through 2030.


While this recent legislation makes our funding obligations for these plans more predictable, factors outside our control continue to have an impact on the funding requirements. Estimates of future funding requirements are based on various assumptions and can vary materially from actual funding requirements. Assumptions include, among other things, the actual and projected market performance of assets, statutory requirements and demographic data for participants.


Investments Valued at Net Asset Value ("NAV") Per Share. On an annual basis we assess the potential for adjustments to the fair value of all investments. These investments valued using NAV as a practical expedient are typically valued on a monthly or quarterly basis by third-party administrators, valuation agents or fund managers with an annual audit performed by an independent third-party, but certain of these investments have a lag in the availability of data. We solicit valuation updates from the investment fund managers and use their information and corroborating data from public markets to determine any needed fair value adjustments.


For additional information on our significant accounting policies related to defined benefit pension plans, see Note 9 of the Notes to the Consolidated Financial Statements.


DAL Standards Effective in Future Years

Fair Value of Equity Investments. In June 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions." Under this standard, a contractual restriction on the sale of an equity security is not considered in measuring the security's fair value. The standard also requires certain disclosures for equity securities that are subject to contractual restrictions. The ASU becomes effective January 1, 2024, however we early adopted this standard as of December 31, 2023. The new standard does not impact the valuation of our equity investments, but we have included the newly required disclosures related to the contractual sale restrictions associated with our investment in Wheels Up. See Note 4 of the Notes to the Consolidated Financial Statements for additional details.


DAL Standards Effective in Future Years

Segment Reporting. In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." This standard requires disclosure of significant segment expenses and other segment items by reportable segment. This ASU becomes effective for annual periods beginning in 2024 and interim periods in 2025. We are assessing the impact of this ASU and upon adoption expect that any impact would be limited to additional segment expense disclosures in the footnotes to our Consolidated Financial Statements.


DAL Standards Effective in Future Years

Income Taxes. In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." This standard enhances disclosures related to income taxes, including the rate reconciliation and information on income taxes paid. This ASU becomes effective January 1, 2025. We are assessing the impact of this ASU and upon adoption may be required to include certain additional disclosures in the footnotes to our Consolidated Financial Statements.


DAL Supplemental Information

We sometimes use information ("non-GAAP financial measures") that is derived from the Consolidated Financial Statements, but that is not presented in accordance with GAAP. Under the U.S. Securities and Exchange Commission rules, non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results.


DAL Supplemental Information

Included below are reconciliations of non-GAAP measures used within this Form 10-K to the most directly comparable GAAP financial measures. Reconciliations below may not calculate exactly due to rounding. These reconciliations include certain adjustments to GAAP measures to provide comparability between the reported periods, if applicable, as indicated below: •MTM adjustments and settlements on hedges. Mark-to-market ("MTM") adjustments are defined as fair value changes recorded in periods other than the settlement period. Such fair value changes are not necessarily indicative of the actual settlement value of the underlying hedge in the contract settlement period, and therefore we remove this impact to allow investors to better understand and analyze our core performance. Settlements represent cash received or paid on hedge contracts settled during the applicable period. •One-time pilot agreement expenses. During 2023, Delta pilots ratified a new four-year Pilot Working Agreement effective January 1, 2023. The agreement includes a provision for a one-time payment made upon ratification in the March 2023 quarter of $735 million. Additionally, we recorded adjustments to other benefit-related items of approximately $130 million. Adjusting for these expenses allows investors to better understand and analyze our core cost performance. •Restructuring charges. During 2020, we recorded restructuring charges for items such as fleet impairments and voluntary early retirement and separation programs following strategic business decisions in response to the COVID-19 pandemic. During 2022, we recognized adjustments to certain of those restructuring charges, representing changes in our estimates. •Third-party refinery sales. Refinery sales to third parties, and related expenses, are not related to our airline segment. Excluding these sales therefore provides a more meaningful comparison of our airline operations to the rest of the airline industry. •Aircraft fuel and related taxes. The volatility in fuel prices impacts the comparability of year-over-year financial performance. The adjustment for aircraft fuel and related taxes allows investors to better understand and analyze our non-fuel costs and year-over-year financial performance. •Profit sharing. We adjust for profit sharing because this adjustment allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry. Operating income, adjusted reconciliation######## ######Year Ended December 31,## (in millions)####2023####2022 Operating income##$##5,521##$##3,661 Adjusted for:######## MTM adjustments and settlements on hedges####(52)####29 One-time pilot agreement expenses####864####— Restructuring charges####—####(124) Operating income, adjusted##$##6,334##$##3,566


DAL MD&A - Supplemental Information

####Total revenue, adjusted reconciliation#### ######Year Ended December 31,## (in millions)####2023####2022 Total revenue##$##58,048##$##50,582 Adjusted for:######## Third-party refinery sales####(3,379)####(4,977) Total revenue, adjusted##$##54,669##$##45,605 Operating expense, adjusted reconciliation######## ######Year Ended December 31,## (in millions)####2023####2022 Operating expense##$##52,527##$##46,921 Adjusted for:######## Third-party refinery sales####(3,379)####(4,977) MTM adjustments and settlements on hedges####52####(29) One-time pilot agreement charges####(864)####— Restructuring charges####—####124 Operating expense, adjusted##$##48,335##$##42,039 ##########Fuel expense, adjusted and Average fuel price per gallon, adjusted reconciliations## ############ ######Year Ended December 31,######Year Ended December 31, (in millions, except per gallon data)####2023####2022#### Total fuel expense##$##11,069##$##11,482#### Adjusted for:############ MTM adjustments and settlements on hedges####52####(29)#### Total fuel expense, adjusted##$##11,121##$##11,453#### TRASM, adjusted reconciliation########## ######Year Ended December 31,#### (in cents)##2023######2022## TRASM##21.34##¢####21.69##¢ Adjusted for:########## Third-party refinery sales##(1.24)######(2.13)## TRASM, adjusted##20.10##¢####19.55##¢ CASM-Ex reconciliation########## ######Year Ended December 31,#### (in cents)##2023######2022## CASM##19.31##¢####20.12##¢ Adjusted for:########## Third-party refinery sales##(1.24)######(2.13)## Aircraft fuel and related taxes##(4.07)######(4.92)## Profit sharing##(0.51)######(0.24)## One-time pilot agreement expenses##(0.32)######—## Restructuring charges##—######0.05## CASM-Ex##13.17##¢####12.87##¢


