Delta Airlines 2003 Annual Report Download - page 57

Table of Contents
estimate that our defined benefit pension expense in 2004 will be approximately $525 million. The effect of our Plans on our Consolidated Financial
Statements is subject to many assumptions. We believe the most critical assumptions are (1) the weighted average discount rate; (2) the rate of increase in
future compensation levels; and (3) the expected long-term rate of return on Plan assets.
We determine our weighted average discount rate on our measurement date primarily by reference to annualized rates earned on high quality fixed income
investments and yield-to-maturity analysis specific to our estimated future benefit payments. Adjusting our discount rate (6.125% at September 30, 2003) by
0.5% would change our accrued pension cost by approximately $780 million at December 31, 2003 and change our estimated pension expense in 2004 by
approximately $60 million.
Our rate of increase in future compensation levels is based primarily on labor contracts currently in effect with our employees under collective bargaining
agreements and expected future pay rate increases for other employees. Adjusting our estimated rate of increase in future compensation levels (1.89% at
September 30, 2003) by 0.5% would change our estimated pension expense in 2004 by approximately $20 million.
The expected long-term rate of return on our Plan assets is based primarily on Plan-specific asset/liability investment studies performed by outside
consultants and recent and historical returns on our Plans' assets. Adjusting our expected long-term rate of return (9.00% at September 30, 2003) by 0.5%
would change our estimated pension expense in 2004 by approximately $40 million. For additional information about our pension plans, see Note 11 of the
Notes to the Consolidated Financial Statements.
Impairment of Long-Lived Assets. We record impairment losses on long-lived assets used in operations when events and circumstances indicate the
assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. The amount of
impairment loss recognized is the amount by which the carrying amounts of the assets exceed the estimated fair values.
In order to evaluate potential impairment as required by SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"),
we group assets at the fleet type level (the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on assumptions
involving projections of passenger yield, fuel costs, labor costs and other relevant factors in the markets in which these aircraft operate. Aircraft fair values are
estimated by management using published sources, appraisals and bids received from third parties, as available. Changes in these assumptions may have a
material impact on our Consolidated Financial Statements. For additional information about our accounting policy for the impairment of long-lived assets, see
Note 1 of the Notes to the Consolidated Financial Statements.
Recently Issued Accounting Pronouncements. On December 8, 2003, President Bush signed into law the Medicare Prescription Drug, Improvement and
Modernization Act ("Medicare Act"). The Medicare Act introduced a prescription drug benefit under Medicare and a
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