DELTA AIR LINES, INC. (DAL)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited Consolidated Financial Statements and related notes included in our 2025 Form 10-K.

September 2026 Quarter Financial Highlights

Our operating income for the September 2026 quarter was $1.5 billion, a decrease of $230 million compared to the September 2025 quarter.

Revenue. Compared to the September 2025 quarter, our total revenue increased $3.5 billion. Passenger revenue increased $2.0 billion compared to the September 2025 quarter on broad based demand strength across premium, main, and loyalty. In addition, the increase in total revenue was driven by higher refinery sales to third parties and growth in our cargo and MRO businesses. Total revenue, adjusted (a non-GAAP financial measure, which excludes revenue related to refinery sales to third parties) increased in the September 2026 quarter by $2.4 billion, or 16%, compared to the September 2025 quarter.

Operating Expense. Total operating expense in the September 2026 quarter increased $3.7 billion, or 25%, compared to the September 2025 quarter, primarily due to higher aircraft fuel costs, expenses related to refinery sales to third parties, and salaries and related costs. Total operating expense, adjusted (a non-GAAP financial measure, which primarily excludes expenses related to refinery sales to third parties) in the September 2026 quarter increased $2.4 billion, or 18%, compared to the September 2025 quarter.

Our total operating cost per available seat mile ("CASM") increased 25% compared to the September 2025 quarter, while non-fuel unit cost ("CASM-Ex", a non-GAAP financial measure) increased 7.3%.

Non-Operating Results. Total non-operating expense was $380 million in the September 2026 quarter, compared to income of $93 million in the September 2025 quarter, primarily due to mark-to-market losses on certain of our equity investments in the September 2026 quarter compared to gains in the September 2025 quarter.

Cash Flow. During the September 2026 quarter, operating activities generated $1.7 billion, primarily from ticket sales and the sale of SkyMiles to our partners. Remuneration from American Express was $2.3 billion in the September 2026 quarter.

Cash flows used in investing activities during the quarter totaled $1.3 billion primarily from capital expenditures. These operating and investing activities yielded free cash flow (a non-GAAP financial measure) of $463 million in the September 2026 quarter. Additionally, we had cash outflows of $1.2 billion related to repayments of our debt and finance leases.

Our cash, cash equivalents, short-term investments and aggregate undrawn principal amount available under our revolving credit facilities ("liquidity") as of September 30, 2026 was $6.9 billion.

The non-GAAP financial measures referenced above for total revenue, adjusted, operating expense, adjusted, CASM-Ex and free cash flow are defined and reconciled in "Supplemental Information" below.

Item 2. MD&A - Results of Operations

Results of Operations - Three Months Ended September 30, 2026 and 2025

Total Operating Revenue

(1)Total amounts in the table above may not calculate exactly due to rounding.

(2)Total revenue per available seat mile ("TRASM"), adjusted is a non-GAAP financial measure. For additional information on adjustments to TRASM, see "Supplemental Information" below.

Compared to the September 2025 quarter, total revenue increased $3.5 billion, as a result of broad based demand strength across premium, main, and loyalty. In addition, the increase in total revenue was driven by higher refinery sales to third parties and growth in our cargo and MRO businesses. Cargo revenue increased 29%, driven largely by volume.

Passenger Revenue by Geographic Region

Domestic

Domestic passenger revenue increased 16% in the September 2026 quarter compared to the September 2025 quarter on flat capacity. Domestic revenue increased on broad based demand strength across premium, main, and loyalty.

International

International passenger revenue for the September 2026 quarter increased 12% compared to the September 2025 quarter. The increase in the Atlantic region is primarily driven by demand for premium products. Revenue growth in the Latin America region reflects demand strength to the Mexican business as well as Caribbean and Mexican leisure destinations despite lower capacity in the Mexican leisure markets due to civil unrest in several of our destinations in the first half of 2026. Pacific region revenue growth reflects continued demand for premium products and new routes to Asia.

Item 2. MD&A - Results of Operations

Other Revenue

Refinery. Refinery sales to third parties increased $1.1 billion compared to the September 2025 quarter. See "Refinery Segment" below for additional details on the refinery's operations, including third party refinery sales.

Loyalty and Related. This primarily relates to revenue from brand usage by third parties embedded in miles sold. Loyalty and related also includes the redemption of miles for non-travel awards and revenue from our vacation package operations, lounge access (including access provided to certain American Express cardholders) and travel products (e.g., commissions from car rentals or hotels booked with our commercial partners). Most of the increase compared to the prior period is driven by higher customer spend on American Express cards and new card acquisitions as we refreshed our co-brand credit card portfolio with new and enhanced travel benefits during the June 2026 quarter.