DAL Free Cash Flow

The following table shows a reconciliation of net cash provided by operating activities (a GAAP measure) to free cash flow (a non-GAAP financial measure). We present free cash flow because management believes this metric is helpful to investors to evaluate the company's ability to generate cash that is available for use for debt service or general corporate initiatives. Adjustments include: •Net redemptions of short-term investments. Net redemptions of short-term investments represent the net purchase and sale activity of investments and marketable securities in the period, including gains and losses. We adjust for this activity to provide investors a better understanding of the company's free cash flow generated by our operations. •Strategic investments and related. Cash flows related to our investments in and related transactions with other airlines are included in our GAAP investing activities. We adjust for this activity because it provides a more meaningful comparison to our airline industry peers. •Net cash flows related to certain airport construction projects and other. Cash flows related to certain airport construction projects are included in our GAAP operating activities and capital expenditures. We have adjusted for these items because management believes investors should be informed that a portion of these capital expenditures from airport construction projects are either reimbursed by a third-party or funded with restricted cash specific to these projects. •Financed aircraft acquisitions. This adjustment reflects aircraft deliveries that are leased as capital expenditures. The adjustment is based on their original contractual purchase price or an estimate of the aircraft's fair value and provides a more meaningful view of our investing activities. •Pilot agreement payment. In the March 2023 quarter, Delta pilots ratified a new four-year Pilot Working Agreement effective January 1, 2023. The agreement includes a provision for a one-time payment made upon ratification in the March 2023 quarter of $735 million. Adjusting for this item provides investors a better understanding of our recurring free cash flow generated by our operations. Free cash flow reconciliation#### ####Year Ended December 31, (in millions)####2023 Net cash provided by operating activities##$##6,464 Net cash used in investing activities####(3,148) Adjusted for:#### Net redemptions of short-term investments####(2,235) Strategic investments and related####152 Net cash flows related to certain airport construction projects and other####496 Financed aircraft acquisitions####(461) Pilot agreement payment####735 Free cash flow##$##2,003


DAL Glossary of Defined Terms

ASM - Available Seat Mile. A measure of capacity. ASMs equal the total number of seats available for transporting passengers during a reporting period multiplied by the total number of miles flown during that period.


DAL Glossary of Defined Terms

CASM - (Total Operating) Cost per Available Seat Mile. The amount of operating cost incurred per ASM during a reporting period. CASM is also referred to as "unit cost."


DAL Glossary of Defined Terms

CASM-Ex - The amount of operating cost incurred per ASM during a reporting period, adjusted for the items shown above in "Supplemental Information."


DAL Glossary of Defined Terms

Free Cash Flow - A measure of net cash from operating and investing activities, adjusted for items shown above in "Supplemental Information." Represents the cash available for use for debt service or general corporate initiatives.


DAL Glossary of Defined Terms

Liquidity - Includes our cash and cash-like assets, including cash equivalents and short-term investments, as well as aggregate principal amount committed and available to be drawn under our revolving credit facilities.


DAL Glossary of Defined Terms

Load Factor - A measure of utilized available seating capacity calculated by dividing RPMs by ASMs for a reporting period.


DAL Glossary of Defined Terms

Passenger Mile Yield or Yield - The amount of passenger revenue earned per RPM during a reporting period.


DAL Glossary of Defined Terms

PRASM - Passenger Revenue per ASM. The amount of passenger revenue earned per ASM during a reporting period. PRASM is also referred to as "passenger unit revenue."


DAL Glossary of Defined Terms

RPM - Revenue Passenger Mile. One revenue-paying passenger transported one mile is one RPM. RPMs equal the number of revenue passengers during a reporting period multiplied by the number of miles flown by those passengers during that period. RPMs are also referred to as "traffic."


DAL Glossary of Defined Terms

TRASM - Total Revenue per ASM. The amount of total revenue earned per ASM during a reporting period.


DAL Glossary of Defined Terms

TRASM, adjusted - The amount of total revenue earned per ASM during a reporting period, adjusted for the item shown above in "Supplemental Information."


DAL QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have market risk exposure related to fuel prices, interest rates, foreign currency exchange rates and changes in the market value of equity investments. Market risk is the potential negative impact of adverse changes in these prices or rates on our Consolidated Financial Statements. In an effort to manage our exposure to these risks, we may enter into derivative contracts and may adjust our derivative portfolio as market conditions change. See Note 3 of the Notes to the Consolidated Financial Statements for further information on our derivative contracts. We expect adjustments to the fair value of financial instruments to result in ongoing volatility in earnings and stockholders' equity.


The following sensitivity analyses do not consider the effects of a change in demand for air travel, the economy as a whole or actions we may take to seek to mitigate our exposure to a particular risk. For these and other reasons, the actual results of changes in these prices or rates may differ materially from the following hypothetical results.


