Delta Airlines 2003 Annual Report Download - page 59

Table of Contents
In February 2004, we settled all of our fuel hedge contracts prior to their scheduled settlement dates. As a result of these transactions, we received
$83 million in cash, which represented the fair value of these contracts at the date of settlement. In accordance with SFAS 133, effective gains of $82 million
will be recorded in accumulated other comprehensive loss until the related fuel purchases, which were being hedged, are consumed and recognized in expense
during 2004. These gains will then be recorded as a reduction in fuel expense on our Consolidated Statements of Operations. The ineffective portion of the
hedges and the time value component of these contracts totaling $17 million will be recognized in the March 2004 quarter as a fair value adjustment of SFAS
133 derivatives in other income (expense) on our Consolidated Statements of Operations. We may enter into fuel hedge contracts in the future depending on
certain conditions.
During 2003, aircraft fuel accounted for 14% of our total operating expenses. Based on our projected aircraft fuel consumption of approximately 2.5 billion
gallons for 2004, a 10% rise in our jet fuel prices would increase our aircraft fuel expense by approximately $150 million in 2004. This analysis includes the
effects of fuel hedging instruments in place at December 31, 2003.
For additional information regarding our aircraft fuel price risk management program, see Note 4 of the Notes to the Consolidated Financial Statements.
Interest Rate Risk. Our exposure to market risk due to changes in interest rates primarily relates to our long-term debt obligations.
Market risk associated with our long-term debt is the potential change in fair value resulting from a change in interest rates. A 10% decrease in average
annual interest rates would have increased the estimated fair value of our long-term debt by $682 million at December 31, 2003 and $395 million at
December 31, 2002. A 10% increase in average annual interest rates would not have had a material impact on our interest expense in 2003. For additional
information on our long-term debt agreements, see Notes 4 and 6 of the Notes to the Consolidated Financial Statements.
Glossary of Defined Terms
ASM- Available Seat Mile. A measure of capacity. ASMs equal the total number of seats available for transporting passengers during a reporting period
multiplied by the total number of miles flown during that period.
Cargo Ton Miles-The total number of tons of cargo transported during a reporting period, multiplied by the total number of miles cargo is flown during that
period.
Cargo Ton Mile Yield- The amount of cargo revenue earned per cargo ton mile during a reporting period.
52