MRO. This represents revenue from our Delta TechOps third-party maintenance, repair and overhaul ("MRO") business. The increase compared to the prior period resulted from a shift in mix to work on more legacy engines than next generation engines, which we expect to continue through the remainder of 2026.

Miscellaneous. This is primarily composed of revenues related to codeshare agreements and international commercial joint venture contractual settlements.

Item 2. MD&A - Results of Operations

Operating Expense

Salaries and Related Costs. The increase in salaries and related costs primarily resulted from the implementation of 4% base pay increases for eligible employees effective on June 1, 2026 and for Delta pilots on January 1, 2026, annual pay scale step up and increases in premium pay from operational disruptions.

Aircraft Fuel and Related Taxes. Aircraft fuel and related taxes increased $1.8 billion compared to the September 2025 quarter primarily due to a 63% increase in our average jet fuel purchase price. We expect that fuel consumption for the remainder of 2026 will remain aligned with capacity changes compared to 2025, while elevated jet fuel costs are anticipated to persist until market disruptions and geopolitical events are resolved.

Refinery Expense. This includes expenses associated with refinery sales to third parties. See "Refinery Segment" below for additional details on the refinery's operations.

Contracted Services. The increase in contracted services primarily resulted from expanding our in-flight entertainment and Wi-Fi products, volume increases in our Cargo business and additional contract labor costs associated with the expansion of our Sky Club network, particularly our Delta One lounges.

Landing Fees and Other Rents. The increase in landing fees and other rents resulted from higher rates charged by airports following the completion of extensive redevelopment projects at numerous facilities.

Depreciation and Amortization. The increase in depreciation and amortization results from new aircraft deliveries and fleet modifications, partially offset by aircraft retirements.

MRO Expense. This represents expenses from our Delta TechOps third-party MRO business. The increase compared to the prior period resulted from a shift in mix to work on more legacy engines than next-generation engines, which we expect to continue through the remainder of 2026.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section of Form 10-K does not address certain items regarding the year ended December 31, 2023. Discussion and analysis of 2023 and year-to-year comparisons between 2024 and 2023 not included in this Form 10-K can be found in "Item 7. Management's Discussion and Analysis" of our Annual Report on Form 10-K for the year ended December 31, 2024. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited Consolidated Financial Statements and the related notes and other financial information as well as the material risk factors included elsewhere in this Annual Report on Form 10-K.

2025 Financial Overview

Our 2025 operating income was $5.8 billion, a decrease of $173 million compared to 2024, and operating income, adjusted (a non-GAAP financial measure) was $5.8 billion, a decrease of $212 million compared to 2024. The decreases in operating income and operating income, adjusted primarily result from nearly offsetting increases in both revenue and operating expenses, as described below. As a result of our strong performance in 2024 and 2025, we paid profit sharing of $1.4 billion in February 2025 to our employees and will pay another $1.3 billion in February 2026 in recognition of these achievements.

Revenue. Compared to 2024, our 2025 operating revenue increased $1.7 billion, or 3%, primarily due to a 3% increase in capacity driven by continued strength in demand for premium products, particularly from corporate customers, growth in loyalty travel awards, increased refinery sales to third parties and growth of our Delta TechOps third-party maintenance, repair and overhaul ("MRO") business. In addition, revenue increased year over year due to the Crowdstrike-caused outage in 2024, which led to a direct revenue impact of approximately $380 million related to approximately 7,000 flight cancellations over five days. Total revenue, adjusted (a non-GAAP financial measure) increased in 2025 by $1.3 billion, or 2.3%, compared to 2024. Adjustments were to exclude refinery sales to third parties.

Operating Expense. Total operating expense increased $1.9 billion, or 3%, compared to 2024, primarily due to higher employee costs from increased wages, costs associated with a 3% increase in capacity, and higher expenses related to refinery sales to third parties. These increases were partially offset by lower aircraft fuel costs. In addition, approximately $170 million of additional operating expenses were incurred in 2024 associated with the Crowdstrike-caused outage primarily due to customer expense reimbursements and crew-related costs. Total operating expense, adjusted (a non-GAAP financial measure) increased $1.5 billion, or 3%, compared to 2024. Current year adjustments were primarily to exclude expenses related to refinery sales to third parties.

Our total operating cost per available seat mile ("CASM") of 19.31 cents was comparable to 2024, primarily due to lower fuel expense and a 3% increase in capacity offset by higher employee costs. Non-fuel unit costs ("CASM-Ex", a non-GAAP financial measure), which excludes fuel, expenses related to refinery sales to third parties and other items, increased 2.4% to 13.86 cents compared to 2024, which was in line with our long-term target of low-single digit growth, on higher employee costs and investments in the customer experience.