DAL Fuel Price Risk

Changes in fuel prices materially impact our results of operations. A one cent increase in the cost of jet fuel per gallon would result in approximately $40 million of additional annual fuel expense based on annual consumption of approximately four billion gallons of jet fuel. Our derivative contracts to hedge the financial risk from changing fuel prices are related to Monroe’s inventory.


DAL Interest Rate Risk

Our exposure to market risk from adverse changes in interest rates is primarily associated with our debt and lease obligations. Market risk associated with our fixed-rate debt relates to the potential reduction in fair value from an increase in interest rates. Market risk associated with our variable-rate debt and variable-rate leases relates to the potential negative impact to future earnings from an increase in interest rates.


DAL Interest Rate Risk

At December 31, 2023, we had $16.8 billion of fixed-rate debt, $1.9 billion of variable-rate debt and $583 million of variable-rate leases. The rates used in our variable-rate debt are based on SOFR, or another index rate, which in certain cases is subject to a floor. At December 31, 2023 we no longer had LIBOR-based debt or finance leases. An increase of 100 basis points in average annual interest rates would have decreased the estimated fair value of our fixed-rate debt by $716 million at December 31, 2023 and would have increased the annual interest expense on our variable-rate debt and variable-rate leases by $25 million.


DAL Foreign Currency Exchange Risk

We are subject to foreign currency exchange rate risk because we have revenue, expense and equity investments denominated in foreign currencies. To manage exchange rate risk, we execute both our international revenue and expense transactions in the same foreign currency to the extent practicable. From time to time, we may also enter into foreign currency option and forward contracts.


DAL Foreign Currency Exchange Risk

At December 31, 2023 we had no open foreign currency options or forward contracts.


DAL Equity Investment Risk

We own equity investments in a number of airlines and airline service companies, which are subject to equity price risk. We often hold our equity securities for long periods and short-term price volatility has occurred in the past and will occur in the future, impacting the volatility of our financial results. During 2023, we recorded a net gain of $1.3 billion related to the valuation of our fair value investments. As of December 31, 2023, we have long-term investments recorded at fair value of $2.9 billion and, therefore, a 10% change in the fair value of these investments would have an approximately $290 million impact on our financial results. See Note 3 and Note 4 of the Notes to the Consolidated Financial Statements for further information on our investments.


DAL INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

##Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)##56 Consolidated Balance Sheets - December 31, 2023 and 2022##58 Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021##59 Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021##60 Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021##61 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2023, 2022 and 2021##62


DAL REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Delta Air Lines, Inc.


DAL Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Delta Air Lines, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, cash flows, and stockholders' equity for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.


DAL Opinion on the Financial Statements

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 12, 2024 expressed an unqualified opinion thereon.


DAL Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


DAL Basis for Opinion

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


DAL Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.


DAL Critical Audit Matters

Employee Benefit Plans - Net Asset Value Per Share (NAV) Asset Valuation


DAL Critical Audit Matters

Description of the Matter At December 31, 2023, the fair value of the Company’s benefit plan assets measured at fair value on a recurring basis totaled $16.2 billion, of which $11.4 billion do not have a readily determinable fair value and are measured at NAV as a practical expedient. Management determines the fair value of NAV assets by applying the methodologies described in Note 9 to the consolidated financial statements.


DAL Critical Audit Matters

Auditing the Company’s NAV assets required significant judgment in estimating the fair value of the NAV assets, primarily resulting from the lag in the availability of data provided by the investment fund managers.


DAL Delta Air Lines, Inc. | 2023 Form 10-K 56

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting for the fair value measurement of its NAV assets, including controls over management’s assessment of the significant inputs and estimates affecting the fair value measurement.


To test the fair value of plan assets measured at NAV, our audit procedures included, among others, evaluating the valuation methodologies used by the Company and comparing significant inputs and underlying data used in the Company's valuations to information available from third-party sources and market data. Additionally, we performed sensitivity analyses to evaluate the changes to the Company’s net periodic benefit that would result from changes in the fair value measurement, compared the Company’s asset performance results to applicable third-party benchmarks, and assessed management’s historical accuracy of estimating fair value by performing retrospective review procedures comparing the Company’s estimates of fair value as of the prior year end to the fair value NAV in the investment’s audited financial statements made available during the current year.


DAL Loyalty Program - Mileage Breakage

Description of the Matter##At December 31, 2023 the Company’s aggregate current and noncurrent loyalty program deferred revenue balance was $8.4 billion. For the year ended December 31, 2023, the Company recognized $3.5 billion of revenue classified as loyalty travel awards within passenger revenue and $3.1 billion of revenue classified as loyalty program revenue within other revenue in the consolidated statement of operations. As disclosed in Note 2 to the consolidated financial statements, the Company defers revenue for mileage credits earned and recognizes loyalty travel awards in passenger revenue as the miles are redeemed and services are provided. In accounting for its loyalty program deferred revenue, the Company estimates the amount of mileage credits outstanding that are not expected to be redeemed (mileage breakage). The Company recognizes mileage breakage proportionally during the period in which the remaining mileage credits are redeemed. Under the Company’s loyalty program, mileage credits do not expire. Therefore, the Company uses statistical models to estimate mileage breakage based on historical redemption patterns. ##Auditing the Company’s accounting for its loyalty program required significant estimation in determining the mileage breakage estimate for mileage credits. In particular, there is complexity and subjectivity in estimating mileage breakage based on expectations of future redemption patterns due to the absence of historical expirations as the Company’s mileage credits do not expire. How We Addressed the Matter in Our Audit##We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting for its loyalty program, including controls over management’s review of the estimation of the mileage breakage and the completeness and accuracy of the data underlying the mileage breakage estimate. ##To test the estimate of breakage of mileage credits, our audit procedures included, among others, involving an actuarial specialist to assist in assessing the method used by the Company to develop the mileage breakage estimate and to independently develop a range of mileage breakage estimates and compare to the Company's estimate. Additionally, we tested the completeness and accuracy of the underlying mileage data used to develop the mileage breakage estimate. ##/s/ Ernst & Young LLP We have served as the Company's auditor since 2006.## Atlanta, Georgia## February 12, 2024##


DAL Financial Statements

DELTA AIR LINES, INC.


