Investments

3 Months Ended

Mar. 31, 2020

Investments, Debt and Equity Securities [Abstract]

INVESTMENTS

Long-Term Investments

We have developed strategic relationships with a number of airlines and airline services companies through equity investments and other forms of cooperation and support. Our equity investments reinforce our commitment to these relationships and provide us with the ability to participate in strategic decision-making, often through representation on the board of directors of the investee.

Fair Value Investments

We account for the following investments at fair value with adjustments to fair value recognized in gain/(loss) on investments within non-operating expense in our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income ("income statement"). We recorded losses of $112 million and gains of $100 million on our fair value investments during the three months ended March 31, 2020 and 2019, respectively. These results were driven by changes in stock prices and foreign currency fluctuations.


	Ownership Interest						Carrying Value
(in millions)	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
Hanjin-KAL	15	%	10	%	$	538	$	205
Air France-KLM	9	%	9	%	211		418
China Eastern	3	%	3	%	159		258
Wheels Up	27	%	—	%	234		—
Other investments					225		218
Total fair value investments					$	1,367	$	1,099

Wheels Up. In January 2020, we combined Delta Private Jets, our wholly owned subsidiary which provides private jet operations, with Wheels Up. Upon closing, we received a 27% equity stake in Wheels Up which we have elected to record using the fair value option as this is expected to better reflect the economics of our ownership interest. This transaction resulted in a gain of $240 million which was recorded within miscellaneous, net in our income statement.

GOL. In the December 2019 quarter we sold our ownership stake of GOL Linhas Aéreas Inteligentes, the parent company of VRG Linhas Aéreas (operating as GOL), and are winding down our commercial agreements. Additionally, GOL has a $300 million five-year term loan facility with third parties maturing in August 2020, which we have guaranteed. Based on market value at March 31, 2020, approximately 50% of our guaranty is secured by GOL's ownership interest in Smiles, GOL's publicly traded loyalty program. Because GOL remains in compliance with the terms of its loan facility, we have not recorded a liability for the term loan on our balance sheet as of March 31, 2020. However, as the COVID-19 pandemic continues to impact the global economy, there is an increased risk related to GOL's ability to repay this term loan, which may require our performance under this guarantee. Therefore, we have recorded an immaterial reserve in other accrued liabilities related to the decline in value of our security interest in GOL's Smiles shares.

Equity Method Investments

We account for the investments listed below under the equity method of accounting.


	Ownership Interest						Carrying Value
(in millions)	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
LATAM	20	%	—	%	$	1,088	$	—
Grupo Aeroméxico ⁽¹⁾	51	%	51	%	770		833
Virgin Atlantic ⁽²⁾	49	%	49	%	207		375
AirCo	49	%	49	%	141		142

⁽¹⁾Grupo Aeroméxico's corporate bylaws (as authorized by the Mexican Foreign Investment Commission) limit our voting interest to a maximum of 49%. Therefore, we account for our investment under the equity method. Due to Grupo Aeroméxico's share repurchase program, our equity stake in Grupo Aeroméxico has increased to a non-controlling 51% interest.

⁽²⁾We have a non-controlling equity stake in Virgin Atlantic Limited, the parent company of Virgin Atlantic Airways, and similar non-controlling interests in certain affiliated Virgin Atlantic companies.

LATAM. In January 2020, we acquired 20% of the shares of LATAM Airlines Group S.A. ("LATAM") for $1.9 billion, or $16 per share, through a tender offer as part of our plan to enter into a strategic alliance with LATAM. In addition, to support the establishment of the strategic alliance, we agreed to make transition payments to LATAM totaling $350 million, $200 million of which was disbursed in 2019. As part of our planned strategic alliance with LATAM, we have also agreed to acquire four A350 aircraft from LATAM and have assumed ten of LATAM's A350 purchase commitments with Airbus for deliveries through 2025. The total consideration of $2.3 billion, including the tender offer and the transition payments, has been allocated based on their relative fair values to the shares ($1.1 billion) and to the alliance-related indefinite-lived intangible asset ($1.2 billion). We expect to record the aircraft at cost upon delivery.

Based on our 20% ownership interest and planned strategic alliance, we determined that we have significant influence over LATAM and will accordingly record this investment under the equity method of accounting. At acquisition, our investment was recorded at $1.1 billion based on the allocated value to our 20% equity stake in LATAM on January 3, 2020. Due to the timing of information available from LATAM, we will record our portion of LATAM's financial results on a one quarter lag, beginning in the June 2020 quarter.

Our portion of Grupo Aeroméxico's and Virgin Atlantic's financial results are recorded in miscellaneous, net in our income statement under non-operating expense, and our share of AirCo's financial results is recorded in contracted services in our income statement as this entity is integral to the operations of our business.

If an equity method investment experiences a loss in fair value that is determined to be other than temporary, we will reduce our basis in the investment to fair value and record the loss in non-operating expense. Given the recent and unprecedented impact of the COVID-19 pandemic on the airline industry, we evaluated whether our equity method investments in LATAM, Grupo Aeroméxico, Virgin Atlantic and AirCo were other than temporarily impaired. Based on discussions with each investee's management and review of their respective liquidity and financial projections, we do not believe these investments are other than temporarily impaired as we have the intent and ability to retain these investments for a period of time sufficient to allow for anticipated recovery in value. However, we will continue to monitor the continuing effects of the pandemic, self-help measures each investee executes and potential assistance provided by their respective governments.

Effective January 2020, we combined our separate transatlantic joint venture agreements with Air France-KLM and Virgin Atlantic into a single three-party transatlantic joint venture. Under the new agreement, certain measurement thresholds were reset from the previous joint venture with Virgin Atlantic, reducing the value Delta would have received over the original term. To compensate Delta for this reduced value, we entered into a transition agreement with Virgin Atlantic and, as of March 31, 2020, have recognized a receivable of approximately $200 million, which is recorded in other noncurrent assets, and corresponding deferred revenue, which is recorded in other noncurrent liabilities.