Delta Airlines 2002 Annual Report Download - page 173

Notes to the Consolidated Financial Statements
Subsequent to September 11, 2001, our insurance providers reduced our coverage
and significantly increased our premium rates for war and terrorism risk
insurance. Under the provisions of the Stabilization Act, the Federal Aviation
Administration (FAA) has been selling U.S. airlines excess war and terrorism
risk insurance coverage since the September 11 terrorist attacks. Effective
January 24, 2003, under the Homeland Security Act, the FAA is required to sell
passenger, third-party (ground damage) and aircraft hull war and terrorism risk
insurance to U.S. airlines through August 31, 2003.
Note 20. Related Party Transaction
The Delta Employees Credit Union (DECU) is an independent entity that is
chartered to provide banking and financial services to our employees, former
employees and certain relatives of these persons. At December 31, 2002, we had a
$71 million liability to DECU recorded in accounts payable, deferred credits and
other accrued liabilities on our Consolidated Balance Sheet. The liability
results from a timing difference in funding a portion of our 2002 year end
payroll and is reflected as a non-cash transaction on our Consolidated Statement
of Cash Flows for the year ended December 31, 2002. We paid the liability on
January 2, 2003.
Note 21. Valuation and Qualifying Accounts
The following table shows the valuation and qualifying accounts as of December
31, 2002, 2001 and 2000, and the associated activity for the years then ended:
Allowance for:
------------------------------
Obsolescence
Restructuring Uncollectible of Expendable
Leased and Other Accounts Parts & Supplies
(in millions) Aircraft(1) Charges(1) Receivable(2) Inventory(3)
------------- ----------- ------------- -------------- ----------------
Balance at December 31, 1999 $ -- $ 41 $ 39 $ 104
Additional costs and expenses -- 22 15 22
Payments and deductions -- (7) (23) (2)
----- ------ ------ ------
Balance at December 31, 2000 -- 56 31 124
----- ------ ------ ------
Additional costs and expenses 71 115 18 38
Payments and deductions (1) (50) (6) (23)
----- ------ ------ ------
Balance at December 31, 2001 70 121 43 139
----- ------ ------ ------
Additional costs and expenses -- 90 21 51
Payments and deductions (70) (72) (31) (7)
----- ------ ------ ------
BALANCE AT DECEMBER 31, 2002 $ -- $ 139 $ 33 $ 183
===== ====== ====== ======
(1) See Note 17 for additional information related to leased aircraft and
restructuring and other charges.
(2) The payments and deductions related to the allowance for uncollectible
accounts receivable represent the write-off of accounts considered to
be uncollectible, less recoveries.
(3) These additional costs and expenses in 2001 and 2002 include the
charges related to the writedown of certain aircraft spare parts
inventory to their net realizable value (see Note 16).
Note 22. Subsequent Events (Unaudited)
ENHANCED EQUIPMENT TRUST CERTIFICATES
On January 30, 2003, we issued, in a private placement, $392 million aggregate
principal amount of insured Pass Through Certificates, Series 2003-1 G
(Certificates). The certificates bear interest at floating rates based on LIBOR
+ 0.75% and require principal payments from 2003 to 2008. This financing is
secured by two B-737-800 and 10 B-767-300ER aircraft owned by us. The net
proceeds of this financing were made available for general corporate purposes.
CONTRACT CARRIER AGREEMENT
During February 2003, we amended our contract carrier agreement with Chautauqua
to increase from 22 to 34 the number of aircraft Chautauqua will operate for us.
All of these aircraft are scheduled to be in service under the Delta Connection
program by the end of 2003. We estimate that the total fair value of these
additional aircraft that Chautauqua could assign to us or require that we
purchase if we were to terminate this agreement without cause is approximately