DAL Consolidated Balance Sheets

######December 31,#### (in millions, except share data)####2023######2022 ####ASSETS###### Current Assets:########## Cash and cash equivalents##$##2,741####$##3,266 Short-term investments####1,127######3,268 Accounts receivable, net of an allowance for uncollectible accounts of $17 and $23####3,130######3,176 Fuel, expendable parts and supplies inventories, net of an allowance for obsolescence of $123 and $136####1,314######1,424 Prepaid expenses and other####1,957######1,877 Total current assets####10,269######13,011 Noncurrent Assets:########## Property and equipment, net of accumulated depreciation and amortization of $21,707 and $20,370####35,486######33,109 Operating lease right-of-use assets####7,004######7,036 Goodwill####9,753######9,753 Identifiable intangibles, net of accumulated amortization of $911 and $902####5,983######5,992 Equity investments####3,457######2,128 Other noncurrent assets####1,692######1,259 Total noncurrent assets####63,375######59,277 Total assets##$##73,644####$##72,288 ####LIABILITIES AND STOCKHOLDERS' EQUITY###### Current Liabilities:########## Current maturities of debt and finance leases##$##2,983####$##2,359 Current maturities of operating leases####759######714 Air traffic liability####7,044######8,160 Accounts payable####4,446######5,106 Accrued salaries and related benefits####4,561######3,288 Loyalty program deferred revenue####3,908######3,434 Fuel card obligation####1,100######1,100 Other accrued liabilities####1,617######1,779 Total current liabilities####26,418######25,940 Noncurrent Liabilities:########## Debt and finance leases####17,071######20,671 Pension, postretirement and related benefits####3,601######3,707 Loyalty program deferred revenue####4,512######4,448 Noncurrent operating leases####6,468######6,866 Deferred income taxes, net####908######24 Other noncurrent liabilities####3,561######4,050 Total noncurrent liabilities####36,121######39,766 Commitments and Contingencies########## Stockholders' Equity:########## Common stock at $0.0001 par value; 1,500,000,000 shares authorized, 654,671,194 and 651,800,786 shares issued####—######— Additional paid-in capital####11,641######11,526 Retained earnings####5,650######1,170 Accumulated other comprehensive loss####(5,845)######(5,801) Treasury stock, at cost, 11,224,246 and 10,535,033 shares####(341)######(313) Total stockholders' equity####11,105######6,582 Total liabilities and stockholders' equity##$##73,644####$##72,288 ####The accompanying notes are an integral part of these Consolidated Financial Statements.######


DAL Consolidated Statements of Operations

########Year Ended December 31,#### (in millions, except per share data)####2023####2022####2021 Operating Revenue:############ Passenger##$##48,909##$##40,218##$##22,519 Cargo####723####1,050####1,032 Other####8,416####9,314####6,348 Total operating revenue####58,048####50,582####29,899 Operating Expense:############ Salaries and related costs####14,607####11,902####9,728 Aircraft fuel and related taxes####11,069####11,482####5,633 Ancillary businesses and refinery####4,172####5,756####3,957 Contracted services####4,041####3,345####2,420 Landing fees and other rents####2,563####2,181####2,019 Aircraft maintenance materials and outside repairs####2,432####1,982####1,401 Depreciation and amortization####2,341####2,107####1,998 Passenger commissions and other selling expenses####2,334####1,891####953 Regional carrier expense####2,200####2,051####1,736 Passenger service####1,750####1,453####756 Profit sharing####1,383####563####108 Pilot agreement and related expenses####864####—####— Aircraft rent####532####508####430 Government grant recognition####—####—####(4,512) Other####2,239####1,700####1,386 Total operating expense####52,527####46,921####28,013 Operating Income####5,521####3,661####1,886 Non-Operating Income/(Expense):############ Interest expense, net####(834)####(1,029)####(1,279) Gain/(loss) on investments, net####1,263####(783)####56 Loss on extinguishment of debt####(63)####(100)####(319) Pension and related (expense)/benefit####(244)####292####451 Miscellaneous, net####(35)####(127)####(397) Total non-operating income/(expense), net####87####(1,747)####(1,488) Income Before Income Taxes####5,608####1,914####398 Income Tax Provision####(999)####(596)####(118) Net Income##$##4,609##$##1,318##$##280 Basic Earnings Per Share##$##7.21##$##2.07##$##0.44 Diluted Earnings Per Share##$##7.17##$##2.06##$##0.44 ######The accompanying notes are an integral part of these Consolidated Financial Statements.######


DAL Consolidated Statements of Comprehensive Income

########Year Ended December 31,#### (in millions)####2023####2022####2021 Net Income##$##4,609##$##1,318##$##280 Other comprehensive income:############ Net change in pension and other benefits####(44)####1,329####1,908 Total Other Comprehensive (Loss)/Income####(44)####1,329####1,908 Comprehensive Income##$##4,565##$##2,647##$##2,188


The accompanying notes are an integral part of these Consolidated Financial Statements.


