Delta Airlines 2003 Annual Report Download - page 106

Table of Contents
on those flights; and we retain the related revenues. We pay those airlines an amount, as defined in the applicable agreement, which is based on an annual
redetermination of their cost of operating those flights and other factors intended to approximate market rates for those services. Our contract carrier
agreements with ACA and SkyWest expire in 2010, and our agreement with Chautauqua expires in 2012.
The following table shows the total number of aircraft and available seat miles (ASMs) operated for us by ACA, SkyWest and Chautauqua under, and our
expenses related to, the contract carrier agreements, for the years ended December 31, 2003, 2002 and 2001:
(in millions, except aircraft) 2003 2002 2001
Number of aircraft operated, end of period (1) 123 100 72
ASMs (2) 5,121 3,513 1,562
Expenses $ 784 $ 561 $ 240
(1)
The 123 aircraft operated for us at December 31, 2003 include 30 aircraft operated by ACA, 59 aircraft operated by SkyWest and 34 aircraft operated
by Chautauqua. Our contract carrier agreements do not include any scheduled changes in these numbers during the remaining term of those agreements,
except that the number of aircraft scheduled to be operated for us by Chautauqua increases to 39 by the end of 2004.
(2)
These amounts are unaudited and are not included in our ASMs disclosed in Item 6 in this Form 10-K.
During 2004, we expect to incur a total of approximately $890 million in expenses related to our contract carrier agreements with these airlines. See Note 1
for information about our accounting policy for revenues and expenses related to our contract carrier agreements.
We may terminate the ACA and SkyWest agreements without cause at any time by giving the airlines certain advance notice. If we terminate the ACA
agreement without cause, ACA has the right to (1) assign to us leased aircraft that it operates for us, provided we are able to continue the leases on the same
financial terms ACA had prior to the assignment and (2) require us to purchase, at fair value, aircraft that ACA operates for us and owns at the time of the
termination. If we terminate the SkyWest agreement without cause, SkyWest has the right to assign to us leased regional jet aircraft which it operates for us,
provided we are able to continue the leases on the same terms SkyWest had prior to the assignment.
We may terminate the Chautauqua agreement, as amended, without cause at any time after November 2008 by giving the airline certain advance notice. If we
terminate the Chautauqua agreement without cause, Chautauqua has the right to (1) assign to us leased aircraft that it operates for us, provided we are able to
continue the leases on the same terms Chautauqua had prior to the assignment and (2) require us to purchase or sublease any of the aircraft that it owns and
operates for us at the time of the termination. If we are required to purchase aircraft owned by Chautauqua, the purchase price would be equal to the amount
necessary to (1) reimburse Chautauqua for the equity it provided to purchase the aircraft and (2) repay in full any debt outstanding at such time that is not
being assumed in connection with such purchase. If we are required to sublease aircraft owned by Chautauqua, the sublease would have (1) a rate equal to the
debt payments of Chautauqua for the debt financing of the aircraft calculated as if 90% of the aircraft was debt financed by Chautauqua and (2) specified
other terms and conditions.
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