Non-Operating Results. Total non-operating income was $363 million in 2025, compared to total non-operating expense of $1.3 billion in 2024, primarily due to mark-to-market gains on certain of our equity investments in 2025 compared to losses in 2024.

Cash Flow. During 2025, operating activities generated $8.3 billion, primarily from ticket sales and the sale of SkyMiles to our partners. Remuneration from American Express related to the SkyMiles program were $8.2 billion during 2025, an increase of approximately 11% compared to 2024. Investing activities resulted in net cash outflows of approximately $4.2 billion, primarily for capital expenditures. After adjusting for our strategic investment in WestJet and certain other items, these results generated $4.6 billion of free cash flow (a non-GAAP financial measure) in 2025.

Also, during 2025 we had financing cash outflows of $4.8 billion related to repayment of our debt and finance leases, including $2.9 billion for early repayments and the remainder for scheduled maturities. Our proceeds from long-term obligations primarily related to the issuance of $2.0 billion in aggregate principal amount of unsecured notes. Our cash, cash equivalents, short-term investments and aggregate principal amount committed and available to be drawn under our revolving credit facilities ("liquidity") at December 31, 2025 was $7.4 billion.

The non-GAAP financial measures of operating income, adjusted, total revenue, adjusted, total operating expense, adjusted, CASM-Ex and free cash flow used above are defined and reconciled in "Supplemental Information" below.

Item 7. MD&A - Results of Operations

Results of Operations

Operating Revenue

(1)Total amounts in the table above may not calculate exactly due to rounding.

(2)For additional information on adjustments to TRASM, see "Supplemental Information" below.

Operating Revenue

Our operating revenue increased $1.7 billion, or 3%, compared to 2024 due to an increase in demand for premium products, particularly from corporate customers, growth in loyalty travel awards, increased refinery sales to third parties and growth of our MRO business. Refinery sales and MRO are included in other revenue, discussed below. These increases were partially offset by a decline in main cabin revenue due to industry-wide supply exceeding demand for main cabin travel in the uncertain economic environment.

Passenger Revenue by Geographic Region

Domestic

Domestic passenger revenue in 2025 increased 1% on a 3% increase in capacity compared to 2024. The increase in domestic revenue primarily resulted from strong demand for premium products across our domestic network. We generated higher growth in premium products revenue compared to main cabin with the delivery of new aircraft that include more premium seat capacity and an increase in yield in premium products compared to main cabin, as we see more consumers choosing these premium offerings. Domestic passenger unit revenue ("PRASM") for 2025 decreased 2% compared to 2024 primarily due to weakness in main cabin demand.

International

International passenger revenue in 2025 increased 2% on a 4% increase in capacity compared to 2024, with growth primarily driven by improvement in the Atlantic and Pacific regions, while Latin America remained stable compared to 2024.

Revenue in the Atlantic region increased 2% on a 3% increase in capacity as we introduced new routes and destinations to Europe and Africa in 2025. Revenue growth in the Atlantic was led by demand for our premium product offerings.

Item 7. MD&A - Results of Operations

Revenue in the Latin America region remained consistent with 2024 on a slight increase in capacity. We experienced slight revenue growth in the Caribbean and South America compared to 2024. In South America, we continued to build on the strength of our joint venture with LATAM through greater network connectivity and a more streamlined airport experience.

Revenue in the Pacific region increased 10% on a 9% increase in capacity compared to 2024 on strong demand to Japan and South Korea, particularly with our premium product offerings. We continued to invest in our joint venture partnership with Korean Air through the introduction of a new route from Salt Lake City to Seoul-Incheon.

Other Revenue

Refinery. This represents refinery sales of non-jet fuel products to third parties. These sales increased $435 million compared to 2024. See "Refinery Segment" below for additional details on the refinery's operations, including third party refinery sales recorded in other revenue, during each period.

Loyalty Program. This relates to revenues from brand usage by third parties and other performance obligations embedded in miles sold, as well as redemption of miles for non-air travel and other awards. These revenues are mainly driven by customer spend on American Express cards and new cardholder acquisitions, which both grew double-digit on a percentage basis compared to 2024.

Ancillary Businesses. This includes revenues from our MRO business and our vacation package operations. During the years ended December 31, 2025 and 2024, the MRO business generated revenues of $822 million and $658 million, respectively.

Miscellaneous. This is primarily composed of revenues related to lounge access, including access provided to certain American Express cardholders, travel products (e.g., car rentals or hotels booked with our commercial partners), codeshare agreements and international joint venture partnership contractual settlements. The increase in revenues was primarily driven by growth in travel products, codeshare and lounge access.

Item 7. MD&A - Results of Operations

Operating Expense

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