DAL Consolidated Statements of Cash Flows

########Year Ended December 31,#### (in millions)####2023####2022####2021 Cash Flows From Operating Activities:############ Net income##$##4,609##$##1,318##$##280 Adjustments to reconcile net income to net cash provided by operating activities:############ Depreciation and amortization####2,341####2,107####1,998 Deferred income taxes####980####591####115 (Gain)/loss on fair value investments####(1,283)####874####(38) Pension, postretirement and postemployment payments greater than expense####(121)####(453)####(2,038) Changes in certain assets and liabilities:############ Receivables####(7)####(728)####(981) Fuel inventory####121####(158)####(318) Prepaids and other current assets####17####(867)####(58) Air traffic liability####(1,216)####1,902####1,814 Loyalty program deferred revenue####538####324####376 Profit sharing####821####455####108 Other payables, deferred revenue and accrued liabilities####(285)####1,226####1,986 Noncurrent liabilities####(18)####(348)####(399) Other, net####(33)####120####419 Net cash provided by operating activities####6,464####6,363####3,264 Cash Flows From Investing Activities:############ Property and equipment additions:############ Flight equipment, including advance payments####(3,645)####(4,495)####(1,596) Ground property and equipment, including technology####(1,678)####(1,871)####(1,651) Purchase of equity investments####(152)####(870)####— Purchase of short-term investments####(2,312)####(2,704)####(12,655) Redemption of short-term investments####4,547####2,804####15,036 Other, net####92####212####(32) Net cash used in investing activities####(3,148)####(6,924)####(898) Cash Flows From Financing Activities:############ Proceeds from long-term obligations####878####—####1,902 Payments on debt and finance lease obligations####(4,071)####(4,475)####(5,834) Cash dividends####(128)####—####— Other, net####(73)####(60)####80 Net cash used in financing activities####(3,394)####(4,535)####(3,852) Net Decrease in Cash, Cash Equivalents and Restricted Cash####(78)####(5,096)####(1,486) Cash, cash equivalents and restricted cash at beginning of period####3,473####8,569####10,055 Cash, cash equivalents and restricted cash at end of period##$##3,395##$##3,473##$##8,569 Supplemental Disclosure of Cash Paid for Interest##$##1,164##$##1,261##$##1,524 Non-Cash Transactions:############ Right-of-use assets acquired under operating leases##$##661##$##531##$##2,113 Flight and ground equipment acquired under finance leases####31####91####1,049 Operating leases converted to finance leases####84####342####42 Equity investments and other financings####—####330####— ######The accompanying notes are an integral part of these Consolidated Financial Statements.######


DAL Consolidated Statements of Stockholders' Equity

####Common Stock######Additional Paid-In Capital####Retained Earnings / (Accumulated Deficit)####Accumulated Other Comprehensive Loss####Treasury Stock###### (in millions, except per share data)##Shares####Amount##############Shares####Amount####Total Balance at January 1, 2021##647##$##—##$##11,259##$##(428)##$##(9,038)##9##$##(259)##$##1,534 Net income##—####—####—####280####—##—####—####280 Other comprehensive income##—####—####—####—####1,908##—####—####1,908 Common stock issued for employee equity awards(1)##3####—####102####—####—##1####(23)####79 Government grant warrant issuance##—####—####86####—####—##—####—####86 Balance at December 31, 2021##650####—####11,447####(148)####(7,130)##10####(282)####3,887 Net income##—####—####—####1,318####—##—####—####1,318 Other comprehensive income##—####—####—####—####1,329##—####—####1,329 Common stock issued for employee equity awards(1)##2####—####79####—####—##1####(31)####48 Balance at December 31, 2022##652####—####11,526####1,170####(5,801)##11####(313)####6,582 Net income##—####—####—####4,609####—##—####—####4,609 Dividends declared ($0.20 per share)##—####—####—####(129)####—##—####—####(129) Other comprehensive loss##—####—####—####—####(44)##—####—####(44) Common stock issued for employee equity awards(1)##3####—####115####—####—##—####(28)####87 Balance at December 31, 2023##655##$##—##$##11,641##$##5,650##$##(5,845)##11##$##(341)##$##11,105


(1)Treasury shares were withheld for payment of taxes, at a weighted average price per share of $40.08, $40.52 and $38.87 in 2023, 2022 and 2021, respectively.


DAL Basis of Presentation

Delta Air Lines, Inc., a Delaware corporation, provides scheduled air transportation for passengers and cargo throughout the United States ("U.S.") and around the world. Our Consolidated Financial Statements include the accounts of Delta Air Lines, Inc. and our consolidated subsidiaries and have been prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP"). We are not the primary beneficiary of, nor do we have a controlling financial interest in, any variable interest entity. Accordingly, we have not consolidated any variable interest entity.


DAL Basis of Presentation

We have marketing alliances with other airlines to enhance our access to domestic and international markets. These arrangements may include codesharing, reciprocal loyalty program benefits, shared or reciprocal access to passenger lounges, joint promotions, common use of airport gates and ticket counters, office co-location and other marketing agreements. We have received antitrust immunity for certain marketing arrangements, which enables us to offer a more integrated route network and develop common sales, marketing and discount programs for customers. Some of our marketing arrangements provide for the sharing of revenues and expenses. Revenues and expenses associated with collaborative arrangements are presented on a gross basis in the applicable line items on our Consolidated Statements of Operations ("income statement").


DAL Basis of Presentation

We have reclassified certain prior period amounts to conform to the current period presentation. Unless otherwise noted, all amounts disclosed are stated before consideration of income taxes.


DAL Use of Estimates

We are required to make estimates and assumptions when preparing our Consolidated Financial Statements in accordance with GAAP. These estimates and assumptions affect the amounts reported in our Consolidated Financial Statements and the accompanying notes. Actual results could differ materially from those estimates.


