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Why Delta’s cash balance decreased

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Sources and uses of funds

Delta (DAL) generated cash from operations of $4,365 million. This was ~29% higher than last year. However, the cash balance decreased by ~17% to $2,510 million as of September 30, 2014. This was due to higher investing and financing activities.

Even though Delta’s cash and marketable securities increased by ~9.7% to $4,362 million, cash and marketable securities as a percentage of sales was 39%. This is much lower than its peers.

American’s (AAL) was ~70%. United’s (UAL) was 52%. Southwest’s (LUV) was 74%. JetBlue’s (or JBLU) was 48%. The iShares Transportation Average ETF (IYT) and the PowerShares DWA Consumer Cyclicals Momentum Portfolio (or PEZ) have more than 3% of their holdings in Delta Air Lines.

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Investments

During 3Q14, Delta used more than twice the amount in investments compared to 3Q13—despite the 28% year-over-year (or YoY) decline in capital expenditure. Capital expenditure decreased due to a 37% lower investment in flight equipment.

During the quarter, Delta had 22 aircraft delivered. It retired 34 aircraft. However, short-term investments increased by six times to $1,402 million—from $240 million. This led to 34% higher cash used in investing activities for the first nine months of 2014.

Financing

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Delta made almost three times more debt and capital lease payments during the quarter. Debt payments increased to $1,008 million—compared to $347 million in 3Q13. Delta also raised $707 million in debt—compared to only $68 million in 3Q13. Delta had higher cash outflows related to dividend and stock repurchases. This led to a 28% higher cash outflow for financing activities.

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