DAL Standards Effective in Future Years

Fair Value of Equity Investments. In June 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions." Under this standard, a contractual restriction on the sale of an equity security is not considered in measuring the security's fair value. The standard also requires certain disclosures for equity securities that are subject to contractual restrictions. The ASU becomes effective January 1, 2024, however we early adopted this standard as of December 31, 2023. The new standard does not impact the valuation of our equity investments, but we have included the newly required disclosures related to the contractual sale restrictions associated with our investment in Wheels Up Experience Inc. ("Wheels Up"). See Note 4, "Investments," for additional details.


DAL Standards Effective in Future Years

Segment Reporting. In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." This standard requires disclosure of significant segment expenses and other segment items by reportable segment. This ASU becomes effective for annual periods beginning in 2024 and interim periods in 2025. We are assessing the impact of this ASU and upon adoption expect that any impact would be limited to additional segment expense disclosures in the footnotes to our Consolidated Financial Statements.


DAL Standards Effective in Future Years

Income Taxes. In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." This standard enhances disclosures related to income taxes, including the rate reconciliation and information on income taxes paid. This ASU becomes effective January 1, 2025. We are assessing the impact of this ASU and upon adoption may be required to include certain additional disclosures in the footnotes to our Consolidated Financial Statements.


DAL Significant Accounting Policies

Our significant accounting policies are disclosed below or included within the topic-specific notes included herein.


DAL Cash and Cash Equivalents and Short-Term Investments

Short-term, highly liquid investments with maturities of three months or less when purchased are classified as cash and cash equivalents. Investments with maturities of greater than three months, but not in excess of one year, when purchased are classified as short-term investments and are stated at fair value. Investments with maturities beyond one year when purchased may be classified as short-term investments if they are expected to be available to support our short-term liquidity needs. Our short-term investments in debt securities purchased prior to October 1, 2022 are classified as fair value investments under the fair value option and unrealized gains and losses are recorded in non-operating expense. Our short-term investments in debt securities purchased on or after October 1, 2022 are classified as available-for-sale investments and are stated at fair value with unrealized gains and losses recorded in accumulated other comprehensive income/(loss) ("AOCI"). Realized gains and losses on these investments are recorded in non-operating expense.


The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets ("balance sheets") that sum to the total of the same such amounts shown within the Consolidated Statements of Cash Flows ("cash flows statement"). ######Reconciliation of cash, cash equivalents and restricted cash###### ########December 31,#### (in millions)####2023####2022####2021 Current assets:############ Cash and cash equivalents##$##2,741##$##3,266##$##7,933 Restricted cash included in prepaid expenses and other####199####138####163 Noncurrent assets:############ Restricted cash included in other noncurrent assets####455####69####473 Total cash, cash equivalents and restricted cash##$##3,395##$##3,473##$##8,569


DAL Inventories

Fuel. As part of our strategy to mitigate the cost of the refining margin reflected in the price of jet fuel, our wholly owned subsidiary, Monroe Energy, LLC ("Monroe"), operates the Trainer oil refinery. Refined products (finished goods) and feedstock and blendstock inventories (work-in-process) are both carried at the lower of cost and net realizable value. We use jet fuel in our airline operations that is produced by the refinery and procured through the exchanges with third parties of gasoline, diesel and other refined products ("non-jet fuel products") the refinery produces. Cost is determined using the first-in, first-out method. Costs include the raw material consumed plus direct manufacturing costs (such as labor, utilities and supplies) as incurred and an applicable portion of manufacturing overhead.


DAL Inventories

Expendables Parts and Supplies. Inventories of expendable parts related to flight equipment, which cannot be economically repaired, reconditioned or reused after removal from the aircraft, are carried at moving average cost and charged to aircraft maintenance materials and outside repairs as consumed. An allowance for obsolescence is provided over the remaining useful life of the related fleet. We also provide allowances for parts identified as excess or obsolete to reduce the carrying costs to the lower of cost or net realizable value. These parts are estimated to have residual value of 5% of the original cost.


DAL Accounting for Refinery Related Buy/Sell Agreements

To the extent that we receive jet fuel for non-jet fuel products exchanged under buy/sell agreements, we account for these transactions as nonmonetary exchanges. We have recorded these nonmonetary exchanges at the carrying amount of the non-jet fuel products transferred within aircraft fuel and related taxes on the income statement.


DAL Derivatives

Changes in fuel prices, interest rates and foreign currency exchange rates impact our results of operations. In an effort to manage our exposure to these risks, we may enter into derivative contracts and adjust our derivative portfolio as market conditions change. Our derivative contracts are recognized at fair value on our balance sheets and had net balances of $5 million and $47 million at December 31, 2023 and 2022, respectively. See Note 3, "Fair Value Measurements," for further information regarding our derivative contracts.


DAL Long-Lived Assets

Our long-lived lived assets include property and equipment, net and operating lease right-of-use ("ROU") assets on our balance sheets. See Note 7, "Leases," for further information regarding our leases. The following table summarizes our property and equipment: Property and equipment by classification########## ########December 31,## (in millions, except for estimated useful life)##Estimated Useful Life####2023####2022 Flight equipment(1)##25-34 years##$##40,976##$##38,091 Ground property and equipment##3-40 years####9,986####8,996 Information technology-related assets##3-15 years####3,307####3,375 Flight and ground equipment under finance leases##Shorter of lease term or estimated useful life####1,862####1,950 Advance payments for equipment######1,062####1,067 Less: accumulated depreciation and amortization(2)######(21,707)####(20,370) Total property and equipment, net####$##35,486##$##33,109


DAL Long-Lived Assets

(1)Includes aircraft and associated engines and parts.


DAL Long-Lived Assets

(2)Includes accumulated amortization for flight and ground equipment under finance leases in the amount of $525 million and $463 million at December 31, 2023 and 2022, respectively.


DAL Long-Lived Assets

We record property and equipment at cost and depreciate or amortize these assets on a straight-line basis to their estimated residual values over their estimated useful lives. The estimated useful life for leasehold improvements is the shorter of lease term or estimated useful life. Depreciation and amortization expense related to our property and equipment was $2.3 billion, $2.1 billion and $2.0 billion for the years ended December 31, 2023, 2022 and 2021, respectively. Residual values for owned aircraft, engines, spare parts and simulators are generally 5% to 10% of cost.


DAL Long-Lived Assets

We capitalize certain internal and external costs incurred to develop and implement software and amortize those costs over an estimated useful life of three to fifteen years. Included in the depreciation and amortization expense discussed above, we recorded $340 million, $307 million and $301 million for amortization of capitalized software for the years ended December 31, 2023, 2022 and 2021, respectively. The net book value of these assets, which are included in information technology-related assets above, totaled $932 million and $891 million at December 31, 2023 and 2022, respectively.


DAL Long-Lived Assets

Our tangible assets consist primarily of flight equipment, which is mobile across geographic markets. Accordingly, assets are not allocated to specific geographic regions.


DAL Long-Lived Assets

We review flight equipment, ROU assets and other long-lived assets used in operations for impairment losses when events and circumstances indicate the assets may be impaired. Factors which could be indicators of impairment include, but are not limited to (1) a decision to permanently remove flight equipment or other long-lived assets from operations, (2) significant changes in the estimated useful life, (3) significant changes in projected cash flows, (4) permanent and significant declines in fleet fair values and (5) changes to the regulatory environment. For long-lived assets held for sale, we discontinue depreciation and record impairment losses when the carrying amount of these assets is greater than the fair value less the cost to sell.


DAL Long-Lived Assets

To determine whether impairments exist for aircraft used in operations, we group assets at the fleet type level or at the contract level for aircraft operated by third-party regional carriers (i.e., the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of capacity, passenger mile yield, fuel and labor costs and other relevant factors. If an asset group is impaired, the impairment loss recognized is the amount by which the asset group's carrying amount exceeds its estimated fair value. We estimate aircraft fair values using published sources, appraisals and bids received from third parties, as available.


DAL Income Taxes

We account for deferred income taxes under the liability method. We recognize deferred tax assets and liabilities based on the tax effects of temporary differences between the financial statement and tax basis of assets and liabilities, as measured by current enacted tax rates. Deferred tax assets and liabilities are net by jurisdiction and are recorded as noncurrent on the balance sheets.


DAL Income Taxes

We have elected to recognize global intangible low tax income in the period it arises and do not recognize deferred taxes for basis differences that may reverse in future years.


DAL Income Taxes

A valuation allowance is recorded to reduce deferred tax assets when necessary. We periodically assess whether it is more likely than not that we will generate sufficient taxable income to realize our deferred income tax assets. We establish valuation allowances if it is more likely than not that we will be unable to realize our deferred income tax assets. In making this determination, we consider available positive and negative evidence and make certain assumptions. We consider, among other things, projected future taxable income, scheduled reversals of deferred tax liabilities, the overall business environment, our historical financial results and tax planning strategies. See Note 11, "Income Taxes," for further information on our deferred income taxes.


DAL Fuel Card Obligation

We have a purchasing card with American Express for the purpose of buying jet fuel and crude oil. The card carried a maximum credit limit of $1.1 billion as of December 31, 2023 and must be paid monthly. At both December 31, 2023 and 2022, we had $1.1 billion outstanding on this purchasing card and the activity was classified as a financing activity in our cash flows statement.


DAL Manufacturers' Credits

We periodically receive credits in connection with the acquisition of aircraft and engines. These credits are deferred until the aircraft and engines are delivered, and then applied as a reduction to the cost of the related equipment.


DAL Maintenance Costs

We record maintenance costs related to our mainline and regional fleets in aircraft maintenance materials and outside repairs and regional carrier expense, respectively. Maintenance costs are expensed as incurred, except for costs incurred under power-by-the-hour contracts, which are expensed based on actual hours flown. Power-by-the-hour contracts transfer certain risk to third-party service providers and fix the amount we pay per flight hour or per flight cycle to the service provider in exchange for maintenance and repairs under a predefined maintenance program. Modifications that enhance the operating performance or extend the useful lives of airframes or engines are capitalized and amortized over the remaining estimated useful life of the asset or the remaining lease term, whichever is shorter.


DAL Advertising Costs

We expense advertising costs in passenger commissions and other selling expenses in the year the advertising first takes place. Advertising expense was $347 million, $302 million and $198 million for the years ended December 31, 2023, 2022 and 2021, respectively.


DAL Commissions and Merchant Fees

Passenger sales commissions and merchant fees are recognized in passenger commissions and other selling expenses when the related revenue is recognized.


DAL Passenger Revenue

Passenger revenue is composed of passenger ticket sales, loyalty travel awards and travel-related services performed in conjunction with a passenger’s flight. Passenger revenue by category############ ########Year Ended December 31,#### (in millions)####2023####2022####2021 Ticket##$##43,596##$##35,626##$##19,339 Loyalty travel awards####3,462####2,898####1,786 Travel-related services####1,851####1,694####1,394 Total passenger revenue##$##48,909##$##40,218##$##22,519


DAL Ticket

Passenger Tickets. We defer sales of passenger tickets to be flown by us or that we sell on behalf of other airlines in our air traffic liability. Passenger revenue is recognized when we provide transportation. For tickets that we sell on behalf of other airlines, we reduce the air traffic liability when consideration is remitted to those airlines. The air traffic liability primarily includes sales of passenger tickets with scheduled departure dates in the future and travel credits, which can be applied as payment toward the cost of a ticket. We periodically evaluate the estimated air traffic liability and may record adjustments in our income statement. These adjustments relate primarily to tickets that expire unused ("ticket breakage"), refunds, exchanges, transactions with other airlines and other items for which final settlement occurs in periods subsequent to the sale of the related tickets at amounts other than the original sales price.


DAL Ticket

We recognized approximately $7.4 billion, $4.2 billion and $2.2 billion in passenger revenue during the years ended December 31, 2023, 2022 and 2021, respectively, that had been recorded in our air traffic liability balance at the beginning of those periods.


DAL Ticket

As of December 31, 2023, all of our air traffic liability was recorded as a current liability. As of December 31, 2022, our air traffic liability was $8.3 billion, of which $100 million was included in other noncurrent liabilities on our balance sheet due to ticket validity extensions related to certain tickets and travel credits as of the end of 2022.


DAL Ticket

Ticket Breakage. We estimate the value of ticket breakage and recognize revenue at the scheduled flight date. Our ticket breakage estimates are primarily based on historical experience, ticket contract terms and customers’ travel behavior.


DAL Ticket

Regional Carriers. Our regional carriers include both third-party regional carriers with which we have contract carrier agreements ("contract carriers") and Endeavor Air, Inc., our wholly owned subsidiary. Our contract carrier agreements are primarily structured as capacity purchase agreements where we purchase all or a portion of the contract carrier's capacity and are responsible for selling the seat inventory we purchase. We record revenue related to our capacity purchase agreements in passenger revenue and the related expenses in regional carrier expense. See Note 10, "Commitments and Contingencies," for additional information regarding contract carrier agreements.


DAL Loyalty Travel Awards

Loyalty travel awards revenue is related to the redemption of mileage credits ("miles") for travel. We recognize loyalty travel awards revenue in passenger revenue as miles are redeemed and transportation is provided. See below for discussion of our loyalty program accounting policies.


DAL Travel-Related Services

Travel-related services are primarily composed of services performed in conjunction with a passenger’s flight, including baggage fees, administrative fees, and on-board sales. We recognize revenue for these services when the related transportation service is provided.


DAL Loyalty Program

Our SkyMiles loyalty program generates customer loyalty by rewarding customers with incentives to travel on Delta. This program allows customers to earn miles by flying on Delta, Delta Connection carriers and other airlines that participate in the loyalty program. When traveling, customers earn miles primarily based on the passenger's loyalty program status, fare class and ticket price. Customers can also earn miles through participating companies. Miles are redeemable by customers in future periods for air travel on Delta and other participating airlines, access to Delta Sky Club and other program awards. To facilitate transactions with participating companies, we sell miles to non-airline businesses and other airlines.


DAL Loyalty Program

The loyalty program includes two types of transactions that are considered revenue arrangements with multiple performance obligations (1) passenger ticket sales earning miles and (2) sale of miles to participating companies.


DAL Loyalty Program

Passenger Ticket Sales Earning Miles. Passenger ticket sales earning miles provide customers with (1) miles earned and (2) air transportation, which are each considered performance obligations. We value each performance obligation on a standalone basis. To value the miles earned, we consider the quantitative value a passenger receives by redeeming miles for a ticket rather than paying cash, which is referred to as equivalent ticket value ("ETV"). Our estimate of ETV is adjusted for miles that are not likely to be redeemed ("mileage breakage"). We use statistical models to estimate mileage breakage based on historical redemption patterns. A change in assumptions regarding the redemption activity for miles or the estimated fair value of miles expected to be redeemed could have a material impact on our revenue in the year in which the change occurs and in future years. We recognize mileage breakage proportionally during the period in which the remaining miles are actually redeemed.


DAL Loyalty Program

We defer revenue for the miles when earned and recognize loyalty travel awards in passenger revenue as the miles are redeemed and transportation is provided. We record the air transportation portion of the passenger ticket sales in air traffic liability and recognize passenger revenue when we provide transportation or if the ticket goes unused.


DAL Loyalty Program

Sale of Miles to Participating Companies. Customers earn miles based on their spending with participating companies, such as credit card, retail, ridesharing, car rental and hotel companies, with which we have marketing agreements to sell miles. Our contracts to sell miles under these marketing agreements have multiple performance obligations. Payments are typically due to us monthly based on the volume of miles sold during the period, and the initial terms of our marketing contracts are from one to thirteen years. During the years ended December 31, 2023, 2022 and 2021, total cash sales from marketing agreements related to our loyalty program were $6.9 billion, $5.7 billion and $4.1 billion, respectively, which are allocated to travel and other performance obligations, as discussed below.


DAL Loyalty Program

Our most significant contract to sell miles relates to our co-brand credit card relationship with American Express. Our agreements with American Express provide for joint marketing, grant certain benefits to Delta-American Express co-branded credit card holders ("cardholders") and American Express Membership Rewards program participants, and allow American Express to market its services or products using our customer database. Cardholders earn miles for making purchases using co-branded cards, and certain cardholders may also check their first bag for free, are granted discounted access to Delta Sky Club lounges and receive priority boarding and other benefits while traveling on Delta. Additionally, participants in the American Express Membership Rewards program may exchange their points for miles under the loyalty program. We sell miles at agreed-upon rates to American Express which are then provided to their customers under the co-brand credit card program and the Membership Rewards program.